Clearly Articulating Your Market - A Key to Raising Private Equity

I’m often asked by entrepreneurs seeking investment capital to explain the top one or two success factors in securing private equity from investors. While there is certainly no “magic bullet” that can ensure success every time, I submit that one of the areas that entrepreneurs seem to have the most difficulty is clearly articulating the market they intend to serve. One of the keys to securing private equity and venture capital is to paint a clear and quantifiable picture of the overall market that you intend to serve. This picture should also include the slice of that large market you intend to pursue, and your competitive advantage against others that are competing for that same slice. While that may sound simple enough, far too often I see the entrepreneur leave out critical details. Here’s a quick suggestion:   

Do your homework (maximize search engines like Google) to understand how much money is spent annually by individual and commercial customers in the market you intend to serve. This should be dollars spent in the U.S as well as foreign markets. Aggregating how much money individual and commercial customers spend on a product or service should generally land somewhere around $1 billion or better if you are interested in getting the attention of would-be investors. 

Once you have segmented the market (either by demographics, low to high-end users, domestic versus international, etc.), clearly explain your niche, and be sure that your niche is far more substantive than you will simply deliver “superior customer service.” Your niche should be a highly unique or differentiated product or method of service delivery, an exclusive contractual relationship with a major player in the industry, or some other factor that is extremely difficult for your competitors to duplicate. Your “uniqueness” represents value to a would-be investor, and if you can clearly articulate how that uniqueness can secure just one to two percent of a billion market, your chances of securing investment capital increase exponentially.

Darrin is Chief Economic Inclusion Officer of JumpStart. He founded and ran his own strategic planning and management assistance firm and spent 16 years in the commercial banking and finance industry. Darrin has an MBA from Baldwin Wallace College and an undergraduate degree from Mount Union College. He has led a series of workshops and seminars on matters of economic development and diversity.