There is nothing more powerful than the passion and vision of an entrepreneur. However, when trying to raise venture capital, passion and vision is not enough. Entrepreneurs need to fulfill the criteria that the VCs use to decide who to fund.
Some firms have a narrow set of criteria- specific technologies, at specific stages, in a particular region. For some others, the criteria are broad and they invest across many sectors and locations. If your startup meets these conditions, then you may be ready for funding; if not you might just receive a polite note informing you that you have not been selected.
Raising Funds
Compelling value proposition
Every entrepreneur believes that his idea is compelling but going through the pitch deck, not many ideas are truly unique. It is common for investors to see the same idea preached to them within a couple of months. The factors that make an idea compelling are for it to reflect a deep understanding of a big problem and offer a solution that brings benefits to customers. Oftentimes, the starting point is that you get investors interested, but the idea itself should make you fundable.
A solid team
It is possible to have a great idea, but without a solid team, they will struggle to bring to life your great idea. This does not mean you need to have a completely world-class team. However, there are some skills that need to be present on the founding team. Even with all the passion in the world, you need skills. You need to demonstrate that you can build a high-performing team.
Market fit
Venture-capital typically focuses on businesses that gain a competitive edge. These businesses should also have the potential for rapid growth by taking advantage of technology. Avoid market sectors that are already overcrowde. Demonstrate that you have a great market and that you can win and then steal from there. The game-changer is not how big the market is but how much value you can create. If you are able to create a lot of value you can dominate the market within a short time.
Technology
What makes your technology great is when there are many customers with plenty of money who are willing to pay to use it. Assuming you have a technology advantage you need to sustain that advantage for years. You need to convince investors that you can stay ahead of the curve because you are likely to have competition regardless of the partnerships we have secured.
Financial projections
Your financial projections demonstrate that you have a good understanding of the economics of scale in your business. It tells your story in numbers what factors drive your growth, what drives your profits and how you plan two skills in the next couple of years. Base your projections on reality and research. Avoid presenting projections that are unrealistic.
Customers
Do you already have strong validation from paying customers? Do you have evidence that there is sufficient demand for your solution? Do you have a distribution partner or channel? How well have you tested the market and gotten feedback? The more credibility and customer traction you can demonstrate the more likely investors are going to be interested in your idea.
To secure funding, you need to do well in the majority of the aspects outlined above. Regardless of the startups making the headlines for raising funds, it is still tough to raise venture capital. You are up against competition from talented entrepreneurs. You need to go the extra mile to demonstrate that you have what it takes to build a successful company and excel in the critical factors that VCs look for.
