Today I’ll continue with my series on the Entrepreneur’s Guide To Venture Capital.
14 Things VCs Look For
9) Factor 30
I like to call number nine Factor 30 because it helps show what kinds of products / services venture capitalists are looking to invest into.
VCs typically invest into companies that have a unique or “unfair” competitive advantage. If you’re selling an average product with the same features as everyone else, don’t expect to get funded. What VCs like to see is that your product has 10 times the capabilities of the competition offerings currently being sold on the market and you can produce it at one third the cost.
10) President Can Sell
Too many companies who pitch for venture capital money are led by Presidents who know their product or service inside out but are not great salespeople. They are the knowledge base and might make great heads of research and development for the company but VCs know that the company won’t go as far as it could unless a better President is in place – someone who can sell.
Are you the type of President who can hit the pavement and bring in the deals? If so you stand a much better chance of getting funded. If not, you better find either a replacement for yourself as President or a really good Vice Preside of Sales for the company.
11) R&D Can Lead To More Than One Product
Venture capitalists like to protect their downside risk. Sure your projections look great but what if your technology doesn’t sell? It works as you expected it to but customers just aren’t willing to pay for it. Then what?
VCs like to see that the money that has been put into developing the technology can help lead to more than one commercialized product. Show that you have a primary focus and you believe that you’ve identified the best market for your product but also have a backup plan to show how else the technology can be spun off in case Plan A doesn’t work out.
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Great list. Although I know VCs are a great way to go, not many of us can get them to invest in us.
Of course we should never forget bootstrapping and our beloved family and friends (who actually are usually fairly willing to loan your venture money).
Recently I have been talking to angel investors for a cash infusion into my three year old environmentally friendly brand of accessories and apparel called Sand Shack… so I will end with one word of advice —be careful—just as evan mentioned, VCs are looking for an ‘unfair’ competitive advantage, why? Because they want an unfair amount of money in return (well, maybe not unfair, but they want a lot, so don’t jump on the first deal that comes your way).