I attended the London Innovation Conference yesterday. The only session I caught was the “Investment Readiness” session with Doug Richards (of Dragon’s Den fame). I think he did a very good job of expressing the investor mindset and investment criteria. One key comment regarding investment readiness was “Are companies investment suitable?”
So many of the businesses I look at are not investment suitable businesses. This doesn’t mean they aren’t good companies, but rather that they will not provide the growth opportunities and returns that business angels and venture capitalists are looking for.
One of the other points Doug made was “do your research before you contact an investor”. I can tell you now, if you forecast that your business will be turning over £1 million in 3 years time, you are not going to get venture capital funding. What types of companies are suitable for venture funding? Companies that have:
1. A large market opportunity
2. Unfair, sustainable competitive advantage
3. Relevant management experience
Those are my three cornerstone criteria, of course there are other characteristics. If your company does not meet those three criteria, then it is not going to be an investment suitable company.
Again, not all companies are suitable for venture capital and venture capital is not suitable for all companies. At the end of many meetings, I have sent companies away because they did not need equity funding. They could finance their customers and through their bank. No VC required.
I was delighted to see the level of interest in innovation and venture investing at yesterday’s conference. London is very much alive and kicking, but companies should be innovative in their financing decisions as well… VC is not the only way to finance your business.