How to convince venture capitalists to invest
When preparing to file an LLC, entrepreneurs are also looking for funding, often from venture capitalists. Here is some insight into what investors are looking for in a business.
Mark Sutter of Entrepreneur magazine finds that management, market, money and momentum are key.
Sutter notes that almost all investors will only contribute funds to a business that is run by a management team they support. Also, entrepreneurs should be prepared with metrics to show that the potential backer will be investing in what has the potential to be a big market.
Most venture capitalists will want to own a large enough percentage of your company to feel connected to the project, with a minimum normally around 20 to 25 percent, says Sutter.
The idea that is driving the business is of the utmost importance. Sutter highly recommends meeting with venture capitalists early so they can see the product develop over time and determine its momentum.
John Warrillow of Inc. magazine, who is also an investor in companies, says that when evaluating an entrepreneur’s idea, venture capitalists will try to determine whether it should be its own product or if it is just a new feature on an existing product. They also want to invest in products that can be patented and are not too expensive to bring to market.