Today everyone who has the desire to start a new business is an entrepreneur. If you can put together a one-page executive summary, a slide deck describing the opportunity, and a vision for the idea, you think you should be able to raise money. Not so fast. Although many are entrepreneurs, not every entrepreneur can raise money from professional investors.
There are four traits which can dramatically improve your chances of getting the attention and money for your new venture.
1. Your life and idea intersect.
Entrepreneurs have ideas, but does the idea and where you are in your life intersect? My first partner in a startup was Richard Brock. Prior to starting his company, he was a CPA in a very staid New Orleans CPA firm. He was not only a CPA but also a programmer. He saw computing as a way to measure and increase the productivity and profitability of the CPA firm. But his firm didn’t get it. So he left and started a business which had great success in first time automation of CPA firms nationwide. His life and the idea intersected.
2. You have deep industry experience.
B2B founders need to come from the industry they intend to serve. There is a level of unconscience knowledge gained by working in the industry. This unconscience knowledge is critical for success. You have it and you are gold. You don’t and you are one expensive investment. Gaining this knowledge, which may be considered the industry secret sauce, takes time, and time is money. Marc Benioff was a talented programmer and fast track executive at Oracle when they bought Siebel Systems. Marc saw the future as cloud computing, but no one would listen. He left Oracle and started Salesforce.com. He had all the industry knowledge and technical skills needed to make his vision a reality. Even Larry Ellison was an angel investor.
3. You can attract great people.
This includes a clear and compelling vision, the communication skills and intelligence to explain it, and the character to pull it off. Fundable entrepreneurs have these chops. Investors and the A players for the core team flock to them. You know if you’ve got it by experiencing how hard or easy it is to attract the right people to your vision.
I met Tom Noonan at an industry event in Atlanta in 1995. We spent all of five minutes in a conversation about the startup he was joining called Internet Security Systems. In five minutes I knew I wanted to invest. Not because of the quality of the business, but because Tom is one of those guys you know will attract great people. ISS sold to IBM in 2005 for $1.3B. Tom continues to use his entrepreneurial chops as a partner in a VC firm, an active angel investor, and a founder of companies. Everybody wants in.
4. You develop yourself.
These were the best people to start these businesses, and they all had market impact by building great companies. Each of them had the qualities necessary to attract professional money. But what if you don’t have these qualities as an entrepreneur?
Just because you don’t have the qualities to raise money from professional investors does not mean you can’t succeed. You should, however, stop wasting your time pitching professional investors.
Seek money from friends and family. In lieu of spending time pitching professional investors, build a smaller, slower growth business which requires a modest amount of funding.
If you are successful at building your company on a smaller scale, you will have built the qualities needed to attract the professional investors necessary to build an enterprise.