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The VC Process

Although Horizon Ventures is not currently making new investments, the interaction between the entrepreneur and venture capitalist to determine if they want to enter into an investment is a very important process, and we feel strongly that the more entrepreneurs can learn about that process, the better off both parties will be. We have summarized below the elements of the process from a venture capital firm's point of view and have suggested an outline that a start up company can use to present to a VC firm to efficiently and completely tell the story during the first meeting between the venture capitalist and the entrepreneur.

What You Can Expect

When you are invited to present your business plan to a VC firm, you should expect direct, open feedback on your plan.  A sponsoring partner will then determine if there is sufficient interest from both sides for further research and validation.  If there is interest, the sponsoring partner will work with you on personal and customer references, an on-going market, business, product, and technology evaluation and financial modeling.

If the above process is promising, the sponsoring partner will prepare the company to meet with all the partners of the firm.  At that meeting you and the VC firm will explore the type of investment syndicate which would appeal to both parties and begin more in-depth research.  The process of reaching terms for an investment (term sheet) can take from 3 weeks to 3 months.

What Is Expected in the Initial VC Presentation

In the first contact with an entrepreneur (usually via email), a venture firm wants to see at a minimum a two page Executive Summary which addresses the VC firm's investment criteria and describes the background of the management team and current investors, along with a description of how much money you need and for what purposes. If there is interest, an initial meeting with one of the partners will be scheduled for the company to present their business. For the partner presentation, the following is a suggested format:

Company Background

  • Short overview of the company
  • Founders/Background/Funding so far

Market Opportunities

  • Needs
  • Value Proposition
  • Size & Growth of Market

Products/Technology

  • Differentiation
  • Barrier-to-Entry
  • Price & Cost

Target Market

  • Competition
  • Entry Strategy
  • Positioning
  • Distribution

Operating Plan

  • Historical Results
  • Quarterly for 1st Year
  • Yearly for Next Two
  • Balance Sheet
  • Cash Flow

Funding

  • How Much for What Milestone?

 

 
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Horizon Ventures
4 Main Street, Suite 20
Los Altos, CA 94022
(650) 917-4100