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What Venture Capitalists Are Looking For in Your Company

Rick Smith is the co-founder of Crosscut Ventures (http://crosscutventures.com/). You can watch more content here on Docstoc.

One of the most confusing things to a company is why other companies are raising money and they are not. Here are reasons why.

  1. A passionate management team. We know they will be working night and day to make the old product better or to launch the new product.
  2. Large potential opportunity. Many ideas are good, but venture capitalists need a big idea to make it work because so many fail.
  3. Absence of entrenched competitors. Look for Greenfield opportunities.

Transcription

I think one of the most confusing things to a company is why they see some companies raising money and others not, right? So what is it that’s motivating venture capitalists to invest in this company and not in my own company? I think it’s hard to explain oftentimes but if I were to boil it down, without a doubt, number one, passionate management team. All right.

More than the idea, the management team is really driven to do whatever it is they’re going to do, service, product, make a new thing great, make the old thing even better. They are passionate about doing that and we know they’re going to be out there working night and day to make that successful. All right. That is by far what we are looking for first. All right.

Beyond that, it does have to be a big opportunity. I think one of the things that knocks a lot of companies out is it’s a good idea and it may be a good business but we need a big opportunity to make it work. We’re going to fail so many times in our investments on our side of the table, venture capital side of the table that the ones that succeed have to big, right? So we see good ideas but they got to be big ideas.

So passionate management team, large opportunity, and then really want to see a space that is new and open. It’s tough to go into a space where there’s two or three entrenched competitors already there. All right. You might be able to chip away and get some market share, but generally speaking, we rather see a greenfield opportunity that will create and turn an opportunity for that startup to generate the kind of returns that we’re looking for.

So be passionate. All right. Go after big opportunities and go after open spaces. That’s what a lot of venture capitalists are looking for.