Is your venture REALLY investment worthy?
KARL R. LAPAN, PRESIDENT & CEO, THE NIIC
Many entrepreneurs yearn for the day when an angel or venture capital (VC) firm is interested in helping them get to the next level. But without a strong track record coupled with the right contacts, it can be hard to identify the right opportunities.
While it is sexy to say your venture is venture-backed or angel backed, before you embark on VC or angel investment, you have to realize a couple of sobering realities:
- Only .6% businesses ever raise VC
- 78% of all VC went to 3 states (NY, MA, CA)
- <1% went to rural areas
- <2% went to women founders
- 1% went to African-American and Latino Founders.
That said, entrepreneurs should keep the following in mind if they wish to be more attractive to potential outside investment:
- Determine your comfort level. Are you more comfortable with the idea of bootstrapping or open to the higher stakes potential that comes with angel and VC funding? This is an important question because it can affect autonomy (or lack thereof). Some founders wish to keep the reins close so they can direct and execute their vision, even if it means more sacrifices. Others may look to build skills and a more robust network through such mean as an incubator or accelerator program. Most founders try to raise money to soon in the venture’s life and often give up more control and equity than is necessary. Find paying customers before taking someone else’s money. Remember, once you take someone else’s money you have a boss.
- Evaluate your human capital. Investors will put your founders and core team under the microscope. That means considering experience and past successes. For example, if a founder has proven he/she has what it takes to set their mind to do something (and achieve it), then investors will feel more confident about potential outcomes. Research studies show that at the time of first discussions with angels it is about the deal, but at the time of the decision about whether to do the deal, it is all about the founder and his/her team (domain expertise, chemistry, trustworthiness etc.)
- Check your attitude. Are you coachable or do you come across as knowing it all? How willingly do you accept feedback? Investors want to see you have the EQ to empower people and lead and inspire diverse teams. Many are using psychometric assessments and other tools to more formally vet emotional intelligence. Dissonance in the management team is one of the top 3 reasons new ventures fail.
- Think beyond the here and now. Potential investors want to see a business model and evidence of planning that indicates you’ve given thought to how you’ll get from Point A to B. That means robust financial projections, marketing plans, customer segmentation , business intelligence, among other things. Also, they will expect to see a credible not theoretical exit strategy.
In short, you have to have some critical pieces in place to ensure that your business is investor-ready. Feeling stuck? We are always willing to lend a hand at The NIIC.
Capital fuels growth. Plain and simple. High-performance companies require constant access to a continuum of capital to ensure stable, long-term success. To capitalize on product introductions, geographic market expansions, strategic acquisitions, and new customer segments, you’ll need financial partners capable of growing with you.
Our longstanding partnerships with banks, credit unions, institutional and angel investors make the continuum of capital transparent for high-performance companies working with The NIIC.
For high-performance companies thinking about SBA-backed loans, private placement memorandums or dabbling in crowdfunding, The NIIC can be your trusted advisor and go to resource to connecting you and your team to these programs.