There has been a lot of talk, particularly around the explosion of Dot-Com businesses, about venture capital, or VC, funding. At the surface, it sounds like a terrific opportunity. Go to a group of investors or an investment management company, make your pitch, and take home millions of dollars with which to start your business.

Unfortunately, it¹s not that simple. Only seven of 1,000 businesses that take their ideas before venture capitalists receive funding, according to the Profit Dynamics Inc. 1998 Venture Capital Survey.

One of the most important things to do when looking for venture capital of any kind is to do your homework. Does the company you're targeting fund the type of business you¹re trying to start? If not, you need to look elsewhere. Similarly, if the company has funded many similar businesses, check to see if any of those businesses have already begun working with a nearly identical business idea as yours‹it¹s unlikely a VC firm will fund the same idea twice.

Is VC Funding What You Need?
It is important to consider whether you really need VC funding or not. Generally, the criteria is whether your idea is a "multi-million dollar idea" or not. Is this something that will become a national corporation? Are you willing to open your idea up to additional large investment, and the additional scrutiny that will bring? Are you looking to grow your business quickly and make substantial capital investments in office or manufacturing space, inventory and computer equipment? If the answer to all these questions,not just one or two is yes, then perhaps VC funding is what you¹re looking for.

How to Contact VC Firms and What They Want to Hear
According to Profit Dynamics Inc.'s 1999 VC Survey, 42 percent of VCs say they prefer to be contacted initially through e-mail. The best thing to send, according to the survey data, is a two- to three-page executive summary; 56 percent of VCs like to see that summary first; 22 percent prefer to see a 10- to 15-page mini-business plan.

It is important to note, however, that you should have a full business plan ready before you make that initial contact with the VC firm. There is nothing worse than contacting such a firm and then having to scramble to pull together a complex plan without any preparation time. Also, that lack of preparation will reflect poorly on you as a business owner. Have everything planned out and ready to go before you send that first e-mail, and you will be much more likely to be one of those seven companies out of 1000 that gets successfully funded.

Who Are the VC Firms?
Many VC firms currently focus on technology start-ups; that is where the hot economic growth is taking place, and make no mistake, these firms want to make their money back plus a healthy profit. A list of firms to examine and consider follows, including their area of interest. Be sure to look at each firm closely. Each one has a different area of interest and many fund businesses at different stages. Some fund start-ups, but others do not provide funding until a business has become more established.