Let's face it – your million-dollar business idea is never going to get off the ground. You'll push it on company after company until you've drained your piddly seed money and your network's resources. Eventually, you'll end up eating Dinty Moore Beef Stew on a futon in your parents' basement, complaining about how nobody "gets" you.

At least, that's what will happen without a little financial help. Venture capital firms are comprised of private investors who research, negotiate and (hopefully) fund businesses in their early stages of development. Even some of the leaders in business today - Home Depot, Starbucks and Google, to name a few - relied on venture capital in their early stages. (To learn more, check out Cashing In On The Venture Capital Cycle.)

In Pictures: 8 Tips For Starting Your Own Business

Studying the Competition
Applying for venture capital isn't quite as informal as the ABC TV show "Shark Tank" would have you believe. Before you have the opportunity to present your idea or invention to the sharks, paperwork filing, business-plan writing and demographic analysis must be conducted. Many of these firms receive up to 5,000 business plans per year, all competing against your business plan for funding consideration. Only 10% of these plans are seriously considered, and 1-2% are actually picked up and funded. And this process can often take years.

In a situation like this, the smallest details (punctuation, accurate bookkeeping and sentence structure) could mean the difference between the inbox and the paper shredder. Obviously, attention to detail is a quality that will pay off tenfold.

Who Is Eligible?
Individual firms have their own criteria for funding. Since venture capitalists are private investors and boards, they have the freedom to alter conditions in order to suit their own causes. Think of venture capital funding as educational grants or bursaries – certain benchmarks must be met on the applicant's end before funding will be considered.

  • Edit, edit, edit
    Considering the volume of business plans that venture capitalists weed through every year, it's often the low points - not the high points - that stand out. Punctuation, grammar, appealing graphics and concise writing may not bring your plan to the front of the pile, but at least it won't wind up in the recycle bin right off the bat.

    Consider the last time you updated (or created) a resume and the amount of editing and revision work was put into those few pages before even daring to send it to a prospective employer. Business plans are often 25-50 pages long, and it's easy to let a typo slip through the cracks. With a document as important as a business plan, it's worth the expense to hire a professional copy editor and save on the anxiety felt with a spelling error that's discovered down the road.

    When writing a business plan, it's best not to rely on page count to determine length. As with any good story, the number of words is irrelevant – it's over when it's supposed to be over. Ensure that your plan has all pertinent information and answers any questions that may arise. Making the business plan as thorough and clean as possible will appeal to the reviewers' senses of meticulousness, and gain the firm's trust in your abilities. (To learn more, see 4 Steps To Creating A Stellar Business Plan.)

  • Do Your Research and Know Your Audience
    Some of the "best" ideas lose their luster between the brain and the paper. When we realize how difficult or involving a new idea may become, frustration and defeatism set in. The only way to avoid this is to cover all avenues of research in your business plan. Not only so you fully understand what you're getting into and can answer any questions that may arise, but also so the venture capitalists can grasp the concept without over-thinking or speculating.

    If a similar product to yours already exists, focus on the aspects that make yours different. Pinpoint your target demographic and the level of competition for that audience, and consider your return on investment (ROI).

    Yes, the technology (or science, or mechanics) of an idea is important to explain, but not as important as to whom the idea will be sold, how much it costs and its competition. Work on those factors before you outline 15 pages dedicated to the uniqueness of the hydrogen-fueled internal combustion engine that will power your invention.

  • Round Peg in a Round Hole
    Most venture capital firms focus on one type of business or product, such as: wireless technology, health care, alternative energy, etc. Your idea for a series of children's books that are pre-packaged with Ritalin probably wouldn't fare too well in an automotive-focused firm. Due diligence is required here, to ensure that you're not just wasting time and money by sending a great idea to the wrong firm.
  • Team Up
    It's tempting when starting a business or introducing a product to try to brave the waters alone. But having a group in on the idea will allow you to be as creative as possible, while filtering or revamping the loose ends. Don't think of this as profit sharing – think of it as a group of co-workers acting as a bouncing wall for ideas. (Learn more in Should You Have A Business Partner?)

If at First …
Remember that the face-to-face meetings between young inventors and venture capital boards don't come on day one. If an idea is worth hearing – and luck and timing collide at just the right moment – a well-written, thorough and appealing business plan can catch the eye of just the right person. And if it doesn't, wash, rinse and repeat.

Check out last week's business highlights in Water Cooler Finance: My iPad Beats Your Toyota.

Related Articles
  1. Investing Basics

    How To Invest In Private Companies

    Owning a private firm means sharing more directly in the underlying firm’s profits.
  2. Entrepreneurship

    How to Run a One-Person Business

    Learn how to get a successful one-person business up and running with a business plan, financing, time-management tricks and delegation of tasks.
  3. Entrepreneurship

    Top Legal Tips for Starting a Business

    Before you launch a new business, make sure you're on top of the key issues that most startups face.
  4. Investing News

    The 10 Fastest Growing Green Startups in 2016

    These social entrepreneurs adopt triple bottom lines that champion urgent environmental problems while generating returns for shareholders.
  5. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  6. Entrepreneurship

    Multilevel Marketing Isn't Always A Scam, But It Often Is

    Nerium and Amway are popular direct sales companies that recruit new buyers and sellers to make a profit. Sadly, many direct sales firms are scams.
  7. Fundamental Analysis

    The 3 Best Investments When Bull Markets Slow Down

    Find out why no bull market lasts forever, and why investors should shift their assets away from growth and toward dividends when stocks slow down.
  8. Entrepreneurship

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  9. Investing

    5 Up and Coming Social Media Startups

    Although the days of Facebook's dominance aren't close to being over, here are some new creative platforms gaining traction on the worldwide web.
  10. Entrepreneurship

    Are You Really an Entrepeneur? A Reality Check

    If you are going to be an entrepreneur, and you’re doing it on a shoestring, you’ll need more than a good idea. Here are some skills to master.
  1. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  2. How does escheatment impact a company?

    In recent years, state governments have become increasingly aggressive in enforcing escheatment laws. As a result, many businesses ... Read Full Answer >>
  3. Do hedge funds invest in private companies?

    Hedge funds normally do not invest in private companies because of liquidity concerns. Capital funding for private companies ... Read Full Answer >>
  4. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  5. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  6. Who do hedge funds lend money to?

    Many traditional lenders and banks are failing to provide loans. In their absence, hedge funds have begun to fill the gap. ... Read Full Answer >>
Trading Center