Preparing For A Meeting With A Venture Capitalist

Questions the Venture Capitalist may ask

1.In addition to Financial questions, what other questions is the venture capitalist likely to ask Pedro?

2.Would a business plan be any value to Pedro? Why or why not?

3.How would you recommend Pedro get ready for his meeting with the Venture Capitalist?

1.The venture capitalist will ask questions to Pedro relating to his business and some of these are as follows:

• The first question that will be asked by venture capitalist to Pedro will be about the business. A brief description of business need to be narrated to the venture capitalist by Pedro so that he firstly get convinced with the business idea and then think of further like investment aspect (Carland, Carland and Carland 2015).
• The venture capitalist will definitely ask question about the barrier to entry for competition. This question come from venture capitalists that might not be as familiar with the overall industry and the ease for making the business takes place. The venture capitalist expects a technological barrier that might not exit.
• The venture capitalist will definitely ask question to Pedro on how will he survive or what are strategies to compete with already established companies in the sector. The venture capitalists will be curious to know how Pedro will compete with companies who already have huge market share, employee base and financial status and reputation in the current competitive marketplace.
• The venture capitalist will definitely want to know how much money Pedro needs to start the business or take a loan for it (Schaper 2016).
• The venture capitalist will ask question regarding whether Pedro has any existing customers or have spoken to any potential customers.
• The most important question asked by venture capitalist to Pedro will be about the marketing strategy (Baum, Frese and Baron 2014).
• The venture capitalist will be eager to know about some of the technical details of the business.
• The venture capitalist will ask Pedro about how he will handle the technological infrastructure for scaling activities.
• Venture capitalists will show interest in knowing the backgrounds of Pedro and the people who will be hired by them (Carraher and Paridon 2015).

The above questions are some of the probable ones that venture capitalist may ask to Pedro but it can differ at the same time. These are some of the common questions that can be asked by the venture capitalists but it is not possible for Pedro to be prepared for every question. He should be ready to even face new ones and be confident and comfortable to answer those questions at the time of pitching for own business idea or plan (Drucker 2014).

2.The answer to the above question is yes because drafting a business plan is the first stage that needs to be developed by Pedro. It is necessary to have a business idea at first place and then start with the planning phase. Pedro is quite confident that the word accounting software program developed will be more powerful and comprehensive as compared to others in the competitive market. If he has that positivity in his mind about his software, he should become a risk taker and invest his plan into real course of business. Starting a business is not an easy task, it need venture capital to start it and then after profit generation at the end. To explain in detail, it is much needed for Pedro to start with the business plan as it will definitely add value to his future business activities. Being an entrepreneur is like taking risk at each step. Business plan is a time consuming process and that need to align with value-added services. Therefore, business plan carries or add lot of value to the business that need high quality ventures as well as getting access to these are quite difficult in practical terms (Carland and Carland 2015). It is all about quality of the business plan that counts and makes it a successful one in the near future. Some of the essential component of the business is as follows:

• Uniqueness of the business proposition- Pedro firstly should give it a thought that whether his word accounting software program is a unique idea or not. It needs to be decided at first place that is it a new market or segment where business can flourish in the near future. In order to understand, Pedro had also asked his experienced friends about the program and received positive feedback from them as it is the most powerful and comprehensible programs than any others in the market. This makes the product unique and different from others (Kirzner 2015).
• Desk-based plan or real-life case- A business plan should not be written just getting ideas from internet and existing ones. It should come from individual who actually plan it or think of it before hand as in case of Pedro. He was a computer analyst for five years and was aware of his position and knows his specific area of specialization. To that, he made a word processing software program by his own (Chaston 2017). Now, this is called innovation and innovative idea that leads to attainment of success in the near future.
• Assumptions underlying financial projections- Financial assumptions should be realistic in nature as in case of sales volume, cost structure and many other financial aspects.
• Static or dynamic- A best business plan takes into account both static and dynamic approach to deal with the issues. A very rigid business plan is that where individual already start predicting the future with great accuracy. On the other hand, dynamic ones are that approach that involves getting out the market as well as start with trade operations and then assessing the information in the adaptable business competitive environment (Kuratko 2016).

It is important to understand the fact that business plan is all about how to approach the task. It is necessary to gather information as well as put up the important approaches together. Business plan is not about how it can be adaptable but on how it can be sustaining in the near future and developing it towards exploiting the target market opportunity (Acs, Autio and Szerb 2014).

The value of a Business Plan for Pedro

3.It is recommended to Pedro to prepare with the financial figures at first place before meeting any venture capitalists. Pedro should be ready to answer the questions with confidence. Firstly, he should prepare list of answers to the questions asked. On asking about the business, Pedro should present it in the most simple and powerful way that he can remember at that point of time. The background of the business should be told in a manner that venture capitalist should get impressed or curious about the business. Pedro already can get positive points in this question because he had developed and even tested his programs with his close friends who are already experienced (Singer, Amorós and Arreola 2015). This case scenario should be explained to the venture capitalist that he is planning to launch a developed work processing software program in the market. They key features or unique selling proposition of the program is that it is more comprehensive, powerful, and easier to use than any other software programs in the market. The software program is already written as well as tested by Pedro by giving it to handful of friends. Pedro should be ready to answer the question on technological barriers. Pedro needs to convince the venture capitalist that the software program is full-proved with no barriers of any such. The program is ready to be launched in a big market and devoted community that had strong key partnership or customers. The software program is so fast and reliable that it can easily compete with other programs in the current marketplace.

Pedro should be ready to answer about the competitor in the market where the new software program will be launched. In the competitive market, Pedro will answer that the word processing software program will easily compete with other programs that are present as it is fast, reliable, comprehensible and powerful at the same time. The product developed by Pedro has the capability to compete with top companies as it is an innovative program (Carland, Carland and Stewart 2015).

Pedro should be ready with the financial assumptions where it is not advisable to say number; rather Pedro should explain how he arrived at them. In practical terms, it need 6 months past launch of any product when it is expected that the cash flow to be positive. In order to arrive at the answer, Pedro need to think about calculating how long the money will last if he earn zero revenue from the business. It is advisable to count backwards by 4 to 6 months and that will let him know when he will be in need to start the process to raise more money. On analysis, if it is noted that money is going to last only for 4 to 6 months, then Pedro need to start looking for money on immediate basis (Bae et al. 2014).

Recommendations for Pedro to prepare for the Meeting

Pedro is an experienced computer analyst so he should be having contacts with those people who deal with software programs. Pedro should answer the question on potential customer smartly and confidently that he has some references and source that had already showed interest in the software program. This will make the venture capitalist feel that the software program that Pedro is talking about had already been tested by experienced people. Marketing strategy need to be elaborated by Petro in front of venture capitalists as they will be keen for knowing the strategies. Pedro should mention that he will keep economy pricing approach for his software program (Baum, Frese and Baron 2014). The basic version will be kept free where people will show interest in trying the updated ones for sure. Getting the software programs that is faster and reliable at affordable prices will attract the customers and that is marketing strategy proposed to the venture capitalists. Pedro will be all set to tell the venture capitalists about the technical details of word processing software program as it is one of the things that is his comfortable zone. It was properly developed by Pedro so telling about the technical details becomes easy for him. Pedro needs to summarize the points in front of the venture capitalists and make them realize that their money is safe and secure if they invest in Pedro’s business for sure. Future prospects of the business should be highlighted by Pedro and give details on how far it can attain or compete with other big business firms. Pedro should try to convince the venture capitalists without putting too much stress on facts and information. Pitching any business plan is all about crisp, short and concrete innovative idea that gets stuck on listener head (Storey 2016)

Reference List

Acs, Z.J., Autio, E. and Szerb, L., 2014. National systems of entrepreneurship: Measurement issues and policy implications. Research Policy, 43(3), pp.476-494.

Bae, T.J., Qian, S., Miao, C. and Fiet, J.O., 2014. The relationship between entrepreneurship education and entrepreneurial intentions: A meta?analytic review. Entrepreneurship theory and practice, 38(2), pp.217-254.

Baum, J.R., Frese, M. and Baron, R.A. eds., 2014. The psychology of entrepreneurship. Psychology Press.

Carland Jr, J.W., Carland, J.A.C. and Carland III, J.W.T., 2015. Self-actualization: The zenith of entrepreneurship. Journal of Small Business Strategy, 6(1), pp.53-66.

Carland, J.C., Carland, J.W. and Stewart, W.H., 2015. Seeing what’s not there: The enigma of entrepreneurship. Journal of small business strategy, 7(1), pp.1-20.

Carland, J.W. and Carland, J.C., 2015. A model of potential entrepreneurship: Profiles and educational implications. Journal of Small Business Strategy, 8(1), pp.1-14.

Carraher, S.M. and Paridon, T.J., 2015. Entrepreneurship journal rankings across the discipline. Journal of Small Business Strategy, 19(2), pp.89-98.

Chaston, I., 2017. Entrepreneurship. In Technological Entrepreneurship (pp. 1-24). Springer International Publishing.

Drucker, P., 2014. Innovation and entrepreneurship. Routledge.

Kirzner, I.M., 2015. Competition and entrepreneurship. University of Chicago press.

Kuratko, D.F., 2016. Entrepreneurship: Theory, process, and practice. Cengage Learning.

Schaper, M. ed., 2016. Making ecopreneurs: developing sustainable entrepreneurship. CRC Press.

Singer, S., Amorós, J.E. and Arreola, D.M., 2015. Global entrepreneurship monitor 2014 global report. Global Entrepreneurship Research Association, pp.1-116.

Storey, D.J. ed., 2016. Entrepreneurship and new firm. Routledge.