New business ideas may sound great on paper, especially to an enthusiastic entrepreneur. However, venture capital firms are more concerned about the risk the product faces in a targeted market.
Venture capital firms will ask many questions about your product or service, particularly regarding the acceptance in the market. If you’re an entrepreneur, what are some of the questions you should ask yourself about your product or service before facing a venture capital inquisition? Here are a few key things to think about and prepare to answer.
1. What is the Trend You’re Riding?
Trendy technology faces a big risk. Will the trend be a short-term fascination with the market and fail to sustain regular sales and profits? In order to avoid being a ‘trendy’ flash in the pan, be sure your product or service offers an integrated total solution, rather than something that falls by the wayside when the next best thing comes along.
2. How is your Product/Service Different from the Competition?
Can you quantify how your new business idea will differentiate itself from what’s on the current market? It’s important to brainstorm a short sentence about your market differential. At the same time, you should also create a full matrix designed to spell out point by point how your product stacks up to its competition. This will give you the ammunition needed to show why your idea can take the market by storm.
3. Is the Industry Aware of Your Product/Service?
Some new business ideas are unique and have yet to fall into a defined industry category, while others are ones that have been recycled. Be sure you are fully aware whether your new business idea is a breakthrough “revolutionary” idea or whether the product/service already exists in the market. Keep in mind that a “revolutionary” product will have a much more difficult time carving out a new market.
4. How Safe is Your Technology?
If you do have a unique technology, you need to ask yourself how safe it is from potential competitor theft. Do you have all the patents and other intellectual property protection that keeps your technology away from curious eyes that can potentially take it to market first?
Remember, venture capital firms are in the business of taking risks. Just be sure that you also know the risks involved with your new business idea. Be prepared to show a venture capital firm that you understand and are aware of the potential acceptance factors of your product.