Raising Venture Capital, Tips for Entrepreneurs, Post 2

In the previous post we tackled the issue of keeping the value proposition simple and easy to socialize. Believe me, if we cant convince our wives or mothers, we will have a tough time convincing anyone. Lets now look at the second issue of the executive summary:

2.  Do you explain the problem that needs to be solved? What is it about the current environment that makes doing business either difficult, inefficient or downright impossible? I have read many plans that seem to be a solution looking for a problem. It is very common. You think you have created something of incredible value and given your intelligence and experience, you are convinced people will buy it because they see the world as you do. This is a dangerous place to be. I can tell you first hand that you spend more time trying to convince prospects of the problem than you do of the solution. This makes you a “nice to have”, not a “need to have”. Many VC’s fall into this trap as well. We get excited over something we like or know and forget to really define the problem. I suggest you spend a bunch of time on this critical section. It will define your business in the early stage of growth and help you strategize about how to meet the market of your product or service. Give it the sniff test. Ask industry vets whether they perceive the problem as small, medium or large. Ask them open-ended questions to discuss how to quantify it, what it would mean to them if they could solve the problem and how they best solve it today. Don’t even discuss your solution as much as you focus on the market intelligence. Once you “interview’ enough people and build a credible case, then you can support your theory with other qualitative research that builds your overall market case. This is critical, don’t miss this step, it will almost always disqualify you from a prospective funder. I look hard at this area to determine if we can really solve the problem together.

Next post: 3. Do you have a keen understanding of the market you intend to compete in?

About cavacapital

Cava Capital is a venture capital firm targeting go to market stage investments (series A and B) in next generation marketing solutions companies primarily in the Metro New York region. We are business builders, actively assisting our CEO's in the critical areas of Sales, Business Development and team building, bringing our exceptional and deep network to each and every portfolio company to help drive success. We prefer enterprise facing companies, but aren't scared off by the new consumer models.
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