How to Use Venture Capital to Grow Your Start-Up

Scaling with Venture Capital

Building your business from the ground up is the American dream. But to be a millionaire, you need to build a multi-million-dollar business. To do that you need to scale your business and that takes an infusion of cash and lots of it. 

Successful businesses can grow organically, fueled by their cash flow and profits. But to grow quickly takes substantial capital, usually from outside investors.

When businesses reach the ready-to-scale stage, they often seek Venture Capital (VC). Below is a quick guide and when, how, and where to get venture capital and other funding sources.

What is Venture Capital (VC)?

Venture capital is when investors use private funds to finance the expansion of start-up companies. Many young companies simply do not qualify for traditional bank or institutional financings. Start-ups do not have a long track record, and many are pre-revenue or just beginning to generate sales. 

Banks shy away from start-ups for good statistical reasons. Only 40% of start-ups ever turn a profit, and that is typically not for the first three to four years. And eventually, 90% of all start-ups fail.

But venture capitalists look at these statistics differently. They are betting on the start-ups that make it big with exponential growth. VCs invest in start-us all the time and often offer technical, legal, and managerial expertise to help improve the odds.

And so venture capital is usually given to small companies with exceptional growth potential, or to quickly growing companies poised for continuing expansion.

And since the risk is higher, VC firms demand above-average returns for their investment. The higher the risk, the higher the return.

Advantages and Disadvantages of Venture Capital

If your start-up is ready to grow big quickly, venture capital can be an excellent option for you. But because the investments are usually large, your start-up must be prepared to take that money and have a plan to use it right away.


One of the most significant advantages of venture capital is if your start-up fails, you are not obligated to pay back the money. This is certainly not true with banks and other institutional financing arrangements.

VC firms come with a ton of business and institutional knowledge. And VC firms have a network of other businesses that help start-ups successfully expand. After all, the VC firm literally has a vested interest in your success.


Venture capital firms expect a high return on their investment within a few years. This means that you should have an exit plan to pay off the VC firm with an acquisition, an IP, or an additional equity partner down the road to replace the VC firm’s equity position. 

VC funds are large and are for rapid expansion. If you are just looking for a smaller amount of money to help grow your business slowly, VC funds may not be for you.

How Much Venture Capital is Available?

When you are starting and running your business, making money can be difficult, and every penny counts. It seems ironic that there is an ocean of financial capital available to companies if they know where to look and how to get it. 

The amount of venture capital raised in the US alone is more than $130 billion annually, according to Statista Research Department. They define venture capital as a temporary equity investment in young, innovative, non-listed companies that stand out on the market. The largest majority of venture capital goes to internet and tech companies, followed by health care companies and other industries.

How do I get Venture Capital?

First, you must decide how much money you need and for what purpose. Venture capital can bring you a large amount of capital for rapid growth and expansion. But you may not be ready for that much cash, control, or obligations.

There are other forms of raising capital that you may want to try first.

Many businesses start their financing with friends and family investors. Some smaller private investors may be interested in your industry. If your business model fits, you might be able to get small-business loans or grants. Crowdfunding is a current popular way to raise initial capital for expansion.

And before getting backing from venture capital firms, some companies use Series Seed Funding, with smaller and increasing raises of money in Series, A, B, C, etc.

But if you are ready to use venture capital money, you need to understand what venture capital firms and looking for from you.

Find Venture Capital Firms for Your Industry.

Finding a VC firm to work with is part art and science. Searching for the best VC firm is a numbers game, and some companies spend months and months sending out hundreds and hundreds of pitch decks and proposals. But a little bit of thought and research can save you months of time and frustration. However, finding the right VC firm will usually take dozens and dozens of contacts.

The best way to reach a VC firm is with an introduction or reference from someone they know. Warm emails go to the top of the pile. Cold emails do not.

VC firms see hundreds of proposals monthly and spend about four minutes looking at your pitch deck or idea before deciding to move forward or not.

Know that VC firms are looking for exponential growth. VC firms may lose money in 9 out of 10 investments, so their winners have to be great investments.

And the VC firm will typically give you one of three answers

  • Not interested 
  • You are too early
  • We would like to see more

You need to be prepared for and learn from all answers. If a VC fir says you are too early, take it as a compliment. Stay in touch and send them monthly updates.

If they say they would like to see more, have all your documents ready and be prepared to move quickly.

The Truth About Venture Capitalists

Thousands of companies approach VC firms armed with elaborate pitch decks and pages of financials.

But venture capitalists are people. They are looking for a great story about a company ready to take off. And it should be easy to understand and explain. Alibaba was called “the Amazon of China.”  The Airbnb pitch deck said, “Book rooms with locals, rather than hotels.” Simple

And VC firms are interested in people before numbers. They know that the best founders surround themselves with exceptional people early. Financial are necessary, but VC firms want to know you have talented people to help you grow quickly.

Determine Needed Funding

You need to know how much funding you need and what you will do with it.The amount is determined by several factors including:

  • How much capital do you need for your business
  • The current stage of your business
  • Valuation and dilution preference

Determine how much dilution you are willing to give up. Dilution is how much ownership you will give to new investors. The less you raise, the less you give up.  

Get Your Pitch Ready

VC firms want you to have a pitch deck and a business plan. They will look at the pitch deck, but usually, skip the business plan until they move forward. But they want you to have one so they know you have put careful thought time and energy into a plan to move forward.

Your business plan needs to be strong and detailed, but realize they will skim it in the beginning, so format accordingly.

Every business is a little bit different in terms of what’s needed to prepare for a venture capital round. In general, most companies will need to prepare a business plan, pitch deck, and product demonstration. Additionally, you may be asked to provide detailed product documentation and references to your potential investors.

Your pitch deck should be tailored to the individual VC firm. It should be short and to the point- no more than 12-15 slides.

Realize it will be read in about 4 minutes, so save the details for later. Make it impactful and persuasive. There are great pitch deck software products, so making a powerful pitch deck is not difficult or expensive.

  • What problem your product or service solves
  • How you provide the solution
  • What is the current market?
  • Product or service description
  • How your product or service is performing and traction for further growth:
  • Your team
  • Your competition
  • Projected financials (only the basics on the pitch deck)
  • Amount of funds needed and why.

Two quick tips:

Do not email the pitch deck. Use a company like Slidebean to build the deck and send a link to the VC firm. That way you can see who accessed the deck and how long they spend on each page. 

And never send an NDA to a VC firm with your pitch deck or financials. They receive hundreds of submissions and do not want the legal liability of signing hundreds of NDAs. Sending them an NDA will show them you have not done your homework.

Start Contacting VC Firms

Remember this is a process and don’t’ get discouraged. 

You can learn from every answer, even if it is a no. 

Keep great records and stay in touch with those firms that have any interest. The process usually takes a few months. But remember that VC firms are funding more than $130 billion in the US every year. With the right VC partner, your can take your business to the net level

Let Our Team Help You

If you are curious about how to grow and finance your business, let us help. We can help with business valuations, financials and know how to work with VC and funding firms.

​​ At CE Accounting, we don’t just file forms and crunch numbers. We analyze your personal and business goals to minimize your tax obligations.

We keep up with the laws, rules, and ever-changing tax code, so you don’t have to.

Call today and let us show you how using a qualified CPA is your next best step.

“This article is not intended to give, and should not be relied upon for, legal tax advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of a qualified professional.”