One of the top questions we’re asked at ventureLAB is “How do I get investment?” While that’s definitely something you should be considering as you build your company, we think it’s better to start with “How do I know if my company is ready for investment?”
Why? Because great ideas don’t make money, great businesses do. It’s definitely possible to be a unicorn with a great idea that gets funded instantly, but we can’t all be magical mystical creatures with statistically anomalous circumstances that provide us with key investors before even creating a prototype, can we? No. But that’s why you’re an entrepreneur, because you know that it takes more than an idea to build a business, before your company is ready for investment.
So, how do you know if your company is ready for investment?
We surveyed the brain trust here at ventureLAB to help you determine if you’re ready to pitch your company to an investor and if an investor will be receptive to your pitch.
1. You have a well thought out business strategy.
Jane Gertner, VP, Partnerships and External Relations highly recommends preparing “a well thought out business strategy/plan, including financial forecasts.” This shows investors that you’re not just there to sell an idea, you’re there to sell a business. That’s something that investors can get behind.
2. You know how your company will build value.
Paul Rivett, Director, Network Partnerships says that companies seeking investors should have “a convincing plan of how the founders are going to build value in the company over the next five years. To be convincing, it must have specific steps and metrics, and investors must believe that the current team can achieve the metrics.”
3. You understand the problem your company is solving.
Heather Crosbie, Senior Analyst at ventureLAB says it’s important to know “how and why the problem/need you’re addressing is important” and whether its “widely felt.” In a nutshell, you should “understand the problem you’re solving and its relevance” to the marketplace.
4. You can clearly articulate the problem your business is going to solve.
Jeremy Laurin, President & CEO, emphasizes the importance of “a clearly articulated global pain point” to illustrate market interest. Companies should be able to state in 30 seconds or less what the problem is, and how “their technology/business aims to solve” the problem.
5. You have the right team for the job.
“Any company pitching to a VC should be able to clearly articulate why they have the right team in place for the next set of milestones,” says Melissa Chee, Chief Operating Officer of ventureLAB. She adds to this advice with a caution for founders, “realize that the [current] team may not be the right team for the entire ‘life’ of the company.” Having strategic foresight will also demonstrate the potential longevity of the company to investors.
6. You have a good business.
“Having a good business. I think a lot of people assume that having a good idea is enough to raise capital on and it’s not. You need to work hard to take that idea and prove out the business fundamentals around it (traction, customers, revenue etc.) without other people’s money and then show those people how that money can amplify an already successful business to the next level. This is one of those things we encounter time and time again. So, simply put, the most crucial thing is to have a great business opportunity, not a great idea.” – Mike Betts, VP, Venture Services
So how do you make sure your company is ready for investment?
ventureLAB board member Janet Bannister is a partner at Real Ventures. Her Venture Capital firm invests in startups and makes a point of providing guidance to selected companies. Lucky for you, she let us record a master class on how to talk to a VC! This is a rare peek inside a sometimes confusing and very daunting world that will give you exceptional insights and tips for when you’re ready to pitch. Check it out the video now!