3 Things You Need to Have When Raising Money

 

First: You must address a big market, large enough to allow a new entrant to have a shot at making a dent with a great product or service, and growing to a size that will make the company valuable at the exit. We often draw the line at believing that a company can capture enough of the market to generate over $40 million in revenues by the fifth year in the market. Many, many businesses will never be able to obtain this kind of market size or share. And often, these are the ones that will be bypassed by most organized angel groups when considering funding. Your big market can come from having a dominant share or just by being in a very large space. Both work—with the dominant share being preferred.

 

Second, you must have and be able to tell an easy to understand story to your prospective customers, suppliers and investors. If your product is too complex to describe in a few words, your opportunity to sell it will suffer, and investors will quickly lose interest or the ability to follow your explanation. I’ve often repeated that entrepreneurs must construct a short, single sentence “mantra” that explains what you do in as few words as possible, sometimes using the name of a well-known company as a proxy for your activities. “We are the Skype of Internet one-to-many interactive broadcasting.”

 

And third, you must have some “secret sauce” that is unique, and makes you and your offering stand out among the thousands of possible competitors. What gives you a head start, a barrier to entry, an extra value that others cannot easily emulate? Secret sauce is important to investors and to you in competing against a company with more money, a brand name, or a head start.

 

A big market. An easy-to-understand story. Secret sauce. Why not spend a few minutes right now, and explain to yourself how you address each.