Part 4/20 - Twenty Questions You Will Be Asked By Venture Capitalists (If You Get That Far)

By Laurence K. Hayward

This is part four of a twenty part series on this topic.

4. Why would someone be "compelled" to purchase your product or service? What specific needs does it address?

VCs look for businesses with products or services that address a demonstrable market need or demand. Is your product or service something the buyer needs? Does it solve a problem? Or is it something that would be “nice to have”? It is said that VCs prefer innovations that resemble aspirin to those that resemble vitamins. The idea being that people feeling pain will swallow the aspirin; while vitamins may be beneficial, people may or may not take them.

However, if the product or service is more like a vitamin, then it becomes that much more important to establish how people will come to demand it based on certain market trends. And, in either case, it will be important to demonstrate how substantial the problem or opportunity – how many people have it, and how much are they willing to pay for a solution?

Can you demonstrate convincing and tangible evidence of market acceptance by credible potential users (not just proposed distributors or technology-development partners) who are willing to be contacted for due-diligence purposes? The answer to this question directly addresses an investor's concerns about marketability and profitability. It is your opportunity to demonstrate the need for your offering within the targeted market segment and its corresponding revenue potential.

Laurence K. Hayward is the Founder and CEO of TheVentureLab. To learn more about him follow the link here