While there are entrepreneurs and innovators that wish there was some kind of divination that worked for finding out what an investor is looking for and what do venture capitalists look for in a startup, we have to console ourselves with the time-honoured tradition of hard graft and research.
For most businesses, this isn't too big of an issue, but if you're focused on a very niche market that VCs simply prove hesitant towards, or you're just wholly unfamiliar with how to get the attention of these investors, this is the article for you.
Venture capitalists are an interesting, diverse group to really look into, but we sincerely hope that we can provide you with some insight into what venture capitalists look for in a winning startup and potential investment opportunity.
If you're fishing in a sparsely populated river, you're not going to be walking back at the end of the day with nets full of fish. The same kind of logic applies for showing off a business plan for a very specific area with little demonstrable return on investment (ROI) for Venture Capitalists to get excited about.
So how do we address this? Appeal to VC funds that are firstly interested in the field that you are, and the second being to position yourself and have the research to hand that shows there's not only a febrile consumer-base but one with a voracious appetite for a company providing the services that you do.
If you decide to go into a VC's office with a business or product idea that visibly just comes off as one of an extensive line of interchangeable companies. You're going to have a mammoth task ahead of you in trying to convince these same people that you stand out from among the crowd.
But how do you actually stand out? There are a few ways to do just that:
In this sense, you're fitting into your industry by standing out in a specific and unique way. Which is more than enough to gain you some serious credibility in the eyes of VCs.
VCs are not just interested in the kind of company or product you have. What's important to them too is that there's a robust team standing right behind it. So now that they've seen the kind of innovative business or product you have, VCs will want to know about the structure of your team.
For this reason, you need to show that you not only have a highly structured and hierarchical team in place.
Additionally, you need to be able to showcase some of the highly professional members of the team that demonstrates that you not only have the winning product but that you have the best team to work with.
This sometimes does depend on the VC that you're in a meeting with. Some companies get behind a project because of the CEO that's at the helm, while others look, not just at the top level, they look at the foundation team members too.
Have any experiences with VC firms that you'd like to share with aspiring startups and entrepreneurs? Let us know in the comments!