In startup land, pitching is all the rage!
Last fall, I co-starred on a show on ABC Family (now Freeform) called Startup U, and the one topic that got us a massive spike in viewership was fundraising.
Everyone wants to know the secrets. How do you raise that $1 million seed round?
When you are looking at the problem, you need to ask yourself two very specific questions:
- What is the problem that I am trying to solve?
- Do enough people also have this problem?
The answers to these questions alone will let you know if you are wasting your time going after venture investment. Venture capitalists want to know that you are solving big problems.
What solution have you come up with for the problem you are attempting to solve, and is this the correct solution to solve it? You will know that by going out and testing the market. If enough people believe that you are solving their problem, then you are headed in the right direction.
How big is the market opportunity? Venture capitalists want to know that you are going after a HUGE market. They want your solution to solve a problem for millions and millions of individuals. If your solution is only solving a problem for a few people, it might make a great business, but it may not be necessarily ripe for venture capital investment.
Every VC wants to know how you will make money. Is it through revenue shares, advertising sales, or a freemium business model? Whatever the case may be, you need to have a plan for how you intend to generate revenue.
Who are your competitors? How is your solution different or better than theirs? If ever your answer is, “I have no competitors,” a VC will look at you as if you have two heads attached to your body.
Every company has competitors. They may not be direct competitors, but you should most certainly know who your competitors are.
This refers to growth. How many customers do you have? Are they paying customers? How much are they growing month-over-month?
Who makes up your team? Are they all qualified to work on the solution? Furthermore, do their skill sets overlap, or are they each contributing differently to the business? Also, how long did the team known each other before deciding to go into business together? All of these are very important factors that a VC will consider when investing.
Now, I say this all to say that this is not the be all to end all. There are many different interpretations of this, but I can guarantee you, if you go into your investor meeting with these items checked off, you are much more likely to leave with some form of financing.
Sequoia Blodgett is the Associate Technology Editor for Black Enterprise, Silicon Valley. She is also the founder of 7AM, a lifestyle, media platform, focused on personal development, guided by informed, pop culture.