What Venture Capital Looks for in Entrepreneurs
The Big Q: What does venture capital look for when backing entrepreneurs?
With billions of dollars flowing into start-ups around the world, that question is really important, as is the answer.
It starts with the people, and then the sector.
1. The People: Convincing
2. The Sector: Disruptive, with rapid growth potential
In the ’90’s, that meant software and semiconductors and biotech. Today, it is a wide range of industries, from synthetic biology to rockets to electric cars (?) to a variety of sectors that were not ripe for venture investment prior, but now are becoming software businesses that are experiencing rapid changes, rapid change means great opportunity.
These things tend to correlate with ideas that actually change the world
“If a few people passionately think that something is the future, and a large number of people think it’s absolutely harebrained and will never work, that’s a good sign.” — Steve Jurvetson, partner at Draper Fisher Jurvetson.
The Team at Work must have enough self-confidence to be humble about what it is proposing and respect for the team over individuals, as opposed to the cult of a CEO running a company.
Now, which sectors to look at?
Early stage money looks at how Moore’s Law is working into new industries and turning them from industrial, lowest-gross-margin businesses into software-centric, rapidly innovating, exciting businesses.
Techniques that flow almost every industry are Key, because they embody a fundamentally different way to do the engineering.
Then the process can focus on a variety of applications in radically different industries, which may not seem to have anything to do with each othe, and spot opportunities others do not spot early on.
The pace of change in technology is accelerating and is taking over almost every industry as time moves forward.
Big companies will not do something substantial, worth thinking about or worth writing about in their core businesses.
Innovation is often synonymous with disruption, meaning that something has changed.
Innovation means not business as usual, newly ‘minted’ money is looking forward.
Innovation is Key. Recognition is Vision. Team work can make it happen.
We read about all of this in the 1970’s, we are living it now.