Every entrepreneur dreams of rocketing to success with the help of a million-dollar investment from a venture capital firm.
Just as athletes dream of Olympic Gold and climbers pine to scale Mt. Everest, entrepreneurs will always strive to attract Venture Capital dollars.
I've helped dozens of entrepreneurs raise millions of dollars of venture capital and along the way I've discovered a few secrets. So if you find yourself dreaming of venture capital, dream big and follow these simple rules:
1. Spot the BIG Trends
Venture capitalists succeed by staying ahead of the curve. The nature of their business demands that they invest in markets and industries that are rapidly expanding. If you are not in today’s hot markets, its unlikely you will get the attention of these professional investors.
Sure, technology firms make good venture investments, but those in the fastest-growing markets like mobile computing, alternative energy or biotechnology will have an even better chance of attracting attention. Industries that are in vogue with VC change however, so be vigilant. Keep an eye out for the big trends that will shape your market and align your business to take advantage of those trends.
There's a bonus to this strategy... Even if a venture fund never comes your way, this strategy can pay off in faster growth. So keep the wind at your back and your eye on the horizon.
2. Target a BIG Market
Being part of a big trend should point you toward some big market opportunities. To justify a VC investment you’ll need to show lots of sales in a short time. There’s no way to do that without selling into a large, growing market.
How Big? Most VC will tell you up front that a $100 million dollar market is not big enough to justify their investment. If you’re looking to grow your business rapidly with venture money, remember this: it’s easier to launch a big ship in a vast ocean than in a backyard swimming pool. (PS: For more on how to find the size of your market, check out my post "How Big Can Your Biz Be?".)
3. Make a BIG Difference
The most "fundable" companies will not only be different from their competition, but they will also be fundamentally different kinds of businesses. Starbucks was unlike any coffee company the US had ever seen. Amazon, eBay and Netflix created fundamentally new business models. And FedEx radically changed package delivery.
Each of these businesses took familiar products – coffee, books, movies, etc. – and made a big difference in how they were sold or delivered. So while consumer acceptance was not assured, each company captured the imagination of investors by unlocking new ways of looking at old businesses. You should do the same.
4. Think BIG, but Start Small
Rome was not built in a day…and neither are relationships with investors. Start your search for an investor with just a few prospects. Learn everything you can about them. And then approach each one individually, with caution and respect.
Remember, before they give you a big chunk of change, busy investors will afford you only a small amount of time. Be courteous by preparing several bite-sized pieces of information about your company. (Drop me a line if you'd like to see the one-page Investment Summary I wrote that raised more than $2 million!)
Start with a short “elevator pitch” – a 30 second sound bite about your market and the problem your company solves. If that gets their attention, follow-up with a small executive summary – 1 or 2 pages that describes your strategic approach and the key strengths of your company.
Finally, be ready to follow-up with a brief business plan – say 25 pages of details about your market, management, and momentum – and a short PowerPoint presentation that encapsulates all the reasons why an investment in your company will make everybody rich.
I've seen these 4 rules used successfully over and over. In fact, no successful entrepreneur I know has ever raised venture capital without following all 4 of these rules.
Now its YOUR turn. If you'd like to learn more about VC funding, or have a story to share with us about VC, please take a moment to comment below. I'll reply personally to each comment... and hope to see you here again tomorrow for another discussion on business finance.
Dedicated to your (VC-Sized) profits,
PS: Don't forget to become a member... when you join, you'll receive my free 27-page report on venture capital and the other great ways to raise the money you need to grow your business.
- Is venture capital right for your company? (theequitykicker.com)