The Cardinal Rule of Venture Capital: Good Ideas Get Funded

Over dinner one evening, a friend of mine mentioned how she had so many good business ideas that she would like to execute.  I told her to put her ideas to paper as a first step to see whether they really are “good ideas.” We’ve all been there. The point where we see a problem that we believe we have a solution for and feel that it would make for a great business plan. By default, any good idea will get funded. With that said, any good idea must incorporate the following critical elements:

Time and dedication

An entrepreneurs’ time is not his/her own. An entrepreneur who has a “day job” is even more time constrained. Running with an idea will take time and effort, so make sure you’re in it with the finish line clearly in your mind.

An idea

You need an idea. You don’t necessarily need a breakthrough mind-boggling idea that is the first of its kind.  You need a good idea.  Good ideas could be ideas that others have implemented and are successful in. Don’t hog ideas and don’t be surprised or take it the wrong way if you see other people working on the same idea. Good ideas are good ideas to everyone. Furthermore, you need a plan that is not half-baked; think of what product or service you will be offering, where can you source the product or service, who will be buying the product or service, who are your competitors, etc.

I’d like to cite one of the most powerful and concise guides to making the most of yourself, “It’s Not How Good You Are, It’s How Good You Want To Be” by Paul Arden who urges people to not hog ideas.  Below is a short excerpt from his book:

“Ideas are open knowledge. Don’t claim ownership.
They’re not your ideas anyway; they’re just floating by on the ether.
You just have to put yourself in a frame of mind to pick them up.”

Market, market, market

You need market demand. You need a sizeable market that is able to support a profitable business (or non-profitable if that’s the route you’re taking). You need a market that is willing to pay a price that includes your profit. You need to have some marketing background (or partner up with someone who knows how to or what is needed to sell your product or service).

Competition is good

Competition in the industry you are looking to enter is good.  It’s good! It means that there is an actual market. It means that there are customers and you could customize the product or service. Now don’t take this point to mean that you should go into a flooded market. Too much of a good thing is still too much. Scope out your competition and rather than vowing that you will overtake them, differentiate your product or service and you will have customers.

Fundraising plan

Get out there and pitch your idea to potential investors.  Whether the investor is in your family, your group of friends, Khalifa Fund, etc., make sure you have a solid pitch. In my opinion, even if you have your own capital to start your business, fundraising and pitching it to investors will tell you how successful your business could be.  When you have a good idea and you can’t get funding, then it is time to analyze the process, the product, and the package you have been selling. Because when a good idea can’t get funded, something is missing from the “good idea package”.

So, what should you do? If you have an idea, work with it and do it fast. Recall one of the building blocks for business (that I actually apply to a lot of my life), KISS (Keep It Simple, Stupid). Just KISS. Take your business idea seriously and form a strategy around it.  Execute on your business plan, and most importantly GO TO MARKET.  The truth of the matter is, there’s already a handful of people thinking of the same business idea (someone is stealing your idea before you work on it).  In the venture capital (VC) world, investors are really looking for three very simple things:

1. How quickly you can set up your business and start selling your product or service
2. How quickly you can show your investor the money
3. How little start-up capital is needed up front

The cardinal rule of VC is that good ideas will get funded.  In the start-up world, slow and steady doesn’t necessarily win the race.