Case Study: It's Just a Matter of Time
Pedro Santini has been a computer analyst for five years. In his spare time, he has developed a word processing software program that is more comprehensive and powerful than any on the market. Because he does not have a great deal of money, Pedro believes that the first step in producing and marketing this product should be to obtain the necessary venture capital.
The software program has been written and trial-tested by Pedro and a handful of friends to whom he gave the material. Two of these friends are computer word processors who told him that the program is faster and easier to use than anything on the market. Pedro believes that these kinds of testimonials point out the profit potential of the product. However, he still needs to get financial support. One of Pedro's friends has suggested a meeting with a venture capitalist. "These guys have all sorts of money to invest for new ventures," the friend told Pedro. "All you have to do is explain your ideas and sell them on giving you the money. They are always looking to back a profitable idea, and yours is certain to be one of the best they have seen in a long time."
Pedro agrees with his friend, but believes he should not discuss the matter with a venture capitalist until he has thought through answers to the various types of questions likely to be asked. In particular, Pedro believes he should be able to provide the venture capitalist with projected sales for the first three years and be able to explain the types of expenses that would be incurred. Once he has done this, Pedro feels that he will be ready to talk to the individual. "Right now," he tells his friends, "it is just a matter of time. I think that, within seven to ten days, I will be ready to present my ideas and discuss financial needs."
1. In addition to financial questions, what other questions is the venture capitalist likely to ask Pedro? What should Pedro be ready for? What are some questions a VC may ask that it is clear Pedro is not ready to answer, or to what questions would he have an incomplete or unacceptable answer?
2. Would a business plan be of any value to Pedro? Why or why not? Should Pedro have had one already? Will a VC care about a lack of business plan? Support your answer.
3. How would you recommend Pedro get ready for his meeting with the venture capitalist? List out what questions he should be prepared to answer, what documents he should have ready, and how he should prepare his elevator pitch.