by Kim Lavine
My search for serious money took me to the Southwest Michigan Innovation Center, where the first Tuesday of every month three entrepreneurs pitched a panel of investors.
Everybody here, including Nobel laureates, was in a state of Code Red when it came to money. There was blood in the water and sharks in the audience and the investor panel spared no egos as they tore apart business plans, technology, burn rates and especially, presenters’ attire. I was scared just sitting in the audience.
There were at least a hundred spectators in the crowded room, all focused on a panel before them made up of three investors, one of them the most buttoned-down, formidable-looking Master of the Universe I had ever seen in my life whom I called Smart Money.
Large Potential Market
The presentations were over and I dashed up to the front and made my pitch to Smart Money. It wouldn’t be long before we were talking regularly.
For most of these events you have to be talking about a minimum $200 million dollar market, of which you would forecast a percentage of sales, with profitability in three years.
High Anticipated Growth Rate
Projected annual sales growth of 25% or more is the minimum, but the reallity is most investors are asking for a minimum 60 tiimes return on their initial investment in 5 years.
Experienced Management Team
Key people who have been there, done that are important, but according to my Master of the Universe, a passionate driven Founder who's a little bit crazy is the most important factor in whether a startup succeeds or not.
A “distinct” advantage in performance, price, etc. compared to the competition. If competitors exist in the marketplace already, that's a good thing--it proves a market exists for your idea.
Barriers to Entry
Economic means to discourage or beat competition in the field, including proprietary technology or patent.
Clear Strategy for Commercialization
A realistic and well thought-out plan to bring product to market, and then to exit with a sale of the company in five years. Investors want to see an Exit Strategy because they're not interested in building a business, they're interested in getting returns.
A substantial likelihood that that the business can grow exponentially once the product is launched. This means that handmade one-of-a-kinds can't be scaled.
Proof of Concept
Ideally, a product or service that clearly fulfills a need, has achieved some level of sales or sales commitments.
Business Model Anchored in Reality
Management has thoroughly assessed its market, product development costs, on-going operating expenses and overall funding requirements.