How to Convince Venture Capitalists of Your Business Strategy
Venture capital (VC) funding has been around for decades, funding some of the most famous companies, including Google and Apple. In order to succeed in obtaining VC financing, you need to convince the firm or group that your business will succeed in making a profit in a short amount of time, usually three to five years.
How does a VC firm decide to invest in a business? They will invest in a business that has the best chance of making the aforementioned profit. To secure the funding from venture capitalists, a business needs clearly demonstrate a solid and viable strategy.
Do the Research
Your new business needs to have a market base. Who will your customers be? You need to know exactly who your target clients are before you meet with a VC with a funding request. Do the market research necessary to get a clear picture of your customers and know that your business idea is viable.
Fill a Niche
Your business needs to be different from the competition. A VC firm does not want to finance another “software solutions” company. Find where your business fits into the existing market and determine your niche. You’ll be more successful at obtaining VC financing if your business can fill an outstanding need in a market.
Employ the Best
Part of your business strategy should be hiring a leadership team who are experts in their field. With an experienced team, your business has solid oars to row through rough times, which is important from the venture capitalists’ perspective.
Make Achievable Goals
What are your business goals? Indeed, you want to make a profit, but how will you achieve that goal? Write down the steps that your business will take to become profitable and sustainable. Goals should be achievable and believable by the venture capitalists if you want to earn their trust.
Emphasize the Strengths and Work on Weaknesses
Be upfront about your business strengths and weaknesses to VCs. Be sure to emphasize your expertise, your leadership team’s edge, and how the business will excel. However, lay out what your business needs to do to improve in areas. Venture capitalists want to know how your business can handle the weaknesses. In addition, discussing your weaknesses also shows the venture capitalists that you can accurately and realistically judge the business environment.
Your business strategy will be one of the biggest selling points to venture capitalists. Refine your strategy and make it strong, achievable, and believable – and you will find that venture capitalists will be equally excited in your vision.