IT is difficult to win the heart of a venture capitalist.

For every 100 business plans that are presented to a venture capital (VC) firm for funding, probably 10 or so receive some serious scrutiny, and only one ends up getting the funding.

“VC doesn't mean Very Charitable but actually stands for Very Calculative,” OSK Ventures International Bhd chief operating officer, Eddie Yap, quipped when sharing his experience on VC investments.

It takes more than just well-pressed office suits and nicely done presentation notes to charm the venture capitalists.

Besides the usual criteria such as business model, scalability, industry growth trend, market size and competition, venture capitalists pay a lot of attention to management attitude in their evaluation process.

It is the most difficult part to evaluate, factors such as management capability, trustworthiness, integrity and reliability are very subjective.

“Textbooks do not teach you that. There isn't any rule or formula to follow,” said Yap. In this instance, experience and gut feeling come in handy.

Venture capitalists spend three to six months just to get to know a company's management before drawing any conclusions.

Therefore, business owners have to be very patient and spend time with the venture capitalist if they are really serious in having them as partners. And commitment is important to win their hearts.

Venture capitalists will always want to see that the owner is committed to the business.

“We must make sure that the owner of the company has the vision, passion and commitment toward the business,” said BI Walden Management Ketiga Sdn Bhd executive director Chok Kwee Bee.

She admitted that venture capitalists were risk takers. “But we are willing to take only calculated risks. We are answerable to our shareholders.”

Yap concurs that the owner's commitment is crucial.

He said a yardstick to measure an entrepreneur's commitment was the amount of money he had poured into the business. “If he is staying in a nicely renovated bungalow but tells you that he has spent every last penny for the business, it is not a good sign to me,” said Yap.

Reference checks are a must. The venture capitalists would speak to industry players and parties who know the owner to gain some insights on him or her. They will never want to partner a stranger.

“We need to visit their offices to find out how he or she treats the staff, how they work as a team,” said Chok.

She added that it was also necessary to meet the business owners outside the office environment. “We may meet them for a drink to get to know the different facets of the person.”

Nevertheless, many business entrepreneurs complain that they failed to obtain funding from VC firms because they did not know the tricks when presenting their proposals.

Chok, however, pointed out that business owners should find out from VC firms the reasons they failed.

“They should be more pro-active and have discussions with us. In fact, they should challenge and convince us,” she said.

Like any relationships, effective communication is always fundamental.

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