One of the hardest challenges’ entrepreneurs face is finding enough money to start a new business, especially for women of color. Fortunately, while this challenge can seem insurmountable, it isn’t with Venture Capital (VC) funding.
About Venture Capital (VC)
VC is a type of private equity that offers financing to entrepreneurs with great potential. Women of color often turn to VC because it provides the necessary seed funding, they need to get their business off the ground. The only caveat is applicants for VC must convince the investors of the future success of their business, as the hope is to invest in a venture that will lead to high returns.
What VC Firms Look for in Business Startups
VC firms look for specific factors in business startups when deciding to fund them. The following are some of those factors:
- Management is the first consideration. You must have a management team that is able to execute a business plan. Most VC firms want business owners who have successfully built other high return businesses through the power of their management team.
- Market size is the next consideration if the management team is adequate. The target market must be large, typically one that generates at least $1 billion in revenues. When the market has high return potential, they expect the business to have a better chance at the same potential. This is, of course, as long as the product is desired and has a competitive edge.
- Product desirability and competitive edge is the next factor for VC firms. How much does the target market want the product and is there a high competition for it? This is where unique ideas that deliver great benefits to the target market come into play. Showing how much people want the products being sold because it provides them with what they need and want and can’t get anywhere else is the way to show the potential of a business startup.
- The last consideration, but equally important, is risk. VC firms will consider any regulatory or legal issues that may arise. They will also consider whether the amount of money needed to seed the venture makes sense when it comes to the length of time it will take for the business to produce a return.
The Women of Color Advantage
You are a woman. You are a woman of color. These two factors, which constituted the lowest probability of getting funded, are now highly desirable to VC firms right now, as women of color are making great strides in the entrepreneurial world. People like Cashmere Nicole, who started her makeup brand in 2011, and is now enjoying great success with 7+ Million in VC funding.
Starting a business takes determination, perseverance, and money. VC firms have the money need to help people just like you make their dreams of owning a business a reality. As you pitch to VC firms for your seed money, keep the above-mentioned considerations in mind. Build a powerful management team, ensure your target market is lucrative and your product is desired by them and competitive, and last but not least, the potential return on the investment is high and quick. With all of these factors, you’ll have VC firms coming to you rather than you trying to convince them of your business’s potential.
