The previous post on things to know about venture capital focuses on how to get funded by the VC. After getting the right ‘channel’ to introduce your company to the target partner and get a chance to send your presentation, it is the time to get ready for a face-to-face meeting.

If the potential VC is interested in your presentation, he may call you back to set a schedule for a face-to-face meeting. Perhaps, he will invite you to come to his office and ask you some important questions. Therefore, make sure to prepare yourself as well as possible. Therefore, you will be able to address every question well. If he is satisfied with your presentation, he will probably ask you to present in front of other potential partners. This is the pitch deck, which has been addressed in another post.

Things to Know about Venture Capital: Getting Funded

The pitch deck is actually the partners meeting. This should be the last step before you receive a term sheet from the VCs. The partners will invite you to come to a meeting room, where you will present and address some questions. This session is just like what you did with the first partner. The difference is that you meet more potential partners.

Unless there are red flags about you and your business, you will ideally receive a term sheet. However, do not feel joyful too early. A term sheet is just a promise from the partners to fund your business. It is not a guarantee that you will get the capital. This promise is not binding in nature. Their decision may change if they find serious problems about your business during the process.

However, if everything goes smoothly, you will typically get the funds in your bank account in 1 to 3 months. At this step, all the required documents have been prepared and signed.

Things to Know about Venture Capital: How VCs Get Money

Now that you have received the fund in your bank account, what’s next? Other important things to know about venture capital are how VCs monetize. Actually, there are two main sources of money for the VCs, namely:

• Management fees; They are generally defined as the percentage of the amount of money they invest in your business. The management fees may vary, but 2% is the most common rate.

• Carried interest; This refers to the percentage of the profits, which the investors receive. The rates vary from 20% to 25%. Carried interests account for the largest amount that the VCs receive.

To withdraw the funds, the VCs need to have funds that are making an exit. This means that the company, where the VCs invest their money, is acquired or getting ready for an Initial Public Offering (IPO). The exits usually happen after 5 to 7 years. Meanwhile, investors have two options to sell their position. The first is through an IPO, and the second is 8 to 10 years of the investment.

Another question related to things to know about venture capital is “To what extend are the VCs involved in your company? And “How to determine the values that VCs bring into your company?” Check out the details on the next post!