6 things a venture capitalist will look for before investing

6 things a venture capitalist will look for before investing

Every business out there will at one point think of bringing on an investor because they don't have the funds to push their businesses to the highest potential. We all know what bootstrapping is, but this isn't always an option for some companies because they can't seem to break through that ceiling based on what they are already making and what they have to pay themselves, this is where a venture capitalist will come in and help out.

It's a good thing to know that less than 1% of companies within the US have obtained Venture Capitalist money so I wouldn't get your hopes up too much. There are things you need to have in place prior to even contacting them.

I was actually talking with a friend who works for one of these types of companies and I asked him a few questions on how I could get on their radar in order to obtain a decent amount of funding, and below are the responses I got from him, but in my own words


1. The character of every business owner involved
My friend said that they look at the people running the business and not just the stats the business is showing. They want to know what kind of people are running the business so they can assess if there are any loose cannons or dead weight within the upper management, which would need to be cut out prior to them investing. He said that you could have the best plan in the world, but if there is someone who is unpredictable within upper management, it's too risky because they could screw everything up. They also don't like lazy people because they are seen as dead weight and not worth the investment.


2. Skill sets of the business owners
You won't be able to just have anyone come in and be the CFO or head of marketing. They will need to have specific skill sets in order to fulfill their role adequately. A CFO that only has experience working the cash register at McDonald's is never a good investment because it looks like you just hired a friend or someone off of the street. You can't just hire someone to fill a spot because you want to have an investor open up their wallets, you need a solid foundation, and that starts with the leaders of the company.


3. Cutting Edge Idea
99.9% of new start ups are the idea of something else. A venture capitalist doesn't want you to pitch them a new social media platform, a video sharing website, or an etsy shop. They want to see what YOUR idea is and not your spin on someone elses idea. If they were in the game to do this, they would just invest into the originators idea and add their own spins to it because it would cost much less money to do so.

Remember, roughly 1% of companies in the US are getting VC money. You will definitely need to stand out from the thousands of applicants spamming VC's in order to get someone to contact you back.


4. Everyone needs to benefit
It's difficult to judge how successful a startup is going to be in the beginning because there are no statistics. The ones that usually do amazing things are the ones that are filling a void and also helping everyone out at the same time. Think of Uber, they allow common drivers to make money taking people to places just like a cab would, and they're cheaper because there's not much of an overhead fee. It's easier to get a ride because of Uber, it's easier to communicated due to snapchat and Facebook, it's easier to find a cheap place for the weekend because of airbnb. You need to be unique and offer something no one else is while also helping people out.


5. Long term profits
All of the VC's in the world want to know that your business idea won't be just some fad that fizzles out and dies after a few years. They want to see sustainable growth for the long haul. A VC won't invest in you if they don't think that your business will be around for the long haul and bringing them 3 or 4 times their investment after that. A VC understands that they can't just cash out when they want because it could cripple the business, so they will stick around for a while and help you grow.

If your idea doesn't show long term growth, I can guarantee that you won't be getting any of that VC money.


6. Financial Gain
We all know that people invest simply to make money, it's the same with VC's, they treat it like a business and not a charity. It would be nice if someone were to give me millions and I didn't have to pay them back lmao

VC's think of when they will begin to be profitable from their investments. They are a business partner and want to have their hands in how the business is ran, usually, unless you're a super technical programming company and the VC just knows you're going to make money lol.

None of the investments a VC will make are going to have over night profits, and they understand this very well. They're in it for the long haul and massive profits, just like you are.




In Conclusion:
If you don't have a very unique idea, you likely won't be talking with many VC's. You need to show amazing growth potential while also helping out people along the way. Venture Capitalists know what to look for when investing into a company, and now you do too



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Razzy