SAN FRANCISCO (Business 2.0 Magazine) - Most venture capitalists will tell you that they invest in people, not business plans. They like experienced entrepreneurs they've worked with before. With luck, you've got one of those people on your team, preferably as CEO. But if you're not a veteran and can't find one, don't fret.

A common misstep is to pitch the wrong partner at a VC firm -- that will get your business plan nixed immediately. Find the partner whose expertise aligns with your business and send that person your well-honed executive summary. (Save the full-blown plan for later.)

If you get a meeting, highlight your experience and what differentiates your startup from others, but keep your ego in check. In such a close-knit business relationship, VCs much prefer to work with people they get along with easily.

In an early-stage round, VCs will want 40 percent of the company in return for their investment. VC term sheets are notoriously demanding, but the place where entrepreneurs can suffer most is in the liquidation preferences. In essence, liquidation preferences determine how money gets divvied up if your company is sold.

Your VCs are entitled to protect their downside, of course, but not to the exclusion of common stockholders -- management and employees -- who also want their equity to be worth something. Proceed with caution.

• For Entrepreneurs, Now is the Time
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• Phase Two: Prototype the Product
• Phase Three: Develop the Beta Product
• Phase Four: Launch the Product
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