Sunday, June 2, 2013

4 Big Ideas for Attracting Venture Capital to a Small Company

It seems like every entrepreneur’s dream: a big VC firm writes a giant check and the business quickly rockets to success.

For most business owners, of course, reality will never match the dream. Saying that most businesses will not be funded is to understate the obvious.  In fact, less than 1 in 1,000 companies are funded by VC -- and that is of those that bother to apply.

Nonetheless, just as athletes dream of Olympic Gold and climbers pine to scale Mt. Everest, entrepreneurs will always strive to attract VC dollars.  If you find yourself dreaming of venture capital, dream big, and follow these simple rules:

1. Spot the Big Trends

Venture capitalists succeed by staying ahead of the curve.  The nature of their business demands that they invest in markets and industries that are rapidly expanding. If you are not in today’s hot markets, it’s unlikely you will get the attention of early stage investors.

It’s generally accepted that technology firms make good venture investments, but those in the fastest growing segments, like biotechnology or nanotechnology, will have an even better chance of attracting attention.  Industries that are in vogue with VC change, however, so beware.  Keep an eye out for the big trends that will shape your market, and align your business to take advantage of these trends.

In the end, even if a venture fund does not take a shine to your company, this strategy can pay off in faster growth.  So keep the wind at your back and your eye on the horizon.

2. Target a Big Market

The corollary to being part of a big trend is having a big market.  To justify a large venture investment you’ll nee to project a big return in a small amount of time.  There’s no way to do that without selling into in a large, lucrative market.