Looking For Startup Venture Capital? 10 Things You Need To Know

During Global Entrepreneurship Week, I was fortunate to attend the Tech City UK Entrepreneurship Festival in London along with over 300 other startups and Venture Capitalists (VC’s) from around the globe. Apart from sharing insights about the kind of companies VC’s fund, they also let us in on what they look for.

Looking past the woes of lack of VC funding in South Africa, here are 10 insights I picked up:

1. Know your product
VC’s, as you know, are busy people who are approached with a lot of potential opportunities for their money. Knowing your product is one way to ensure you get them to listen.

2. Differentiate yourself
This is true of any startup and is not a revelation. The astounding revelation from a Silicon Valley V.C is – an average V.C receives an average of 200 – to – 300 opportunities a month and declines 99% of them. These startups are at different levels and the question is; will you be in that 1%?

3. Build a strong team
In as much as they invest in the next big thing, VC’s put their money on entrepreneurs and teams that can multiply their money. The team you are able to build before pitching the VCs puts you ahead of competitors.

4. Be brief – know your pitch inside out
Now that we know VC’s receive a lot of investment opportunities, it is also worth mentioning that they have very little time. In 3 minutes, you need to prove that your concept has a market and has growth potential that will quadruple with funding.

5. Prove your concept before asking for the money
Being a startup is difficult. What’s more difficult is proving your new model without money and this is why you need it. If you cannot prove that your concept works, your chances of raising VC are minimal to none. Start where you are and request people you know to test the product. Start generating insights and overcome the barriers of not knowing how the end user would experience your product.

6. Build within context, build for the world
VC money generally goes to where the users are; more than local users, they invest in products that the world would find useful. Build for a targeted customer, but also build products that will be applicable for masses outside your locality.

7. Understand your user-base.
When torn between meeting your customers or users and developing your product, meet your users. Entrepreneurs are driven by creating value and that could also be our pitfall, because once we have an idea – we start working on it and think the world will receive it as we intend them to. Strike a balance between how you’ll build a user-base and how you’ll fix problems as they arise after going to market.

8. The money goes to where the innovation is
In South Africa, the VC community is small and the belief is that products won’t be funded at the rate we need. Surprise, surprise; the VC community in London is also quite small and entrepreneurs tend to be funded by US VC’s. However, VC’s are open to Africa and look out for innovations that could take them by storm.

9. Prove that you don’t need the money
This a difficult one, but entrepreneurs and some VC’s at the Tech City Entrepreneurs Festival mentioned that if you need the money, you most likely won’t get it. Prove that your product works with very little investment and then ask for the money with very near accurate forecasts of how you’ll return that investment.

10. Africa will make the next internet billionaire
While talking to some local entrepreneurs, who listened closely and attentively, they directed me to an article on Wired UK, which delves into why the next Silicon Valley will spawn out of Africa. With that in mind, it is clear that the world is watching and listening and the VC money will naturally follow.

After 20 of the top-voted entrepreneurs had pitched, when asked, a VC said he hadn’t seen anything that caught his eye, let alone prompt him to grant a meeting. I think from a pool of over 300 entrepreneurs, it is safe to say a sample can be drawn and a trend predicted. We are not alone in creating products that the world wants, but we need to refine our offering.

Are there more ideas you would like to share about raising money for startups? Please leave a comment.

Comments are closed.