Venture capital investment is a type of private equity financing where the investors pour huge amount of capital in your startup with an expectation of a far greater return. Once they get the profit, they will exit the venture and start looking for other investment opportunities. Meanwhile, they share a percentage of your ownership in the company and also take part in the company’s board.
Factors That Can Help You Attract A Venture Capital Firm
An Innovative Business Idea
Innovation is perhaps one of the most powerful tools in today’s world. It is only through technological innovation that we have moved from land phones and pagers to smart phones and tablets and it is the same thing that is enabling businesses to gain traction and earn huge revenues. So if you want to make your startup look attractive, think innovative!
Trying innovation with even the most ordinary product or service can also make your business look attractive. It can cater to your customers in a way that no other product or service can which will ensure that you can easily capture a sizable market in a limited period. And no wonder, any investor would love to grab such opportunities.
You own confidence in your idea is very important as it is the first thing that an investor would observe during the first meeting. If you trust your idea, they will trust your idea and if you aren’t confident about it, how can they be? Quite simple, isn’t it?
A Strong Team
Your team can be your biggest strength or weakness and it all depends on how you select the members. Typically, venture capital firms prefer to invest in experienced businessmen who have already raised a business successfully. If you are a young entrepreneur, you can ideally include a few experienced people in your management team. It should have a complete package of smart and talented individuals who are masters in different division like management, finance and sales. This will not only more efficient but also more presentable in front of investors.
A Growing Market
There is no use of production unless there is a market. Every product or service has to have a market for it or else there will be no means to earn the revenues. Make sure there is demand for what you are offering and also a valid reason behind why a customer should buy your product/service only. And that reason would be your strongest value proposition.
Other Investors’ Interest
Do you have any other investor already interested in your idea? This can be a head-turner for your future investors as they usually rely on a business that other investors are interested in. At times, it is even ok to show a little bit of hurry as if there are others already eyeing your venture but never ever overdo anything. It is fine if they need some time to think about your startup.
There you go. These are some of the basic things you must remember while raising venture capital. One more important point is chasing the right investor. Every firm has its choice of industry and stage of investment; no matter how amazing your idea is, if the investor isn’t interested in the sector, he/she won’t invest. So look before you chase; if yours is a seed stage startup then chase only those investors who are willing to make seed stage investments.
Once you find the right investor and convince them with your idea and team, there will be no looking back!
For more information on how to attract venture capital firms, feel free to visit Merger Alpha.