How do venture capital companies operate?

Although the operation process of each venture capital company is different, in general, it basically includes the following steps: 1. After getting the summary of the business plan at the first time, scan it quickly in a short time to decide whether it is worth spending time on this matter. Second, the exchange between venture capitalists, relevant venture capitalists get together regularly to study the project proposal that has passed the preliminary examination and decide whether it is necessary to conduct an interview or reject it. Interview If venture capitalists are interested in entrepreneurs' projects, they will invite entrepreneurs for an interview, which is the most important meeting in the whole process. Four. If the initial interview is successful, the venture capitalist will carefully evaluate the technology, market potential and scale of the intended enterprise and management department through strict audit procedures, including contact with potential customers, technical consultation and multiple rounds of talks with management departments. V. List of Terms If venture capitalists think that the applied project has bright prospects, they can start to judge the investment form and estimate. Usually, entrepreneurs will get a list of terms and conditions, which will last for several months. Generally speaking, the early venture capital is large, the potential profit is high, and the later investment risk is small, but the profit is small. Venture capitalists try to adapt their investment returns to the risks they take. Venture capitalists analyze the investment value in the next 3-5 years according to the specific situation, first calculate their cash flow or income forecast, then decide the risk according to the evaluation of technology, management department, skills, experience, business plan, intellectual property rights and work progress, and choose the appropriate discount rate to calculate the net present value of their venture enterprises. After discussion, enter the stage of signing the agreement. Once the final agreement is signed, entrepreneurs can get funds. In most agreements, it also includes the exit plan. 7. After the investment takes effect, the venture capitalist will own the shares of the venture enterprise and occupy a seat on the board of directors. Most venture capitalists play the role of consultants on the board of directors. As consultants, they mainly put forward suggestions on reforming the operation mechanism to obtain more profits, regularly contact the creators to follow up the operation, and regularly review the financial analysis reports submitted by accounting firms. In order to reduce the risk, venture capitalists often join hands to invest in a project, which reduces the risk. Secondly, it also brings more consulting resources for venture capital enterprises, provides multiple evaluation results for venture capital enterprises and reduces errors. How to bargain with investors One thing that many excellent start-ups find it difficult to reach an agreement with investors is the price of the enterprise. Entrepreneurs always want to sell their enterprises at a good price, while investors are often "stingy" and keep pushing down prices. From this perspective, it is essentially the same as all other businesses. If entrepreneurs want to have reasonable pricing, they must first practice hard, because the price is the embodiment of enterprise value after all, and a mess will never be worth a good price. In addition, there are some methods for reference. 1. Reasonable financial forecast The main reason why startups, especially high-tech startups, can attract funds is the high growth and high return in the future. Therefore, in order to win a suitable price, it is necessary to have a reasonable expectation for the future, that is to say, the evaluation of enterprise value is not difficult to calculate in the end, but to work hard in the early stage: a reasonable prediction of the company's future growth and a reasonable prediction of the company's expenses and costs. From the perspective of venture capitalists, on the one hand, they care about the specific figures in financial statements, on the other hand, they are also very concerned about the correctness and effectiveness of financial forecasts. The financial forecast of an enterprise is likely to be inconsistent with the views and estimates of venture capitalists, which is normal. It also requires entrepreneurs to understand investors' ideas as much as possible, seek common ground while reserving differences, and try their best to supplement and improve their own estimates, which is well founded. It should be noted, however, that the financial forecast of an enterprise can't have common sense errors and intentional optimistic estimates, which may ruin the financing. At the same time, you must never deliberately hide some key information. Entrepreneurs should believe this: venture capitalists are smart enough to "circle money" from them. Second, it is necessary to negotiate an appropriate valuation method and a reasonable price. Of course, the first point is that everyone must first have a "price" here. There are many ways to evaluate start-ups. Either way, it should be a way that everyone agrees with, so that both sides can have a platform for discussion. Otherwise, investors will have no possibility to discuss their questions with you. For high-tech enterprises, excel is generally used to make a cash flow statement, which is discounted according to the cash flow. When a start-up company uses this method, what kind of discount rate is also a very realistic problem: the discount rate of 30% and 50% has a great influence on the existing value of the company, sometimes even several times. When the startup company has not verified its ability to make money, the discount rate is relatively high, generally 40% to 50%. In addition, this method also has a final value problem, which requires a series of assumptions. Every company is different, and it is generally a few percent of the actual value. With the right method and reasonable price, you can be confident when discussing with investors. Third, set an adjustable price. Entrepreneurs and investors should be able to take some flexible measures when talking about prices. Because investors have done a lot of due diligence, but after all, they are not experts in this industry. The market is ever-changing and there are many unforeseen risks. In order to ensure their own income, investors certainly hope that the lower the price, the better. If entrepreneurs can think from the standpoint of investors, I believe they can understand the difficulties of investors. In order to reduce the risks faced by investors, entrepreneurs don't have to bargain at the beginning, but can set up an elastic clause. Let investors invest in stages. When the first money comes in, the price can be slightly beneficial to investors. If at a certain stage, the goal set by the entrepreneur is reached and investors' funds are needed to follow up, then the price can be slightly higher. In this way, from the whole financing process, it may be that the price is beneficial to entrepreneurs and reduces the risk of investors. It should be said that both sides may be happy. Fourth, when value-added services are used instead of price investors to invest in an enterprise, some resources that enter at the same time as capital cannot be completely measured by money. On the premise that the price is acceptable, entrepreneurs can make full use of the resource network owned by investors and enjoy better value-added services, which is virtually equivalent to raising the price, and this kind of help may be more important than a little higher or lower price. From the investor's point of view, he became a shareholder of the startup company, and of course formed an interest body with this company. As long as it is within his resource network, he will try his best to help startups solve it. Even if he is not in his resource network, he may find some solutions. Moreover, in this case, he will feel that he is not only a provider of funds, but also has many other resources and functions. He will feel that he is highly valued and they will be very happy.