What Really are VCs Looking For?
If you have asked me this question before now, maybe sometimes in the middle of last year, I would have said fancy pitches because Venture Capitalists have so much money and they are always in the mood to support anyone and everyone who comes their way.
I hope you are not thinking in this direction, If VCs thought this way, then they wouldn’t be VCs.
Not wanting to sound like a broken record but the process of launching any product, especially in healthcare can be a tedious one and even when you do it is important to raise some money outside of your own pocket, friends, or family and look to investors to support you. The truth is investors are out looking for ways to fund you so what things must you do to attract their attention.
I’ve only spent 3 months in this VC space and one thing I can tell you is, VCs are not just looking to throw money at you, they see themselves as your partner and will be very committed to actively contributing to the growth of your startup. So forgive us for wanting to do our due diligence by asking you some hard questions. I must also warn you that while you need to show how passionate you are to the vision, there’s more that an investor will be looking to see and let’s reveal what they are:
A Big Market
Imagine you were in front of an investor and you share how your solutions can address 50 million people and you show proof of growing at a cumulative annual rate of 8%. With this, I can tell to invest in your idea because there is a big market, more stable and less inclined to volatility. I know that investing in you will increase your chances for growth and my investment.
Unique selling points/Comparative advantages
If you are working on something amazing, you will always have competitors. Apple vs Samsung, Netflix vs HBO, Instagram vs Tik Tok… these guys are competing with one another and every time we watch them unveil attractive products or services. In the marketplace, you need to stay unique; different, new, and hard for a competitor to replicate. Here are some things you can do to stand out with your startup.
Create a different product that will be completely hard to replicate.
Find a new and more efficient way to do things.
Sell cheaper
Dive into a unique niche
Team/Culture
There needs to be a structure in place and as weird as this may sound it is true - people invest in people, people do business with people. The quality of your management team and the experience they bring to the company is critical. I should probably say here that you need to perish hat idea of being solo, you need people and the earlier you start searching for quality hands, the better for you.
Value Alignment
Every venture capitalist has a philosophy that underlies their approach to investing. I was talking to a friend about investing and it was interesting hearing him say, the model didn’t really make sense to him but I could invest because of bragging rights. While some VCs are strictly in it for the return some others take a strategic approach, looking to support startups that will benefit their parent companies or portray them in a particular light.
Metrics and solid evidence
There needs to be solid evidence of your growth progress which will give the investors a clear view of how you can effectively use the funds they have given you.