There is no way around it. If you want your startup business to succeed you are going to need funds to make it happen. You could have the best idea ever thought of, but if you can’t find a way to get some capital to help your idea grow then it probably isn’t going anywhere.
Venture capital can be a very appealing way to quickly gather early-stage cash to fund and nurture the growth of your business venture. Also known as “VC,” venture capital is money invested in a high-potential, high growth enterprise in its early stages in exchange for equity in the company. This form of private funding works well for companies that don’t have the experience or exposure to gather funding from public sources but have the potential to massively scale (e.g., millions of users/customers) quickly.
Here are five components that could help your business attract venture capital investors:
1. Unique Idea
While a good idea doesn’t guarantee funding, you are almost definitely not going to garner any venture capital if you have a weak or unoriginal idea. Of course there are other aspects of a business that can make it more or less attractive to investors, but when it comes down to it, your company is only as strong as your idea. Your best bet is to be unique and think big. Make your company stand out from the crowd with an idea that will make potential investors believe it will be worth the risk. If you aren’t shooting for the moon with your idea, your business probably isn’t worth the time or money to venture capitalists.
2. Show Experience
Sure, we’ve all heard of the teenage geniuses like Mark Zuckerberg who struck it big with a brilliant idea. But the fact is, those types are very rare and potential investors would rather see that your startup has experience and wisdom working for it. If you yourself are not an experienced entrepreneur, it’s important to try to add a high-level executive to your team that is. Venture capitalists often don’t want to take the risk of investing if they can’t rely on someone who has already proven that they can build a successful business. Which brings us to our next point…
3. Build a Strong, Dependable Team
Some experts (and investors for that matter) believe that the team behind the business is actually the most important factor to the success of the idea. There is a large degree of uncertainty in early-stage startups and the business model, target audience, or even the base idea itself might have to change along the way. Investors want to see a team that they know can handle any challenge. They want to see a mix of passion, experience, and complementary skills. And it’s not all about talent either. Investors know that chemistry can make or break a team so make sure you hire people that work well together.
4. Growth Potential
In order for your venture to appeal to traditional VCs, your business has to have a large viable market and you need to understand who would be willing to pay for your product or service. Is there a large group of people that need what you’re offering? Is your idea significantly better or different enough to pull current customers from other similar businesses with established audiences? Think about how geography will play into your potential consumer base as well. You can utilize a beta or pilot model to grow and tweak your customers so that venture capital investors can see that you have a viable product with people already wanting to use it.
5. Defensible Business Model
So you have the idea and the experience and the team and the customers, but do you have the execution? Do you have a concrete plan? It is essential that you put together a business model that, when scrutinized under a fine-tooth comb, will show that your business will be profitable, sustainable, and expandable. VCs want to see very clear growth potential, and they want to see exactly how you plan to achieve it. A strong, defensible business model is key to attracting venture capital.
If you’re trying to build a startup business in Colorado and you need capital, call Doida Law Group to discuss your options and start working to make your business dream a reality.