According to the National Venture Capital Association, $69.1 Billion dollars were invested into just over 8,000 different companies and start ups for the year 2016. This is a decline from previous years but no matter the case all of these start-ups and companies have similar characteristics that secure the deal to receive funding. I will divulge these characteristics but first it is important to explain what will not secure venture capital funding.
Imagine for a second that you have a diamond but it is completely covered in rock. Now, you know that underneath all that rock there is a very valuable precious diamond hidden beneath the surface. You then proceed to sell me that rock based on a chance that there may be value beneath its surface. I myself wouldn’t buy your rock. You may get a fool to buy that rock in hopes of finding value but you wouldn’t get as much as you would if you took the time to remove all of the rocky material and showcase a magnificent diamond or product. You would then have true value or more importantly “proof of concept”. Well this is where many people fall short when trying to obtain venture capital because they are merely trying to sale a rock with no proof of concept. It is your duty to uncover that rock and prove it has defined value in the market place.
That diamond can be a prototype, intellectual properties, or several patents that you have developed over time but unless you have uncovered your rock (product/service) and have proven it sales in the market you don’t have as much as you think you do. You have a solid foundation but this alone will not get you the financing you need to grow your business. If you ever watch shark tank, you will realize that it always comes down to one question. “ What are your sales?”
The over 8,000 companies that received venture capital did not just sale there patents, intellectual properties, and prototypes for a few million and then leave an investor with a new project to figure out. They committed to a long term plan of growth through building not just a product but building a business brand and developing sales to actualize real profits. Venture capitalists don’t care to have a innovative product if it doesn’t sale and if they have to put so much money into building the business themselves. That’s what you are for. You know your product, you are emotionally attached to it and you know the markets that it will sell to and have the most value. If you don’t necessarily know how to do it or want to spend that time, it is up to you to hire the right people that can. Either way you will absolutely have to be involved wether it is as a consultant to the business or directly hands on day to day operations.There are many other businesses out there that are further along in the business cycle that with a few million dollars of capital could turn there business into a lucrative business within a shorter time period. So if you are not committed to unrocking your diamond don’t expect others to see the complete immediate value when they will have to apply a lot more effort for something in which the value is not defined.
Another characteristic of these companies are the amount of money they request. Out of approximately 8,000 companies and 69.1 billion in funding, the average deal amount came close to 8.7 million dollars. This effectively eliminates the small players and the fakers. Upon the due diligence process many startups will be eliminated if the valuation for the amount of money they need makes completely no sense and is too low. Yes, you heard me right, TOO LOW. Many Venture Capitalists and private equity firms will not even look at your deal if your request for funds are too low. The deal has to be big enough to make profits at scale based on the project.
The last and probably most important is having an actual marketable product. Do you truly have a diamond. Is there value for your product in the market place. Is it’s need already phased out by newer technology? Is the market already saturated with similar products that are better? These are just a few questions to ask yourself about your product when seeking venture capital.
Now, if you or someone you know answers yes to any of these questions below click the link here to work with me and get the proper funding you need to present your product to the World.
Are you seeking venture capital in the amounts of 10 million dollars or better?
Yes click here
Do you need funding to further your startup operations?
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Have you been unsuccessful acquiring funding for your project?
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If you are looking to receive working capital, business loans, fore-fill accounts receivables, acquisition funding or want to learn about some new funding programs visit my website jlouden.northamericanfinancialservices.com or contact me via phone JulianLouden 904–674–9872
Only Clients seeking $500,000 or more.