January 20, 2017
Is Your Company Ripe for Venture Capital?
A lot of people start businesses but they are not all ripe for venture capital investment.
According to the SmallÂ Business Administration, about 600,000 new businesses are started in the U.S. each year, and given the datasets from the MoneyTree report, only 4,561 received venture capital investments in 2016.
So before you go getting your hopes all high, it’s best that you know if your company qualifies, so you aren’t spinning your wheels and wasting time.
First things first, if you are looking for ventureÂ capital investment in the tech community, you need to be going after a BIG idea. Why? Because VC wants to make lots of money. A 2x return, what’s that? No, they want to see the 10x return, the unicorn, that comes galloping toward them with its horn held high.
So, let’s say you are poised to make the next Snapchat. OK. Here comes another ingredient. You need to have a unique idea with a high barrier to entry. What does that mean? It means that if you don’t, Instagram can come and knock you right off. Whoopsies. You get the point. Do you have a specific patent, a trademark, is there some type of intellectual property that is difficult to copy, what makes your product difficult to replicate?
Those are a few things, now add traction, a compelling value proposition, and a solid team to that and you are on your way.
What did you say? All checks out. Oh good! Now let’s set up a pitch meeting.
Oh, wait a minute. One other thing that I should mention is that you should know your investor’s thesis before you try and pitch them. Maybe you are a company positioned with a high-growth opportunity, but are you approaching the right investor?
Monique Woodard’s investments focus on tech categories that are seeing high growth with black and Latino consumers, so if you are trying to disrupt the cat couture market it doesn’t necessarily mean that you are not investable. It just meansÂ she may not be a fit for you.
Â Sequoia Blodgett is a 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.