Turning your vision of a business into a reality requires financing. All businesses need capital. Capital consists of money or credit, which you can use to cover business-related expenses. Even if your business is still in the early stages of getting off the ground, you may be able to partner with a venture capitalist. Venture capitalists are investors who specialize in financing startups. There are several things that venture capitalists look for in a startup, some of which include the following:
What Do Venture Capitalists Look for in a Startup?
If you’re highly motivated, you’ll have an easier time securing financing for your startup. You can’t expect a venture capitalist to invest in your startup if you exhibit little or no motivation. Motivation is the internal drive that pushes entrepreneurs to succeed. You can show venture capitalists that you are highly motivated by talking enthusiastically about your startup and how you intend to make it a success.
Venture capitalists look for a strong moat in a startup. When used in the context of business, a moat is a unique advantage a business has over competing businesses in the same market. A strong moat will safeguard your startup from the competition. Your startup may still have competitors, but they won’t be able to steal your startup’s market share. A strong moat means your startup will have a competitive advantage that keeps customers coming back to it.
Fast Growth Potential
Venture capitalists look for fast growth potential as well. Most startups aren’t profitable. It takes startups three to five years on average to turn a profit. While you don’t need a profitable balance sheet to secure financing from a venture capitalist, you may need fast growth potential. Fast growth potential indicates your startup can quickly expand and generate more revenue.
Acceptable Cash Burn Rate
Also known simply as burn rate, cash burn rate is the rate at which a startup spends its cash. It’s typically measured as a monthly amount, such as $50,000 per month. If your startup’s cash burn rate is too high, venture capitalists may not invest in it. You can take steps to lower your startup’s cash burn rate before stepping in front of a venture capitalist.
This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.