How to Find Ventura Capital for Your Start-Up
Each year venture capitals receive thousands of emails from new startups but only a fraction of these startups are approved for an investment. It is recommended by many VC’s that the best way to approach them is through a referral link and trusted connection. It is even better to build some solid relationships with team members of a venture capital firm. Trust plays a very important role here and most of the startups that are approved for an investment are due to some involvement of people who are not even directly related to that startup.
How to find VC’s for your startup
Contrary to popular belief, venture capitalists are not impressed by young geniuses who have a brilliant idea. They also assess the marketability and business model behind the idea. So what they look for is an entrepreneur who has been around for a while and who knows the ups and downs of the business. They are also looking to invest in a business which could bring a change in people’s lives or solve a problem. This could include solving a particular problem with much better and different solutions than already exist.
Earlier, venture capitalists based their decisions on revenues and figures. However, times have changed and the new breed is more focused on the customer. When you pitch your product or service to a potential investor, be ready to explain why you think your product or service would compel the customer to buy it, what kind of problems are solved by the product or service, and what value it adds. You also need to convince an investor that your offering is better than that of your competitors. One of the most important things that entrepreneurs must remember is that VC’s are not always looking for assumptions. Assumptions are usually wrong and are the biggest reason for all future failures. You should discover the techniques to eliminate assumptions in your business plan as soon as possible.
Standing up to the Test
As an entrepreneur, you will be under scrutiny. Venture capitalists will assess if you have the dedication and passion that will make your business a success. They will see if you have the courage to carry on even when the going gets rough. When pre-determined plans do not work out, an entrepreneur should be willing to improvise and adapt as quickly as possible. If you are setting up a business, you should have invested some capital into it to convince a venture capitalist that you are serious. You should have a team in place that can demonstrate that they can collaborate effectively. Both you and your team members must be willing to learn in order to be able to succeed. If you and your employees are from within the same industry, the chances of impressing the investor are higher. This is because you would already be equipped with some of the skills and background knowledge related to the business.
Another important thing that you must work on is to make sure your startup has a future. Your business may sound cool today but maybe it doesn’t have enough potential to survive in the rapidly expanding business world. VC’s only like to invest in businesses that have potential to grow more and more with time. Growing means it should have increased demand, more profits and more valuation within the sector your startup exists in.
Finally, the strength of your idea is one of the most crucial deciding factors. An investor would be willing to risk their money only if they feel your idea is solid enough to bring in considerable returns. Venture capitalists also check if your business model is expandable, repeatable, profitable and predictable. If you find that you or your business lack any of the criteria mentioned, fix the gaps before actually approaching an investor. The additional effort and time will be worth it since it will boost your chances of getting funding.