If you find yourself in this situation, there are several things you should keep in mind before picking up the phone or sending an email to a venture capitalist…
Is your value proposition interesting enough?
When venture capitalists look for a startup to invest in, they are hunting for value. First and foremost, the goal of the venture capitalist is to make a return on their investment. As such, it is important for the startup owner to put together a value proposition that is compelling enough to get venture capitalists interested.
You need to demonstrate how your product will make the lives of your customers easier, that it can scale, and that it stands out enough from your competition. If you can answer these questions convincingly, it’s only a matter of time before venture capitalists like Marc Leder come knocking on your door.
Do you have proof of consumer interest?
Part of putting together a compelling value proposition is actually having proof that consumers are interested in buying. If you do not have your product to the point where you can sell it, you aren’t ready to go after venture capital.
No venture capitalist wants to invest in a product based on the gut instinct of an inventor that “just knows” that it’s going to be the next big thing. There is no social proof stronger than consistent and rising revenues.
VC’s are solicited by people everyday that have no proof of interest from the public. Sending them an e-mail that shows a history of actual sales will be a beautiful sight for their sore eyes.
Do you have sufficient talent on your team?
It is not enough to have a killer idea. You must also have the talent in place that will be able take your company to the next level. Thus, it is vital to recruit aggressively for key positions before attempting to woo venture capital.
Worry only about covering the most critical areas: as long as you have the key pieces in place to hit the ground running the day after you get your first round of funding, you’ll be able to hire the additional employees to continue your growth.
Does the venture capitalist you are contacting have an interest in your field?
You might have a solid idea with proof that it will be a smashing success, but you will be wasting all the time you spent preparing your presentation if the venture capitalist doesn’t even have an interest in what you do.
A key rule of investing is to never invest capital into an asset class that you don’t understand. They might be impressed with the amount of work you put into your presentation, but inevitably, a VC that has no clue about your niche will give you an answer that will only break your heart.
When you are looking for a venture capitalist to contact, make sure that they have investments in the industry in which you operate.
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