Many of us believe that we have the next multi-million dollar idea that will revolutionize an industry. However, funding is often the biggest obstacle to getting a project off the ground. Raising capital is not an easy thing to do in any economy, let alone a struggling economy. Elevator speeches and elegant billboard presentations will land you in the front door of an office, if you’re lucky.

The goal of any VC is to financially benefit their investors through their company. They will buy, filter whether it is successful or not, and find an exit strategy. It’s important to be fully prepared when using venture capitalists for your business. Here are five basic guidelines to follow when financing through venture capitalists.

1. Your launch time
Most venture capitalists aren’t looking to buy an idea, but to see how well their company has launched so far. If they see that you didn’t make the effort to start the business, they won’t make the effort for you to finance the business. Business plans are about as useful as a stack of old magazines to investors because no venture capitalist will ever read one. Spend the time getting your business off the ground instead of sitting behind a computer writing a 100-page business plan. Your company does not need to be in a fully operational stage, but you must have the ability to show investors that you have started a successful start-up for your company. Let investors know the direction you see the company going and apply for the funds to allow your business to continue in that direction.

2. Meet the investors
In today’s market, most venture capitalists work through large companies, which sometimes makes it difficult to find the personal business relationship most people predict you’ll find. There are different types of investors for the startup phase, the expansion phase, and the purchase phase. It is important that you clarify what type of venture capitalist you need to speak with before applying for funding. It is difficult for any individual to give money to someone they do not know or trust. Do your research before you go to any meeting and search company websites to see what types of companies they have invested in. Ask current companies what their experiences have been like through financing with that particular venture capitalist. Most importantly, when looking for an investor, make sure you take in all the information they have to offer you. They wouldn’t be investing if they didn’t have an idea of ​​where your business could go, so it’s important not only for your financial backing, but also for your trading experience.

3. Back to basics
Once you’ve started your business and know exactly what type of investor you’re looking for, it’s time to prepare your pitch to investors. Make your presentation simple enough that a group of third graders can understand what your business model is. If they can understand, any venture capitalist can too. Dress to impress and show confidence in your business and the direction you see in the future. Bring samples or prototypes of your products so investors can get a hands-on experience and get a tangible idea of ​​what your company has to offer.

Take the time to stop and ask investors if they understand your business ideas and ask if they have any questions. If they have questions and you don’t know the answers, just say you don’t know. They most likely have the answers for you, that they can help your business if they do indeed fund you. Lastly, make sure they know exactly how much financing you’re requesting and what share of the business they’ll receive for that financing.

4. Don’t put all your eggs in one basket.
It is likely that if a venture capitalist likes the business model you have shown, they will try to renegotiate the terms of their participation. It is important that you are prepared before the fact with a written proposal for each individual. In this folder, you should include any information about your company, bylaws, current finances, and operating agreements. Showing your proposal to each investor will allow them to know your current thinking and your projections in the company, in addition to setting a guideline for the negotiation. If your product or service is something highly sought after by investors, it puts you in control of the situation. If a venture capitalist sees that another investor is interested, he creates competition and ultimately gives his company credibility. This will most likely turn your negotiations in your favor, reducing each investor’s share until you reach a deal you feel is best for your company.

5. Maintenance
Once your company is financed through a venture capitalist, it is important to maintain a relationship with investors. Always remember that you can control the company, but investors can cut off your financing at any time, so make them an important part of all decisions and include them in the success of your business. Maintain constant communication and allow access to financial reports to your investors, giving them the peace of mind that you are running a successful company. Healthy relationships between companies and investors can lead to potential future expansion with secure financing to back projects.

Today’s economy makes it increasingly difficult to find financing through banks, which is why many people turn to venture capitalists. Always remember when going through investors, make sure you are prepared before applying for financing. Know exactly how much your business needs and how much your business is willing to give up. Create competition among investors and always maintain a relationship with any potential venture capitalists that are involved in your company. If you follow these guidelines, using a venture capitalist to finance your ideas will be a smooth transaction.