As a venture capital business backing entrepreneurs, I thought it would be interesting to write a few words from this side of the table. What is it that we look for?
1. The person. Without doubt the most important factor in deciding to back a business idea. There is no particular “type” that is successful or not, it doesn’t matter if you’re slightly unhinged (this may actually help), or as straight laced as they come. It’s the passion and the determination to execute an idea. There are plenty of people with ideas, but few who possess the perseverance to realise them.
2. The homework. To assess an idea and the plan behind it, we need to be able to understand it. Make the idea as simple as possible, with as much fact-based information as you can muster without being boring. Know your numbers. If you’re looking for an investment be prepared to be challenged on your concept, valuation, and what return you’re going to provide the investor.
3. What are they prepared to invest. Taking an investment from a third party without any “skin” in the game is like being a banker-broker, dealing with other people’s money. The sum in itself is not important, it’s the preparedness to do it.
4. Scalability. Is the business plan scalable? Lifestyle businesses are rarely invested in by venture capitalists. The scale is in terms of headcount, clients, users, geography, and so on.
5. Can we add value. It’s not all about money. The best VC is the one that adds value to your business in other ways. They could simply be a support function, like marketing, accounting, HR etc., or a more sophisticated value such as business contacts, decision-maker network, in-depth technical knowledge, buyer or seller network, industry contacts.
6. Do they fit our vision and plans. This is obviously a little more difficult to assess before meeting. But we would not diversify from our own vision and plans to adopt even the best of business ideas. Our vision would be designed to achieve a macro result, and if the investment doesn’t fit then we would not consider it. In our case, recruitment related and exit-able within five years.
The dark side of being an entrepreneur is a lonely place, therefore getting a good supportive VC is essential. Running a fast growing business comes with numerous challenges, all arriving at the same time and constantly changing as you grow. Good advice, good support and a mentor is essential in a VC, as much as the VC choosing to invest in your business. Being an entrepreneur means you are a consummate sales person, even if you think you’re not. Getting your ideas across the line successfully requires selling to everyone, from the home front to employees, to the market.
Having said all the above, success or failure, if you have an idea and you are passionate about it, it’s nothing more than that until you try it!
Written by Abid Hamid, CEO of Recruitment Entrepreneur.
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