When a business wants to seek venture capital investment, they often deal with a number of questions: Where do we look for investment? How do we research? When we find potential investment, what do we do, and how do we present our business in the very best light? The answer is to each of these questions comes from the company first looking at their business and deciding whether it truly is a good candidate for an infusion of venture capital. Here’s some things investors will be considering:
Unfair Advantage: Make no mistake about it, a venture capital investor is taking an extraordinary risk on your firm. No matter how much due diligence, confidence, or innate ability you may present, the investor still has to trust that you will do all the work and put in all the time needed to make your business solid enough to reward the investor’s risk with a large payback. The will and ability to do this is referred to as an “unfair advantage” over your competitors, and you must possess it, above all else.
A Scalable Business Model: A bright idea may be very attractive, even profitable, but if it doesn’t have the potential to bring in more than a few million annually, venture capital investors won’t be interested. They are looking for businesses that can scale up exponentially to reach beyond the typical regional or demographic niches that are characteristic of small and mid-sized companies.
The Bottom Line: If you’ve gone through this list and concluded that you’re a strong contender for VC funding, congratulations! You likely have a growing company with a strong valuation, a proven management team and the potential for an excellent upside return on initial investments. If you don’t go looking for VC funding before long, it’s likely that investors will come knocking on your door first.