My background in this is that I did several pitches to VCs and have worked for several VCs in the last couple of years, mostly on the technical side but you get to see a good part of the process as perceived by the companies pitching. I also helped one company get seed capital, because I thought they showed great promise.

So, the following is from personal experience, which is limited but it may be useful.

Some VC's are more forgiving than others when it comes to following proper form, but even if they're forgiving they'll appreciate it if you know your stuff before you apply. Their agendas are almost always quite full and the amount of time they have to spend on you is limited, so you should use it wisely to maximize your chances of success.

== before you start pitching ==

- First off, let's dispel a popular mistaken belief, getting an investment is not 'success'. It's a step towards a possible success, and it may give you a better chance, but it basically comes down to another party estimating that you have a chance of success and that they want a piece of that success in return for an investment.

- You have to know your stuff. This of course, sounds completely obvious but it really is surprising how many people will pitch to a VC (in itself something of an opportunity) and completely blow it by not having done basic homework. A fairly recent example, someone wrote a businessplan around a certain type of person and was pitching for capital. Halfway through the presentation one of the partners of the company being pitched interrupted and asked 'And how many of these people do you know ?'. A sensible question. The answer '0', more or less ended the interview, even though it went on for a while beyond that point, for politeness' sake.

Not knowing your target market, not having done any basic research in to the demographic that you intend to sell your product to is lethal.

As is not knowing your competive arena. If you come up with a brilliant plan that looks like some successful competitor is already executing and you don't know they exist that's probably the end of the ride for you. You really need to spend solid time on mapping out the competition. Know their weak points, know your strong points.

In short, know your stuff, expect to be challenged.

- Make sure you inform your partners about all your moves and get them on board before approaching a new party. To find out that someone isn't on board after you approach a VC is a real problem.

If there is any problem between the founders get it ironed out before you start making pitches, and make sure problems are resolved to all parties satisfaction.

- It isn't a must to be incorporated before approaching VCs, but it can be a problem if you picked the wrong form.

- if there are pending lawsuits it is usually a good idea to get those resolved before pitching as well. This can royally screw up your timing, a window of opportunity can easily close while you attend to this.

- you have to know what it is that you want that investment for, no matter how sure you are that you'll be able to spend it wisely, you need to pretty much lay out how you intend to use the money an investment will bring. This is where a businessplan comes in. These are no longer the 90's, so please no columns with more than 9 0's in it. Keep it realistic and make sure that it contains realistic estimates for the costs of the various components of your business. Factor in market rates for salaries, office space and so on. Get a feel for what it costs a business of a similar size to operate.

- scouting for capital takes time. Sometimes LOTS of time. Make sure you have that time, and make sure that your business does not suffer from this. Farm out as much of the work to your co-founders as you can, spread that load. It will give them more insight in the process and it will get them more involved.

== approaching target VCs ==

- when approaching a VC try to find out the names of their 'spotters', and pitch the spotters first. That way, you essentially get two chances, the spotters might be able to tell you how to shape up your presentation in areas where it is perceived as weak.

- VCs are busy. Most of them are very busy, you have exactly one shot at making a first impression. One good way to get their attention is to send a single sheet executive summary to one of the junior partners if there are multiple partners, otherwise to a senior partner. If they're interested they'll hand it off to one of their underlings who will contact you, or they might contact you directly. Don't harrass them, but do mail two weeks or so later if you haven't had a response to inquire what they thought of it.

== a word of warning ==

- There are 'middle-men' in the VC world that sell their services to unsuspecting young companies in order to get them capital - so they say. The trick is that once they have your signature on a piece of paper that gives them exclusivity they no longer have to do anything. If you find your own capital they will claim their pound of flesh.

Selling 'access' is meaningless. For the price of a google search you can find more VCs than you could possibly hope to pitch, if your stuff is good and you can present it well you will most likely succeed in finding funding, even if you do not have an inside track. Work your network, get on that phone. It's a lot cheaper than giving some loser equity for doing nothing.

If you can't find anybody to refer you then maybe your product isn't that good, or maybe your team has a red flag. Ask why if you won't get a reference.

== you've been spotted ==

- If a VC approaches you because one of their spotters has alerted them to your existence then don't panic. They are simply interested, you've materialized on their radar and they would probably like to establish some kind of contact to be kept in the loop. Give them a bit of backstory about your company, don't gush out anything that you would not want a competitor to know.

If at some point you feel that the time for approaching investors is ripe then inform them. Until then simply keep them up to date of major public developments, if you get to know them a bit better you can ask for advice on business issues.

- make sure the VC that is asking you for information has not invested in a competitor! A bit of googling goes a long way before you start giving out confidential data. This is obviously not the normal case, but it does occasionally happen.

== pitching ==

- get an NDA signed by everybody that you are going to give confidential information if you think that there is something non-obvious about what you are going to present. Most people are over protective in this respect, but every now and then there is a bit of data that is really crucial. Think about if you even need to reveal it at this stage.

- Don't assume anything. You are pitching to people that are probably whip smart, but they don't have your background in your field. They will know business, but they may not know a thing about what it is that you are doing. So when you use words that are 'obvious' to the incrowd keep in mind that you are not talking to the incrowd. Get out of your techie mindset (unless the VC you're pitching to is extremely technical) and present your company as though building up from the ground.

- if you're the CEO of your fledgeling company keep in mind that you are speaking for everyone, not just for yourself, and make sure that you do not let any conflict of interest arise between you and the other founders (you really should have at least one co-founder). One of you should speak for all of you, but that one person should have the unconditional backing of the others.

- You pay your way (and they pay theirs). A VC is not under any obligation to refund you air-fare, hotel costs, legal, presentational or any other costs associated with the pitch. Conversely, you are not obliged to pay for any of their costs, such as legal and technical due dilligence, transportation and so on.

If you're short on cash and you want to pitch to a VC that is in an out of the way location for you, then the reality is that you may not be able to afford to pitch to them.

A recent weirdness is VCs charging an 'entrance fee', this is something to stay very far away from, anybody that wants an entrance fee is making money OF you, not WITH you and that is why they shouldn't be able to call themselves Venture Capitalists. Maybe Vulture Capitalists is a better term for such characters.

- know the terminology. If you don't know an NDA from a MOU then you will have to spend some time on that. Having your eyes glaze over halfway an interview or agreeing to something because you do not know what it means and you don't want to admit your ignorance is simply stupid. It does not mean that you have to know everything, it simply means that it is a lot easier to have a conversation with people if everybody is aware of the meaning of all the terms. It saves time, and makes you come across more professional, and hence will increase your chances of success (both to find capital as well as in succeeding with your venture).

- Other than NDA's nobody expects anything to be signed when it is delivered. So, do not sign stuff that you haven't had the time to go over, with your partners and your lawyer.

- When pitching time comes around: Sleep! Again, dead obvious, for sure. But the best way to get around being nervous is to be well rested. If you have to pitch several parties then try to schedule a break between them. I know that when I was done with a pitch I would literally be exhausted, unable to drive back to the office. It takes every bit of concentration and energy from you in a few hours time.

- never go alone. Bring someone along that you can trust and that will give you a no-holds barred evaluation of how you performed.

- if it doesn't work out, don't despair. No angry letters to a VC that rejected you, instead, thank them for the opportunity and ask them if it is ok to keep them informed of your further development.

Ask them why they rejected you, in as much detail as possible.

Not as a way to get the door to open again, but simply because that is the best you can take away from this pitch, a lesson on what went wrong or why you did not make the grade.

Try again, and do it better next time.

== due dilligence ==

- Due Dilligence usually consists of several parallel jobs. There are legal, technical and financial stages.

Legal is to make sure that you own what you're selling, that all the proper procedures and contracts are in place and that there are no hidden liabilities. Usually this will also look at intellectual property issues and patents if applicable.

Technical is to make sure that what you've built is solid and that it will not open up the investor to a potential liability because of technical weaknesses.

Financial is to make sure that your books are in order and up to date and that there are no skeletons in the closet.

Due Dilligence is a VERY invasive process, depending on the quality of the people that the VC hires. My own specialty, technical due dilligence usually takes the form of a several hour long grilling of the CTO of a company with anybody they wish to call on, subsequently they get a long list of follow up questions via email. I will want to see your code, meet your developers, look at your documentation, inspect your physical security if you store private information and so on.

The questions range from simple ones to very complicated ones and I've seen at least one CTO flee the room to fix a SPOF that became apparent only during the interview. (what do you mean you run a single database server and you've never tried to restore a backup ? What if that drive crashes and it turns out that none of your backups are restorable ?)

== getting to a deal ==

- You have to get your own legal representation. Remember, in this phase of the process you are on opposite sides of the table, and if you are lax and let the VCs handle your legal bill you are effectively using a lawyer who is not working in your interest.

This will cost you dearly.

Pay your own lawyer, and pay him out-of-pocket, not out of a deal that hasn't been done yet, the situation should be the same if you walk away from it or if you take it. That's important because otherwise you might have to do a bad deal just to pay the legal fees.

- Nothing is binding until it is signed. Even a LOI isn't as strong as a real contract, and money in the bank. That goes both ways, but it is considered very bad form to back out once a LOI is signed. Still, a letter of intent is not a contract and VCs have been known to bow out in spite of signing and if anything major happens to your company between the LOI and a real deal you will probably be able to back out. But forget about pitching that VC ever again.

- Stay in constant touch with your co-founders during the whole process, if possible have them there when you're pitching and discussing the deal. People kept in the dark are usually not going to be happy with a fait-accompli that is not in their best interests. By bringing them in on the negotiations you stand a much better chance of not messing up your internal affairs.

- Feel free to request a better deal! Remember, the VCs will negotiate what's best for them. You have to be in control of your side, you have to know what it is that you want and how much you are willing to give up for it. There is no 'bad' deal that was not done, the only deals people regret are the ones that they did do, for too little money or too large a stake in the company.

This phase can take quite a while, don't feel rushed.

- be careful, there doesn't seem to be much difference from a funding perspective between a convertible loan and giving out equity, but in practice the difference is huge, especially if there are survival clauses and the company goes bust.

== the data room ==

- when preparing a larger deal there will usually be a data room set up, a centralized spot at your lawyers, or their lawyers office where all the documentation that both parties provide gets integrated in to a seamless whole

- you have the fiduciary obligation to inform the other party of anything material that you think may influence the deal. If someone has threatened to sue you recently then state it, make it part of the record. If you don't and the suit does happen you are going to be in big trouble.

- the VC has the obligation to do their research as thorough as they can, time permitting.

== doing the deal ==

- Once all the details are ironed out, there will be a concept investment contract. Usually this will involve changes to the articles of incorporation or the shareholder agreements of the company that is being invested in.

Unless you are a legal eagle I'd suggest you spend a lot of quality time ( ;) ) with your lawyer during this phase.

- have all your co-founders go over the contract, if they're unsure about the language get them to bring their lawyers at their expense. Make sure everybody knows exactly what will happen.

Best of luck!

thanks to Mahmud for the critique.