As hard as it may be to hear, a great idea is not all that is needed to get funding. You may have planned out what you believe to be one of the most revolutionary products since the compact disk, but unless you know what investors are looking for in a promising new company, you won't stand a chance of earning a fat funding check. Thankfully, there are many common qualities that make founders and businesses look good to investors, the top five of which are discussed below.
1. Entrepreneurial Experience
Your idea may look amazing on paper, but what exactly makes you think you're qualified to manage a funded business and service an investment to profitability? You had better have a good answer to this question, because it's one of the first things an investor wants to know. A good way to establish credibility is to discuss any past entrepreneurial experience you might have. If you have ever been involved in the founding or managing of a small business before, no matter how small, it is important to mention it in your executive summary and play up the experience you gained in your role.
Entrepreneurship has a learning curve the size of the St. Louis Gateway Arch, and experienced investors will feel much more comfortable dealing with someone who has been there and taken their lumps before. Experience shows an investor that you know what it takes to steer a company, your expectations are more realistic than starry-eyed amateurs, and you'll be in it for the long haul.
2. Existing Cashflow
Nothing speaks the viability of a business model than existing cashflow. Cash is what separates the big players from the pretenders; the aggressive from the timid. Truly skilled businessmen don't wait for someone else to validate their product or service with a blank check, they doggedly pursue it until they literally cannot progress to the next level without an investment.
A positive company revenue in the books tell an investor that, with proper financial management, his or her investment of capital will be used to grow a business that already works, not start a new unproven model that might never make a dime. When it comes right down to it, an investor is only in business to pick winning investments and earn money on his wealth. What stronger, more convincing promise can you make a person like that than a guaranteed return on investment grounded in current positive revenue?
3. A Clear Target Market
Having a great new business idea is all well and good, but if you aim to really wow an investor, you better know exactly who is going to want what you're selling. Many new entrepreneurs make the mistake of overlooking the specifics of the target market, choosing instead to believe that as long as they build it, "the customers" will magically come. What customers? Are they young, old, tech savvy, businessmen, family people, singles?
These are wildly different people who need to be spoken to, catered to and sold on your product in different ways. Without knowing exactly who you're selling to and how you plan to reach them, you could end up spending big bucks on a product that it tuns out no one wants. This is a risk investors cannot afford to take.
4. A Recommendation from a Mutual Contact
Venture capitalists get swamped with so many business plans there simply aren't enough hours in the day to read through them all. One way to set yourself apart from the crowd and make sure your plan gets seen is to get a personal introduction and recommendation from a mutual contact.
The social web makes it easier than ever to finding a mutual contact of the investor you're aiming to bag. Look his or her name up on LinkedIn, Twitter, and Facebook, and find other people in his industry that he or she associates with. You can then approach them for advice, or perhaps to enlist their services in your company. Once you have established a rapport with the person, it is appropriate to discuss funding options and how you are considering venture capital investment. This conversation should naturally begin to involve his investor friend, setting you up for a prime introduction.
5. A Top Level Team
No successful business can run entirely on the skills of one person. At the funding stage, your goals are multifaceted and expectations to perform are high. Even if you are the best programmer you know, you need an equally skilled marketer, a graphics designer, and a business development manager. The bottom line is – you need a team, and a damn good one at that, if you expect to achieve funding.
When selecting the members of your team, be exclusive and aim high. Try to recruit people who are as close to the top of their field as possible – don't settle on your friend who read a couple of books on the subject and really wants to quit his job – this isn't good enough for a serious investor. If you can assure an investor that everyone on your team is the best at what they're expected to do, he or she will suddenly see your company as the winning formula – an all-star team lined up and ready to put their money to the best possible use.
About the Author: Carla Sanchez is a freelance writer for Omniture. Omniture is the world leader at business analytics and cms website services. Software that enables you to better understand your customers and increase your sales. Visit their search engine marketing blog to learn more.
