Barbaros Özbugutu

Be a Part of the Discussion When Engaging with Venture Capital

This article is written by Brian Malika, a Contributor Author at Startup Istanbul.

Barbaros Ozbugutu is the CEO of Iyzico, a Turkey-based startup offering the easiest way for accepting payments online.

Many times when entrepreneurs have been offered lucrative venture capital deals that they accepted only to be frustrated later on by the terms of engagement that they didn’t see coming but yet committed to them. So in case your wondering if there is a standard procedure for entrepreneurs to engage venture capitalists I would say no there is n’t.

However, there are certain rules of the game that every entrepreneur that is new in the partnership environment needs to consider as their basis for engaging the venture capitalists.

On that note, I have prepared five points in our next topic below summarizing the five rules of engagement that each entrepreneur needs to consider before engaging venture capitalists for a partnership deal.

  Am very confident that as an entrepreneur you will be. Avery conscious deal maker whenever you engage with venture capitalists after finishing to read this article. Welcome.

5  Things Entrepreneurs Should Consider Before Engaging Venture Capitalists

1: Draft The Engagement Framework First

Before you even go out to pitch to venture capitalists for a partnership deal with your start-up or in regards to scaling up our business venture to new markets, make sure that you have the picture of what you want the final partnership would look like.  At least have some standards of what you expect to gain in this process of negotiating with venture capitalists.

Many entrepreneurs only focus on bettering their business ideas and even calculating the amount of capital that they would ask from the investors.  However,  very few entrepreneurs would actually go ahead and sketch model of what the terms of engagement should resemble.

At least let the venture capitalists know how you want to be handled during the partnership process. As an entrepreneur, when you let the venture capitalists know your desired terms of engagement ensures that it becomes easier for everyone’s interest within the intended partnership to be accommodated right from the beginning.

2: Analyze And Target The Right Venture capitalists

Don’t be on a scouting spree for by settling on any venture capitalists that you will find in front of you. The truth of the matter is that when you  do a background search on the venture capitalist that are on board and then after that target those that are in the same business line as your venture , then you are more likely to get a better partnership deal than  if you were to approach any venture capitalists  that are not focussing on the line of your business interest .

This is so because venture capitalists that are in the same field as the of the pitching entrepreneur understand better what is being discussed out of practice and as such more likely to appreciate the ambition of the entrepreneur by offering a better deal.

3: Work with a financial advisor. Just think about it.

Imagine being offered the chance to have 1 million dollars invested in your start-up by venture capital?

Well for most entrepreneurs handling 1 million dollars or more is a rare opportunity and such there are high chances for accounting technicalities to be experienced which in turn might shake the relationships with the investors in the long run. 

Therefore in order to ensure that the allocated investment by the venture capitals is well utilized as intended, it might be a wise and time-saving idea to have a qualified financial advisor on board that would give the direction on where each coin will be spent appropriately and how to account for the same.

4: Talk to as many venture capitals as possible :

Another trick that would see you as an entrepreneur to increase your chances of getting a better investment deal is to talk to as many venture capitals as possible.  Of course I had hinted above that you should talk to venture capitals that are with your field of interest, however, this does not mean that you limit your chances by talking to only a targeted set of venture capitals. 

As much as you are hunting venture capitals that are within your scope of work, go ahead and pitch to as many as you can that fit within your entrepreneurial interests.  This way you will not only improve on your negotiation power along the way but also be exposed to many offers that would put you at a better place to decide on the most favoring terms for your start-up growth.

5: Push The Ones That Want To Go

Lastly, whilst pitching to many venture capitals that you will engage with, make sure that you note down those that asked many questions, showed interest or caught your attention in one way or the other.

Do not wait for an offer to be spoon-fed to you. Sometimes you have to note down those that you felt showed interest and follow them up even after the pitching exercise is done.

Be Pro-active Always

Up to here, you should note that you are either on the menu or part of the discussion whenever investment deals are being made between venture capitals and entrepreneurs. This means that if an entrepreneur is not able to initiate the talks on their interest, then the venture capitalist will be glad to do so and as a result, some accommodations might be omitted on parts that affect the entrepreneur.

─ November 2, 2019