A detailed description of the company forms the basis for talks with a potential investor. In most cases VC funds expect a business plan, though some may consider a simpler document while others may require additional financial projections, business models, etc. In each case, however, the document should present the company, its history, ownership, products, position in the market, major competitors, development strategy, financial results and forecasts, and capital needs, as well as the professional experience of the key shareholders and senior managers. More details on the information requirements can be obtained from the PE/VC funds themselves. Their addresses, phone numbers and websites are available at Members section.

VC investors are careful readers of business plans. Their initial critical approach is the first and most discerning judgment all submitted proposals must withstand. Many projects are rejected at this point. One VC fund gives the following example: out of 100 submitted business plans, over half were rejected after the first reading, the next 25 after a few hours of more detailed scrutiny, and another 10 business plans could not withstand deeper analysis. From the initial 100, only several companies managed to reach the more advanced stages of analysis, yet only a few will successfully pass through the negotiations related to contract conditions and eventually receive capital. Therefore, it is worth taking the time to prepare a good business plan. Nobody wants to forfeit a chance to get much-needed capital and waste several weeks of work only because the plan was poorly written and the investor rejected it at first reading.

We lack the space here to go into detail about what a business plan should include, how to prepare necessary forecasts, etc. However, useful information is available in a variety of publications and on the web, for example at: http://www.sba.gov/category/navigation-structure/starting-managing-business

A company can call in a consultant to help with the business plan. However, those who will be responsible for actually carrying out the plan, especially members of the management board, should get involved in the work, take full ownership of it, and demonstrate their competence. Before submitting the plan it is advisable to have it reviewed by impartial and knowledgeable persons not directly involved in your company, such as an accountant, auditor, legal advisor, a reliable consultant, or just a business friend. They can pinpoint possible errors, defects or weak points.

After your proposal has passed through the initial stages of analysis, the VC investor usually asks further questions and requests additional information. Next, the time comes for the fund's representatives and the company's management board to meet. Once the project has been provisionally accepted, it is time to work on more details. At this stage the VC investor carries out an in-depth analysis of the company, known as due diligence, which includes a business analysis, financial and legal audits, organizational analysis, and possibly technical and environmental investigations. Although this requires a great deal of detailed information, the fund guarantees confidentiality. As venture capitalists make many investments and take a long-term view, they treat confidentiality very seriously.

When the PE/VC fund is satisfied that the business is ready for investing and the future plans for the company are agreed between the parties, the fund start negotiating the conditions of the investment. The negotiations focus mostly on determining the shareholders' rights and duties, representation on the supervisory board, possible managerial options, and - the most difficult part of the negotiations - the price at which the investor purchases a specified number of shares in the company. These negotiations typically go on in parallel with the investor's due diligence activities. In fact, at an early stage of due diligence the parties usually sign a term sheet outlining key terms as well as the expected price.

Once the negotiations and due diligence are successfully completed, it is time to approve the decisions. Investment funds usually have a special body, the Investment Committee, which formally approves the final decision on investments. The parties sign a binding agreement based on that decision, and the equity reaches the company.

The investment process presented above - from the moment a company files basic documents and data until the time the money is transferred to the company's account - usually takes a few months. The information about the initial acceptance or rejection of the project can be obtained after just a few weeks, but the pace depends on the parties involved. An active attitude of the company's owners and management board and efficient cooperation with the investor can accelerate the process.

The PE/VC fund completes its investment when it signs the agreement, but its support to the company does not end there. For the fund, the decision to engage capital in a company marks the beginning of long-term cooperation based on mutual trust and respect of each other's interests. The fund is typically represented in the company through seat(s) on the supervisory board, and it monitors the company's current activities and results as well as supporting the company in strategic matters. As a rule it does not get involved in the everyday running of the company but supports the management with its expertise and experience or provides reliable experts in the fields of finance, strategy, marketing, human resources, and other areas.

After a few years and assuming the company has grown as expected, the PE/VC fund starts the process of divestment. Depending on the fund's policy, the company's industry and profile, and the situation on the market, this usually takes place after between three and seven years, although investments can also be shorter or longer. As already mentioned, the divestment method is agreed upon during the initial negotiations. It may take the form of an IPO, a trade sale, buyout by the remaining shareholders or the company's management, sale to another financial institution or other means, and it can happen in several stages or at once. When the fund exits the company and realizes its profit the remaining partners can also assess how the value of their company's shares has increased. In fact, they often exit together with the PE/VC fund, and reap returns that are the same as or even better than the fund's. The increase in a company's value can be substantial, even several times the value determined at the time of investment. In Poland, well-known examples of companies that multiplied their value with the support of venture capital are Computerland, Town&City, Budimex, Polfa Kutno, Euronet, Eldorado, Lukas Bank and @Entertainment. And a few dozen Polish entrepreneurs and managers have become millionaires in the process.