6. Is the market that you will serve huge?
In our example above the Venture Capitalist may not care so much about customer support if the market is so large that it out weighs the cost to educate the consumers. Your oven may have such mass appeal that after development it can be sold to General Electric or Whirlpool for introduction into the market.
7. Can your product produce gross margins greater than 50 percent?
If your "margins" are below 50% than the margin for error is too low. You won’t have enough to sustain you if things don’t go just right and there isn’t enough profit in the deal to make it worth venture capital consideration.
8. Does your management team have the experience and skills to succeed?
Venture Capitalists are not interested in your learning curve and they certainly aren’t interested in risking their money on your education. They are interested in strong management teams with proven track records that pertain to what you plan to achieve.
9. Are you and those now in your business committed to its’ success?
How much have you invested to get this far? Who has invested with you? Do you have Angel Investors who have believed and invested? Has your existing Board of Directors invested? Venture Capitalists hate to be the only one with "skin in the game". They are more likely to invest if they see a number of private investors already in, maybe an Angel Investor they know, maybe a law firm they have had dealings with.
10. Can your company achieve gross annual revenues of $25 million in 3 years, and does it have the possibility to reach at least $50 million in 5 years?
If your business cannot reach $25 million in gross annual revenue in 3 years, then STOP RIGHT HERE. You have no hope of obtaining institutional Venture Capital.
You must score a 10 on this question or you are wasting your time seeking venture capital. Venture capitalists are looking for investments where they can make 10 times their investment, therefore they only invest in companies with large revenue potential.
YOUR TEST RESULTS
If you scored an 80 or above on this test and your business will achieve more than $25 million in gross annual revenue in 3 years or less, then I encourage you to seek venture capital, to use the resources in the remainder of this book. Use BusinessFinance.com to find the Venture Capital Firms that exactly match your product or service. Go For It!
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