How you sell your product or service is an important issue for venture capitalists.  Anyone can have a great product or offer a super service.  However, only those with clearly defined target markets and channels of distribution will have the ear of a VC firm.

 

Target Your Market

 

Knowing your target client base allows you to develop a target market strategy.  Show your marketing strategy to VCs in three steps:

 

1. Market research - Finding a market for your product or service requires research, particularly if you have a great potential niche product or service.  With proper market research, you can determine exactly your target market demographics, such as age range, income, education, etc.

 

1. Analyze demand – In your business plan, display target market demand patterns.  Does your niche fit in a more homogenous or focused sector?  Or will you need to reach a more diffused demand? 

 

1. Approach the market – Show VCs how you select and approach your target markets.  Will you follow a mass market approach?  Or focus different marketing strategies on more specific market segments?

 

If you have already performed market research, you are a good step ahead and can formulate a market approach to present to your VC investors.  If not, VC funding can help your business get the proper research in order to get the data you need to make a targeted approach.

 

Distribution Channels

 

If you know who your customers are, then it is easier to determine how to get your product or service to them.  Even if you do not have the research data needed to make a full target market strategy, you can begin the process of determining your distribution channels.

 

To determine your distribution you need to know your product well.  Will it be something typically purchased at a grocery store?  Will you need a sales agent?  Or can you sell direct?  Below are typical distribution channels.  Relay to your potential venture capital investors how you think your product or service will use the following:

 

• Direct Sell – You may want to sell your product or service directly to customers.  If you do sell directly, will it be through internet sales?  Or will you need a brick and mortar store to display goods?  Selling directly can save money on “middleman” distributors, but requires much more effort on marketing and customer service.
• Agency – An agent is someone who works on your behalf to sell a product.  An agent could be a direct hire who works only for you, or an independent contractor selling on behalf of many clients.  An agent is usually a good and convincing salesperson and has access to good leads.  Though you may sell more through an agent, they usually work on commission, or for a portion of the sales they make for you.

 

• Distributor – A distributor is the “middleman” wholesaler who sells to multiple retail markets.  A distributor can save a lot of money on direct retail selling and delivery.  Of course, your product to the end consumer will be marked up by the cost of the distributor and the retailer markup.

 

• Retail – Retailers are dealers or resellers who carry many products sold directly to consumers.  If you want to avoid a wholesale distributor and sell directly to retailers, you will need a way to transport or deliver services or products. 

 

Before making a presentation to a venture capital firm, spend time on how your product or service ends up directly to consumers.  Knowing in advance, or at least having a good idea, allows you to plan your marketing strategies and reach your consumers.

 

 

 

 

 

 

Tags: angel investor, angel investors, Find funding, funding, startup business, startup funding, vc, venture capital, Venture Capitalist

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