You may have heard of the movie “What a Girl Wants” staring Colin Firth and Amanda Bynes, but do you know about “what a VC wants”? As a startup or early-stage company, you are probably more intrigued and interested in what a VC (venture capitalist) wants. So, what does a VC really want? We do know that they want to realize a return on their investment, “get their money back, and then some”, but how do you win them over in the first place? That’s the REAL question. You need to launch your product, reach customers, and grow your business. To do all of this, you need capital. Initially, that capital may come from friends and family, but eventually you will need capital from outside sources, investors, and venture capital funds. How do you break the code and get the capital you need to grow your business?
With this burning question on my mind, I spoke to a few investors, venture capitalists and CEOs that have “been there, done that”. They were kind enough to share their experience and knowledge with me. Here’s what I found.
- Hands down the #1 deciding factor, in the eyes of a potential investor, is the Founder & CEO. The founder/CEO is the driving force behind the idea and the company. Investors look favorably on a Founder/CEO that has been successful in the past. You’ll want to have solid strategies for marketing and customer acquisition that you can clearly articulate to potential investors. A Founder/CEO that can quickly adapt to changing market conditions is more likely to succeed versus one that is more rigid and unwilling to change.
- Know WHO your customer is. Patrick J. Martucci, a successful entrepreneur, venture capitalist, and CEO of Holt Media Companies, Inc. calls this “identifying the dog”. What does this mean? If you’re an entrepreneur who has identified the next best thing in dog food, make sure the dog will eat it. Think of it this way. Say you’re a budding entrepreneur. You see an opportunity to develop and market a new dog food that you’re sure will win. You formulate a fantastic marketing plan and raise money from venture capitalists. Using focus groups, you determine the perfect color and design for the dog food can and determine the right price point, pitch it to a big box pet store and land the deal. The pet store then places your innovative product right where their target customer, the 30 – 35-year-old female, will see it and buy it. Your initial shipment sells out. Bingo! You’ve made it! But wait, the dog refuses to eat it and you fail to sell another can of dog food and go out of business. Remember “every business must figure out who the dog is, and every decision must be made with the dog in mind”, advises Mr. Martucci.
- It’s good to have CUSTOMERS. A product that already has a customer base in the early stages is one that is more likely to grab an investor’s attention and succeed rather than one that has yet to attract any customers. Even if those early customers are friends and family, that still counts.
- Have a polished DECK and know your DECK. I know, this probably goes without saying, but you’d be surprised at how many times Founders are in front of a group of investors with their pitch deck and forget to speak to it or get off track. What do I mean by having a “polished” deck? David Chitester, a serial entrepreneur, investor and CEO of Florida Funders, recommends using Guy Kawasaki’s 10/20/30 rule when putting your deck together. Limit the number of slides to 10, speak for 20 minutes, and use 30-point font. Just as you know your customers, know your audience when you’re doing an investor pitch. Imagine you’re an investor that has sat through over 100 startup pitches. Would you really want to look at 50 slides in 12-point font and listen to another 60-minute talk?
- Know your NUMBERS. For a startup or early-stage enterprises, the actual forecast results are not as important as knowing, and being able to answer to, how you got to your results. Being able to answer potential investor questions regarding your assumptions and how you plan on getting to your results is critical in setting the right tone and making the right impression. Even if they disagree with your assumptions, having a good handle on your numbers says a lot about your preparedness and certainly gives you credibility.
Yes, there’s a lot that goes into starting and growing a business, gaining investor confidence, and obtaining funding. My intent here is to provide you with some insight that I’ve gained from talking to some investors, venture capitalists, and executives, and to give you something to think about.
Have faith in yourself and your ideas. Persist and don’t be afraid to fail. Remember “success is the result of perfection, hard work, learning from failure, loyalty and persistence” – Colin Powell.
Thank you for reading, please leave me a comment to let me know what you think.
Susan Nieland, CPA