Now that you’ve formed a unique idea for a high-tech company, it’s time you took things to the next level by raising capital. If you can’t find other viable methods to raise growth money, the next best step is to go to venture capitalists.
Marketing your company to VC firms isn’t basic or easy to do, but you can find success with the right approach.
One thing entrepreneurs need to learn first is raising venture capital funds isn’t the entire picture in funding your company. It’s really just one step that includes grants and angel seed funds. However, VC firms are still a major part of bringing more aggressive growth.
Take a look at some steps you can take to convince an investor how valuable your company is.
The Old Elevator Pitch: A Great Idea in One Sentence
The first major step to take is to describe your high-tech company as briefly as possible. This means one sentence as a pitch and a business idea you can prove has moneymaking potential.
Much of this should cover an unmet need in the technology marketplace, a differentiated solution to what’s already out there, and a scalable concept for perpetual growth.
All of these are going to help you gain a meeting with a venture capitalist firm. Remember, though, don’t do cold calls. Go through friend referrals, and present at pitch events.
Prove the Target Customer
You need to do some research and prove you have a strong customer base for your company. Technology is one of the most competitive industries in the world, and you need to assure your customers wouldn’t prefer discounts with your tech products. Otherwise, you might not stay profitable and shut down before being able to grow.
Prove on paper your customers would gladly pay premium for your tech product, just like Apple fans do.
All of this comes down to how well you can solve a unique problem for your key buyers. Even if it’s a slight improvement on a similar tech product, it can make all the difference in consumer decisions. Capture the information in a target customer profile.
Determining the Marketability of the Tech Product
Be sure to do all your research on the marketability aspects to your new tech product or service. It often goes beyond solving one problem for someone and bringing other value for users far into the future.
Do some testing and provide solid metrics to the VC firm that proves your product can stay useful long-term rather than become a temporary fad. Analyze the total addressable market, competitors in the space and articulate your competitive advantages.
No matter if you’re still in beta test mode, present the test customers willing to buy your tech product now. Demonstrate what kind of marketing content you used that led to your test subjects converting.
Business Metrics to Show Your Financial Health
Venture capitalists aren’t going to invest if they realize you could end up in financial jeopardy. You’re going to have to bring in a list of typical financial details VC’s typically look for in tech companies.
These include your committed monthly recurring revenue, your annual recurring revenue, and your annual run rate revenue.
Also present information on your cash flow, your customer acquisition/cost payback period, your customer lifetime value, and your churn rates.
The latter alone is going to tell the VC’s a lot about how loyal your test customers are. Develop a profile on Private Equity and Venture Capital database sourcing sites: Angel.co, Crunchbase, and Pitchbook.
Providing an outline of your goals and milestones is essential to show how far ahead you’re thinking. Your milestones should look out at least three years ahead to see where you are financially.
If you plan to relocate your company in the future, you should say so. One thing you should expect is if you get VC funding, you may have to give up equity to investors in order to allow your company to grow to its fullest potential.
Visit us at Birst Group to learn more about gaining funding for startup or series A, B or C for mid-size technology businesses.