So you have a great idea? You think your idea is so good that it will be the next IPod, automobile, or revolutionary drug so all you have to do is call a few venture capitalists or angel investors and let them know where to send the check. Unfortunately it isn’t that easy. You and many other people may have great ideas but it takes more than a great idea to get startup funding.
If you are looking for funding it an experienced entrepreneur is always more attractive to investors. The old saying that no education is free is certainly true in the world of startups. New entrepreneurs often come on the scene with unrealistic goals and lacking real perspective on the amount of work it will require to make the business a success. With investment dollars a little scarcer than in the past funding often goes to the experienced business owners.
The great idea isn’t marketable to a venture capitalist unless there are some dollars behind it. Startup funding rarely goes to an idea. Instead, a business with positive cash flow proves that entrepreneur is properly managing the money they have and they will be good stewards of the money given to them by the venture capitalist or angel investor. If you don’t have a business that can show sales and growth, your chances of obtaining startup funding are slim.
Your business plan is one of many that will cross a venture capitalist’s hands. They won’t all get read so you have to find a way to stand out in the crowd. Just like trying to obtain a job, often it’s about who you know but what if your circle of friends doesn’t include an angel investor? Consider attending an educational session put on by a venture capitalist firm. Some are even doing entrepreneurial boot camps, mock presentations, and lectures at local libraries. Get face time with these people.
Who is on your team? You might be a great accountant but have no business designing the company logo. When you present your idea, you should be able to talk up the team that is supporting you. Let the venture capitalist know the accomplishments of other team members so they know that there is experience behind you. This makes them feel even more comfortable that their money will be put to good use.
Is your product the perfect product for everybody? Probably not and before you receive any startup funding, you have to prove to the angel investor that you are targeting a certain audience and they are a large enough group to sustain your growth for many years. If your product is designed for architects only, you may have trouble securing funding but if it is for every mother in America, you may have a much easier time.
Don’t look for funding too early in your development. Before you can receive money, you almost always have to have a successful business already.