5 Things a Venture Capitalists looks for in a Company
An essential part in growing your company is obtaining capital from investors to meet the growing demand for your company’s product. Many companies tend to jump the gun and try to land venture capital when they have run out of options. Rather than growing these companies, venture capitalists would then have to take the risk of saving these companies. This is not an optimal investment strategy for venture capitalists, so many young entrepreneurs wonder when is the right time to ask for venture capital. A recent article on entrepreneur.com gives us five things that a company needs before asking for venture capital:
1) Seasoning – Just like in any other job, venture capitalists prefer an experienced entrepreneur who understands the business and has experience with other businesses. This doesn’t mean that a young entrepreneur can’t thrive; it’s just better if they have someone on their team with business development experience.
2) Customers – Why do your customers buy this product? According to the article, there seems to be a strong push towards customer satisfaction. Satisfied customers willing to pass your product along to their friends and continue using your product are the type of customers that a venture capitalist is looking for in a company.
3) The Team – Venture capitalists are looking for certain qualities in a leader of their team, the entrepreneur. They must have passion, tenacity, commitment, flexibility, exhibit teamwork in their environment, coachability, and an astute understanding of the product and industry.
4) Opportunity – Investors like big ideas that have to potential to change the world. This is a broad statement, but investing in a company is a huge risk, so the bigger the potential payoff the better. These are ideas that have the potential to change a societies way of thinking, their behavior or their culture.
5) Business plan – Venture capitalists want to work with an entrepreneur that has all the numbers and opportunity mapped out. What are the potential profits? Will customers keep coming back? How big is the opportunity? Investors want to know exactly how much money it will take to generate that extra dollar of revenue.
Making sure that your company has all of these qualities will vastly improve your chances of obtaining venture capital from an investor. By mitigating their risk, you are cultivating your chances of success.
Click here to read the full article on entrepreneur.com.