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5 Things Venture Capitalists Need to See Before Investing

Venture Capitalists want their investment to grow.

What Exactly Do Venture Capitalists Look for in a Business Proposal?

Once a seldom heard term, Venture Capital has become quite the hot topic in recent years. Everyone including celebrities, athletes, and even rappers are trying to get into this lucrative business.

If you’re looking to take your business to the next level, there’s no doubt that you’ve considered seeking investment from VCs (Venture Capitalists) at least once or twice.

Maybe, you’ve already presented your idea to investors to only be denied funding.

This can be a frustrating experience, as you know that you have a dream along with the abilities it takes to reach the next steps of growth.

The only problem: you simply lack the capital to make it happen.

Asking for money from strangers is never an easy task. You need to prove to Venture Capitalists that the money they invest in you will ultimately make them money in the long run.

Therefore, before you even start to write your sales pitch, you need to know exactly what VCs are looking for when they invest in a company and hand it to them on a silver platter.

ROI (Return on Investment) is, of course, the most obvious metric that every investor looks at before they put down their money. It’s also the first thing that entrepreneurs like yourself consider before they put together a boardroom presentation.

But, there are other related factors that VCs take into account when deciding whether or not to put their money into your pockets.

Let’s explore some of these factors:

5 Things Venture Capitalists Need to See Before Investing

1. Unique Product, Pricing, or Process

With stores like Walmart carrying at least 70 million SKUs, it’s hard to say that your idea has never been done before or has never reached commercial success. Instead, your best bet for achieving success is differentiating your product from the rest by tweaking certain aspects of it, such as pricing schemes, manufacturing processes, and materials.

For example, everyone today has a smartphone and they all do essentially the same thing. What if there were a smartphone made out of 100% recycled metals and a biodegradable alternative to plastic derived from rice husks? That’s creating a synthesis of two existing ideas.

 “There is no such thing as a new idea. It is impossible. We simply take a lot of old ideas and put them into a sort of mental kaleidoscope. We give them a turn and they make new and curious combinations. We keep on turning and making new combinations indefinitely, but they are the same old pieces of colored glass that have been in use through all the ages.”

-Mark Twain

2. Big Market and Potential for Future Growth

VCs want to see your business grow—and their investment along with it. Without a big enough market for your product, you’ll hit a wall rather quickly. Investment is a game of percentages and the more room you have to grow, the higher percentage of ROI your investors will receive.

It can be a tricky situation when trying to come up with new ideas while staying within the boundaries of a large, pre-existing market. For this reason, it’s best not to try to reinvent the wheel. Just seek to improve, build upon, or tweak what’s already successful.

3. A Good Management Team

Businesses aren’t just made up of statistics and cold data—they’re made up of human beings who have the ability to both succeed and fail. One of the most overlooked aspects of pitching your idea to investors is convincing them that your management team is prepared.

Show VCs that your management team is not only experienced and capable but also able to grow alongside the company. If you’re asking investors for an investment to take you from a $10 million dollar company to $100 million dollars, you need to prove that your management team can handle that task.

4. Metrics, Data, and Solid Financials

The numbers never lie.

Having gathered metrics, data, and solid financials is the ultimate test of whether or not your sales pitch will convince Venture Capitalists to invest in your business. ROI is a numbers game and you better bring the numbers that make your offering more attractive than anyone else out there.

Perhaps you have a competitive advantage in labor and manufacturing costs, sourcing materials, or shipping. Whatever your advantage may be, make sure it’s on full display for everyone to see.

This video speaks further about what the decision process of a Venture Capitalist looks like:

5.  Match with VC’s Investment Philosophy

Believe it or not, Venture Capitalists do care about more than just money. Many VCs have personal investment philosophies that guide them in their decisions. Seek out Venture Capitalists and find out what causes they support. Then, contact the ones whose investment philosophies best match your own (e.g. If you sell products that are biodegradable, seek out VCs that care about environmental causes).

Conclusion

After reading this article, we hope that you may have a better idea of what Venture Capitalists are looking for when they decide to invest.

In addition to just a great idea and an already successful business, you need to look towards the future and convince investors that their money is better off in your and your team’s hands than anywhere else.

Apogee Accelerator Group helps get the capital you need by improving your business strategy and accounting, introducing you to the right VCs, coaching you for sales pitches, and much more.

If you’re currently seeking investment from Venture Capitalists and you want to take your business from $10 million to $100 million, or from $100 million to $1 billion in valuation, contact us to schedule a quick consultation.

About the Author Corey Singleton

"As a business owner, I put big money into sales and marketing without ever really knowing what results I was going to get. Tired of this ambiguity, I decided to create a new kind of sales support company: one that provides a guarantee.

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