There are five key characteristics venture investors look for in a start-up:
- A large, rapidly expanding market
- People / management that can get the job done
- A brilliant idea or technology that can be commercialized
- Strategy that has a strong unfair advantage
- Reasonable valuation
First, if you don’t match the above criteria, there is no incentive for investors to respond except for altruistic desires to grow entrepreneurial capacity. The truth is if you get close, many will respond and tell you how to get to the next level. But, if you are not even close, investors simply don’t have the time to educate you. There are too many good deals in the market to waste time on the ones in the tails of the distribution. If you are not getting responses, seek out a local incubator or accelerator or buy a book on the subject matter to figure out how to change your message to get the investor’s attention (New Venture Creation, Spinelli and Adams; The Art of the Start, Kawasaki; The Startup Owners Manual, Steve Blank just to scratch the surface). If you are not getting responses, it is your fault and problem. Sorry to be so blunt and so rude, but that is reality.
If you are looking for funds and having trouble, remember that starting a business requires toughness, adaptability, drive to continuously climb a steep learning curve, the ability to deal with stark realities, and make them work for you. It is important to recognize that if you are not getting a response, you are sending the wrong message. It is time to examine your model, package, presentation, and message. You need to look at your venture from the perspective of the investor. The core question to ask is: “If I was the investor, what would make me want to put hard earned money at extreme risk?” Once, you have figured that out, then craft your message, package, etc. That reason could be the team, the market, the product, the IP, etc. But, you better understand what motivates an investor or don’t waste your time.
I periodically lecture at the University of Tennessee on New Venture Creation. I always tell the students that investors don’t invest in ideas, concepts, IP, technology, or even companies. They invest in people in markets they like and understand. And, communication of the VALUE of a venture is core to getting attention. It is understood the science has to be sound, the technology development is well understood, and a product is demonstrable in beta testing by credible clients before any professional investment is going to be made. Too many investors have lost money on promising technologies that went nowhere. They invest in execution now, not potential.
As for creating a message, Kawasaki’s Art of the Start is a great resource from a successful entrepreneur. I would also point to a particularly poignant TED talk by Simon Sinek (http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.htm <http://www.linkedin.com/redirect?url=http%3A%2F%2Fwww%2Eted%2Ecom%2Ftalks%2Fsimon_sinek_how_great_leaders_inspire_action%2Ehtm&urlhash=dTRN&_t=tracking_disc> ) about starting with the “Why,” not the what or how, in crafting your message. He basically says people buy from you because why you do it, not how or what you do. This presentation, and subsequent reading of the book (Sinek, Start with the Why, which I HIGHLY recommend) really changed my perspective on how sales (vision, shares, products, etc.) really happen. It is a brilliant look at how humans get buy-in of complete strangers, lead, and motivate them.
In short, find your WHY, then craft your pitch.
Copyright Eric L. Dobson, 2016