How to Get Venture Funding, page 19

Customers, continued

You must be very clear about the answers to these questions. In the end, customers drive any business. If the value proposition to those customers is murky, then you have a problem.

The more traction with customers you have, the better. The more customers you have talked to, and the more you understand the value proposition to those customers, the better.

If you are unclear or vague about your customers and their needs, then you probably will not get funded.

Competition

VCs often complain, “Everyone who pitches me says they have no competition.”

In fact, everyone has competition. You may not have done enough research to discover your competition, or your competition may not yet be apparent for other reasons, but it is a sure thing that you do have competition.

VCs therefore regard entrepreneurs who say they have no competition as naive, disingenuous or worse.

The denial of competition will not help you get funded. In fact, one line of thought goes, if there were actually no competition it would show that the business plan was not one worth pursuing.

The best thing you can do is to invest enough time and thought to find out who your competition is, and to speculate who might enter the arena down the road. Then, in a reasonable and measured fashion, using metrics where possible, explain your strategy for defeating the competition.

Know the Numbers

VCs want you to “know the numbers.” When you are through presenting and debating the concepts, the product and marketing ideas, you should show a pro forma profit and loss (P&L) statement and other appropriate financials. The P&L will be scrutinized carefully.

Expect to answer questions about how much capital you’ll need until you break even, inventory costs, staffing plans and costs, and how you plan to finance subsequent rounds.

Continued next page

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