Securing Venture Capital Begins With An Honest Definition Of Your Business

With the launch of our three new investment funds, we have received hundreds of exciting applications from startups all across the country who are looking for the capital they need to grow.

So far, the screening process has been a fantastic experience for our team! However, one theme we have picked up on is that there are often inconsistencies around how entrepreneurs are defining their businesses on technology spectrum.

Specifically, we’ve started to notice that some businesses seem to be trying to shoehorn themselves into the “tech startup“ mold, because they know those are the kind of companies we, and many other investors, are interested in backing.

It’s understandable. There is always some kind of buzz around the latest tech startup receiving funding in Silicon Valley, and when you see that most VC funds are focused solely on tech companies, it seems only sensible to position yourself in a way that actually gives you a shot at the money.

However, this strategy is problematic for two major reasons. One, serious investors always undergo a deep due diligence process; so, it’s not in anyone’s best interest to try to squeeze a business into a category where it simply isn’t a fit—the investor will always figure it out. Two, an honest understanding of where your business fits on the technology spectrum is actually one of the keys to setting yourself up for long-term fundraising success.

So what does the technology spectrum actually look like?

Technology Startups
At one side of this spectrum are the companies who are in the actual business of selling technology to generate revenue. When you think of a Silicon-Valley-style startup, this is the template.

Technology-Enabled Startups
In the middle are the companies that leverage software, technology, or both to help them sell a product or service, but don’t actually sell any technology themselves.

 Lifestyle Businesses
At the far end of the spectrum are companies that probably use basic technology such as email, but don’t sell technology, or leverage it heavily to sell their products.

Even when we at JumpStart can’t invest in a company because it doesn’t fit our criteria, we love to make introductions to other potential funders. But keep in mind that no investor backs something they can’t trust, so an honest assessment of where you fall on the spectrum is absolutely essential.

Bottom line, if you have a good idea and a good team, there is likely an investor somewhere who can fund you—but camouflaging yourself to look like something else will only make it harder for these investors to find you.

The good news is that all investors have defined funding criteria (business-type, market size, location, revenue, run rate etc.) and many make this information publically available. With that in mind, a little reverse due diligence before approaching a new contact can often go a long way for an entrepreneur.

To view JumpStart’s investing criteria and see all of our funding options, click here.