Running a startup is expensive. If you’re an entrepreneur, you already know this, and likely have “find money” high on your priority list. There’s a fair chance that the first place you’re going to look is at venture capital firms — those glorious businesses that, thanks to shows such as Silicon Valley and Shark Tank, have reached nearly mythical status among would-be founders.
As you’re likely aware, you’re not alone. You’ll face a steep uphill battle against many other fully qualified startups, some of whom may even have similar ideas as your own and asking for more money than you’ve ever held in your hands before.
Related: 8 Ways to Fund Your Startup
How do you get VCs’ attention? I’ve scoured the web — and talked to a few — to find the five best tips from five extremely attractive venture capitalists. Here are the winners:
1. Fix a problem others ignore.
“Figure out where the world is going, and get there first,” says Wade Diebner, managing partner of ExCapsa Group, the investment firm behind B2B solution LeadCrunch. “Make sure that your solution is developed for a specific problem that you have the expertise to address. After all, a good solution, no matter how elegant, is only good insofar as someone else cannot come along and develop something similar. Your product will need to stand up against competitors with more capital and resources, along with other assets which they can leverage. We look for startups that not only present solutions to uncrowded markets but also resist the temptation to use their early lead as a crutch.”
2. When you pitch, focus on the big picture.
Edith Yeung, a partner at 500 Startups, advises applicants to the prestigious accelerator — which has produced companies as varied as Twilio to Studypool — to approach their pitches with a big picture assessment and a thorough understanding of their industry as well as their product.
“Most founders I meet are in love with their product,” Yeung writes in a recent blog. “Unfortunately, as an investor, I don’t just want a person who is in love with himself or herself or their product. I want a founder who truly understands how to create a business. You should be the one who can tell me everything about your competitors, market, legal environment or policy changes.”
Richard Werbe, CEO of Studypool, says to get funded by 500 Startups it all comes down to the numbers. “Know your Metrics (KPIs, growth rates, CPA, LTV). Be able to speak analytically about your business at a high level. If you don’t have major revenue and hockey stick growth — don’t apply. 500 looks for traction based startups.”
3. Create products that give a glimpse into the future.
White Star Capital, a Canadian firm that purposefully scouts in locations that are commonly ignored by other venture capitalists, has a thing for making sure that its companies are future facing. Retro may be a great look for personal style, but it’s rarely flattering for a business model.
“At White Star Capital, we are openly interested in companies that see data as a competitive advantage,” Christian Hernandez, an investor at White Star VC, wrote in a recent blog post. “We want to back companies that help collect, collate and bring data to life through algorithms.”
4. Reach out to VCs physically near you.
If you’re in or near a major city — or even a smaller city — there’s likely a venture capital firm that focuses on your location. For example, Massachusetts-based firm MassVentures funnels dollars directly to Massachusetts companies that are working to bring technological solutions to state residents.
“In total, the START program has created an ecosystem of 200-plus unique companies, reviewers, service providers and advisors to create the next generation of successful Massachusetts technology companies,” says Jerry Bird, president of MassVentures. “MassVentures is pleased to have driven the program’s success and are pleased for the continued support from the State to support initiatives such as these that help drive economic growth.”
5. Have a balanced founder team.
Paul Graham, co-founder of Y Combinator, explains: “The most important question for deciding [how good the founder group is]is: ‘please tell us in one or two sentences about something impressive that each founder has built or achieved.’
“To me this is the most important question on the application. It’s deliberately open-ended; there’s no one type of answer we’re looking for. It could be that you did really well in school, or that you wrote a highly-regarded piece of software, or that you paid your own way through college after leaving home at 16. It’s not the type of achievement that matters so much as the magnitude. Succeeding in a startup is, in the most literal sense, extraordinary, so we’re looking for people able to do extraordinary things.”
While you perfect your startup in hopes of attracting venture capital investment, remember: each of these traits also helps you to build a successful company as well. Be genuine and do your research and nothing can stop you!