It is essential for venture capital firms to believe that your small or startup business is hitting the right and size of market. While a management team or new product can be created, a market opportunity cannot, as it must exist. And if a sizable market does exist, then venture capital firms start salivating.
However, don’t get over-zealous and lay down unrealistic market opportunities. Venture capital firms want to see a sizable market, but it must be realistic.
Avoid Overstating Your Intended Market
It is very tempting to say you are entering a “300-billion a year” software industry. And simply stating that even penetrating 1/1000th of that market will lead to riches. However, that is far from the truth. You must be clear to venture capital firms that within that market, Microsoft applications takes up a great percentage. And after bypassing all the gaming software, financial software, and other popular consumer software, your little database program aimed at the bartending industry is only a very small portion of the overall “software industry.”
Use Published Facts and Figures Pertinent to the Market
Let your venture capital investors know the particulars of your intended market and industry. Don’t be afraid to use statistical reports from reputable research companies and from name brand industry leaders such as the Dow Jones, Forbes, Wall Street Journal, or Bloomberg.
These kinds of business or industry reports can give you leveraged data to help persuade venture capital firms that your market is growing. Cite growth percentages and emphasize actual market numbers. This will help give credibility to your intended market segment.
Identify Changes and Trends
You may be able to persuade venture capital firms that a particular market is trending. By using the above strategy of published statistics and reports, you can use your power of analysis to study trends and make your own educated and professional market projections. And if you have created new business ideas to take advantage of early trends, you could score with venture capital financing.
No matter how good (or improvable) your new business ideas are, you must convince venture capital firms that a market is or will be in place. Use targeted market segments, recent reports, and your own valuable trend identification to help VC firms get the picture of your business success.