Take the test below and rate yourself from 0 to 10 on each question with "10" being if you have this question covered 100% percent and "0" meaning you don’t cover it at all. You must score an 80 or above you with a definite score of "10" on question number 10. Passing this test only determines that you "may be" a candidate for a least a Venture Capital Firm’s review process. Failing it, means you should move on.
1. Does your business have some unique technology or service?
What that means is do you have a unique that product or service that addresses a large market? Have you developed new software, hardware, electronics, distribution systems, medical devices, bio-med solutions, new forms of energy, modes of transportation, etc. Something new!
2. Can your business carve out a significant and sustainable market share against existing market leaders?
Venture capitalist will not invest in your company if you are going up against Kraft, Ford, or Xerox, unless of course you have new and proprietary technology. The risk is too great to justify the expense. That’s where your technology comes in, if you have developed something that opens up whole new markets or that will give you a significant lead in capturing the all important first mover position then you have a chance. If your products or services are just an add on or variation of an already existing technology where all the market leader has to do is make changes to their existing product, then you have little hope of being considered.
3. How much money do you need for R&D and to reach the market?
Risk versus reward, the typical Venture Capital fund wants to see that you require between $500,000 to $5 million. Above $5 million and most Venture Capital funds will want to bring in other funds to spread the risk and the deal gets much more complex. Venture Capital firms will want to see that you are going to maximize every penny and that you can get to market for the least amount possible.
4. What is the ease to the market?
Entrepreneurs and inventors are great at coming up with new products and business ideas, but will they sell? Have you considered who will sell them? What will it cost you to reach the market? Is consumer education required? Is brand awareness required? Will you have to develop your own distribution channels or are there existing channels that you can use?
5. What level of customer support will your product require?
Venture Capitalists won’t care if you have an outstanding product if it is going to cost $100 million to teach the public how and why to use it. Very complex products can require very expensive customer support. For example if you have developed a new type of consumer cooking device that is as fast as a microwave oven, but cooks like a convention oven . . . great you’ve got something. But if your device requires an expensive third party install and is difficult and complex for the consumer to use, the appeal of your investment may have gone away. The requirement for expensive customer support may not be a deal killer if your answer to number 6 is a 10.
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