JOHANES LIM CONSULTING

Venture Capital Consultant

Angel & Institutional Investors
If you are a private angel investor or an institutional venture capital firm, Profit Booster Indonesia provides access to many high growth investment opportunities at different stages of development and funding. As a part of our national network, information on these projects is available for your consideration
Email us: doktorjohaneslim@gmail.com

HOW TO MAKE MONEY FROM VENTURE CAPITAL?

Venture Capital Basics and Business Development

Did you know, there is more money looking for a "good deal" than there are "good deals" looking for money?!
It's a matter of learning how to access capital sources, preparing the required documentations, providing answers to the six questions all investors will ask, and addressing four critical management factors.

Profit Booster Indonesia recommends that entrepreneurs put themselves in the place of investors, who want to know the answers to these six key questions “What Every Investor Wants to Know”:

• How Much Can I Make? (mostly 40% ROI expected)
• How Much Can I Lose? (All of it plus any loan guarantees, law suits, time)
• Who Says This Thing Will Work? (Third party verification of all business plan items)
• Who Else Is In The Deal? (The management and investment team and their qualifications in this field)
• How Big is the Market, and How Will the Company Reach the Clients? (Verification of marketability)
• How Do I Get My Money Out and When? (Exit strategy for IPO, Acquisition or Merger)

What and why Venture Capital?

Venture capital is invested in closely held companies in exchange for a percentage ownership for the venture capital firm.
You'd like to get venture capitalists to take a look at your company. But how do you do that? What do venture capitalists look for when deciding to invest in a company?

• Strong management. The first requirement is a strong management team, with relevant experience, drive, self-confidence and expertise. Many venture capitalists even rephrase the old cliche about what is most important in real estate -- "location, location, location." For many venture capitalists, it's "management, management, management."
• A growing market. The next requirement is whether your company is targeting a substantial and rapidly growing market. Does your company have a reasonable chance to successfully enter the market and obtain a strong market position?
• A unique product. Does your company have a proprietary or differentiated product? Does your product offer benefits over existing products? Does it have patent or other proprietary protection to forestall competitors?
• IPO candidate or acquisition target. Does your company have the possibility of growing quickly and becoming an attractive acquisition target or IPO candidate? Venture capitalists are concerned about how they will realize liquidity and receive value for their investment.
• Sound business plan. Is your company's strategy and business plan sound?

Remember, most venture capitalists expect to see a well-thought-out, coherent business plan. Significant gross profit margins. Can your product or service generate significant gross profit margins (40 percent or more)?
Large profit margins give a company room for error and enhance its attractiveness for a possible IPO or acquisition.
If your own projections and plans show only modest growth, or if the growth of the business is limited by technology or competitive factors, don't expect to get financed. Most venture capitalists won't be interested unless the company can grow to at least $25 million in sales within five years.
If venture capital seems like the answer to your company's needs, you should be aware of the pros and cons inherent in dealing with a venture capitalist.

The pros
There are plenty of good reasons to acquire venture capital:

• Opens more doors. Many VCs enter a deal as a lead investor. They will bring you suitors with more money if you need it.
• Backup expertise. As most of them operate in their fields of experience, they can act as backups in the areas they know best. For example, financial control, marketing, production planning or even stress management.
• Familiarity with the trade. VCs can also assist in recruiting the best managers for your company. Within the industry they are thoroughly familiar with, their antennas are always up. They know who is a competent manager and who is not.
• Your best pal. In many cases, they not only provide funds but also strategic assistance and play supportive roles. Management will assist and advise, but not supplant. Many will even share their industry savvy with you.
• Sounding board. VCs can be your closest friends in the darkest hour. You can use them as a sounding board for your decision-making. Data indicates that technopreneurs consider this aspect as one of the most crucial contributions (apart from money) to the success of the business.
• Network connections. VCs are often well connected and can bring in customers. Their involvement in your business means you will have access to their extended network of experienced entrepreneurs, leading technologists and service providers.

The cons
There are some downsides to acquiring money from a VC:

• Short-term capital. VC is short-term capital. VCs come in to realize the potential of your business. The moment payout is in sight, they're gone and you're home alone again.
• They want to run your business. Because you are using their funds, VCs will want to sit on your management and corporate boards. Some may not know how to run your business, and most are financially orientated.
• You're answerable at every turn. VCs can have preconceived ideas that they insist on imposing upon you. It also follows that VCs may have a tendency to press the panic button at the slightest chance of crisis. You are also answerable at every turn.
• Loss of business control. VCs may insist on extra voting rights over key decisions, and you may end up divesting yourself of more control of your company than you are comfortable with.

Most venture capitalists purchase common or convertible stock rather than burden the fledgling enterprise with interest payments on debt or debentures. They may possibly want more than 50 percent ownership. Additionally, while the venture capitalists may insist on sitting on the Board of Directors or offering management and technical advice, they are rarely interested in the day-to-day management of the enterprise, unless its survival and their investment is at stake