Today I’ll continue with my series on the Entrepreneur’s Guide To Venture Capital.
14 Things VCs Look For
12) Customers Repeat For Three Years Or More
The main reason why most businesses fail is that they run out of cash. You can run a profitable business but because people take too long to pay you, the business shuts down. When you’re in startup mode, cash is king!
Venture capitalists like to see that you have a way to make ongoing revenues from your existing customers. Once you sell a client do you have to go out and few new business or can you continue making money every month / year from them? If you can build a recurring revenue model from your products or services it will help put your company on solid financial grounds as well as help you secure VC funding.
13) Easy To See $20 Million In Three Years
VCs like to see companies grow quickly. If you get venture capital funding, where do you see your company in three years? If you’re not around the $20 million in sales mark then you might want to consider changing your business model or looking at a different source of funding (friends, family, angels, etc). You have to have a plan to get there in three years and be confident that you can achieve the goals you set out.
14) Significant Barriers To Entry
What is in place to prevent other companies from copying what you’re doing? Assuming that your product takes off and is the next iPod, what measures are in place to make sure that people can’t come along and offer the exact same offering as you. Do you have patents in place? Do you have exclusive agreements with suppliers? Have you tied your customers into long term contracts? Showing VCs that you’ve thought about how to protect your business from competition will show your sophistication and increase the chances of landing the money investment.
