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The Keys To Venture Capital, In Two Simple Questions

Written by Ken Gaebler
Published: 9/9/2009

To make the startup more attractive to venture capitalists, entrepreneurs should be able to identify who their customers are and how they will make revenue.

Competition for venture capital funding is fierce. The recent IPO activity has been scarce, while the mergers & acquisitions market is equally as dismal. To secure the much-desired venture capital funding, a startup has to rise above the rest.

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Alan Hall, founder and chairman of Grow Utah Ventures in Salt Lake City, had some news for entrepreneurs about how to stand out from the crowd - all it takes are good answers to two crucial questions.

In an article in Business Week, Hall advised entrepreneurs to focus on the question, "Who are your customers?"

"Entrepreneurs and business owners are always passionate about their product or service," he wrote. "This is, of course, important, but often they overlook the critical component of who their target market is and who will buy the product or service they provide."

In addition, entrepreneurs must be able to answer the question of how they will make revenue. Business models are important, but without a way to attract customers, the startup can never succeed.

If the business fails to get venture capital funding, however, it is not necessarily doomed - according to the Ewing Marion Kauffman Foundation, only 1 percent of startups receive VC funding.

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