Raising capital from investors is rarely easy or quick. Entrepreneurs recognise that standing out from the crowd and communicating effectively are critical, and yet investors’ decision-making processes can seem opaque. As a serial entrepreneur turned technology venture capital investor, I’ve been on both sides of the table. Here are a few thoughts on what investors usually want to see in a business, and how entrepreneurs can improve their chances when pitching to them for new investment:
First, assemble the best team for the job. The founding team are the biggest factor indicating a company’s potential success, so that’s what VCs will be focusing on the most. You’ll need to assemble a group of top-quality individuals who fill each of the major roles in a business: in technology, product management, sales, marketing, finance, and who can work together effectively. Sadly, just because a bunch of people are friends and want to work on an idea together doesn’t mean they’ll make a good team, and it doesn’t mean they have all the skills the business needs. Think hard about this before committing people to roles.
Second, you will need an innovative idea which can become a great product. Great technology is always absolutely essential to business, and therefore fundraising, success. Your team needs to build it using modern software components that will enable it to be easily maintained and to scale easily. Ideally it should have already advanced beyond the ‘idea’ stage, to become a working prototype or Minimum Viable Product. It’s also important to show you understand how your product compares with those of the competition: and there is always some competition, whatever you may think!
Third, be clear about the potential size of the business opportunity. Understandably, investors want to invest in businesses which can access the largest possible potential market. All too often, we are instead offered technology solutions which feel like they are still looking for a problem to solve. It’s important to show you understand the true market opportunity, can prove your product works, have already got feedback from users, and perhaps even have hooked some early paying customers.
Be sure to make your presentation clear and concise, rehearse it until the team can present it crisply leaving plenty of time for Q&A, because that’s where you get a chance to prove you know your stuff.
Finally, do your homework on the VCs too: learn about their previous investments, their approach, even their fund cycles. It’s reassuring when presenting teams have done their research and it’s a good sign that those people will be focused on details during the investment.
If you can meet these challenges, then your business stands a decent chance of raising money. Get it right and you could find yourself with not only capital to take your business to the next level but also an experienced and supportive partner who can unlock your idea’s full potential. Good luck!
Alex van Someren is Managing Partner of the Amadeus Early Stage Funds