HOW do I coax a venture capitalist into funding my idea (any idea)?

What exactly does a VC look at before he takes the go or no-go decision on an idea?

-- Sheila Kumar, 31, working professional and budding entrepreneur in Bangalore

You coax the VC into parting with money by making him or an offer he or she cannot refuse! It's useful to keep the following five points in mind during the 'coaxing'.

The team

This is the most important aspect of the VC's decision-making. Given the high risks of the venture and the minimal downside protection (minimal protection for VC if the company sinks), the only real collateral the VC has is the team. Integrity, academic background, work experience, ability to deal with high pressure and challenges, ability to attract and retain customers, employees, and partners, are some of the qualitative criteria that VCs use for evaluation.

What is the team's reputation; what do ex-colleagues, subordinates and supervisors think of the team members? Do they want to work with them again? How did the team members behave during moments of crisis?

Are they trustworthy? Is the team focused on ownership control and protection of their stakes or is the team focused on enhancing the size of the total pie? Is what is good for you also good for your startup?

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Remember that what is good for your startup is almost always good for you. However, what is good may not be good for your startup. Whatever your final role, you will always be known as the founder or CEO or VP of a successful startup.

No VC wants to back someone who wants to continue to remain CEO of a small startup at any cost. And it is your startup that is the focus -- not you as an individual. So, it's important to be able to de-link your startup from your individual self. This is a hard thing to do but it's must, to be able to take dispassionate decisions.

Will the team hire people based on loyalty or competence? Remember, loyalty and competence are not substitutes.

Does the team think of the VC as a partner or as an unavoidable evil? Are you willing to be transparent and share all information with the VC? Maintain the highest standards of governance? Is family involved in the company as key employees, as suppliers, partners, customers? Have these been disclosed?

Does the team demonstrate confidence or are they arrogant and over-confident? Will they be humble enough to learn from experiences including those of others?

Got a question for wealth expert Sanjay Anandaram on entrepreneurship? Post your entrepreneurship queries.

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