Have a great team. Pick a huge market. Build an awesome product. And boom, the financing will be yours, just like that. Except, not really.
Perhaps we do tend to glamorize those sorts of amazing funding success stories, something that can paint a rather lopsided picture of the ease with which startups can secure investment. And in a great post today, entrepreneur Jason Baptiste offers in a great post today with a list of reasons “Why They Were Able to Raise Money.”
“They” in this case are those very success stories we frequently hear about companies that, even prior to launch, have raised millions of dollars from VCs. Baptiste uses Flipboard, which recently launched to much acclaim and with $10 million funding from Kleiner. “I’m not sure on the revenue model,” says Baptiste,” but it’s fine.” These sorts of funding announcements can be bewildering to first-time entrepreneurs, contends Baptiste, who lists some of the reasons for their backing.
These reasons do break down into “great team,” “huge market,” and “awesome product,” but as Baptiste points out, some teams simply have phenomenal advantage in one or more of these areas
They Got Funding Because They Had The Great Team
In identifying company’s with great funding success stories, Baptiste identifies those with a strong track record (such as the Skype founders now working on their startup Rdio and reputation in the tech community (such as 4chan’s Moot’s ability to raise cash for his next startup, the stealthed Canvas. Baptiste observes these well-financed founders are frequently thought leaders and have strong domain experience (like oneforty‘s Laura Fitton). Or they are ex-Googlers, Facebookers, or Paypal Mafiosos. And sometimes, they get funding because “they are founders so smart you cannot ignore them” (as with 19 year old Brian Wong, whose kiip recently received backing from True Ventures).
They Got Funding Because They’re in a Hot Market
Social gaming, group buying, cloud computing, and “throw in a little bit of location based mobile “something” for good measure and you get the idea.” Being in a good market like this certainly increases your changes of funding, as does being able to demonstrate already that you have strong growth.
They Got Funding Because They Nailed the Product
Some products have been really honed through incubation programs, and these teams often receive strong funding support as they have been pre-vetted, of sorts. And some products, writes Baptiste, are simply “technical masterpieces with a secret sauce that makes them an obvious choice to back.”
Certainly many startups can possess one or more of these characteristics, but Baptiste’s post serves as a reminder that getting funded is not as simple as some of the success stories might make it appear.
Photo credits: Flickr user Zack McCarthy