Venture Capitalists are known to invest in unicorns that prove to be home run for their LPs, but now that crowdfunding is turning everyone into a VC, how does one identify those winners? While there is no secret recipe for success, here are a few things NIN.VC looks for while investing:
1. Disruptive Technology
A disruptive technology is an innovation that changes the way an exisiting industry functions and also helps create a new market and value network, displacing an earlier technology or a way of doing business. E.g. 3D printing has been used for rapid prototyping and is being applied in a number of industries today, including manufacturing, automotive, consumer, aerospace, defense, and especially healthcare. As the accuracy and materials market have improved, the medical space shows great potential for this technology. There are about 123,851 people currently on the organ recipient list in United States; that list grows on an average of 12% annually. On the other hand, organ donor increases about 1-2%, and 21 people die every day because they cannot find a right organ. What if 3D printing tissues can help save some of those lives?
Every sector at some point is up for disruption. E.g. Traditional TV has been on a decline for the past few years, because the consumer behavior patterns are changing. People are spending more time on their personal devices like phone, tablets, & PCs. An average American spends about 3 hours everyday on their personal devices, and this is the first time, the time spend on personal devices have surpassed time spent watching TV. So what does this mean for the Ad Tech Industry? The current digital advertising market is $75 billion and traditional TV advertising is $112 billion, and as the consumer migrates to watching more digital TV or on demand content, this $112 billion will migrate to digital advertising, which is a huge opportunity and disruption for the ad tech industry.
2. Revenue Model
Great ideas / technology needs to be backed by a solid revenue model in order to attract customers as well as attain profitability for the company to be an attractive investment opportunity for a VC.
3. Industry Analysis & Competitive Landscape
A startup needs an ecosystem to thrive upon, thus it is very important for a company to understand the market dynamics, its impact on their industry, product, and also have a good understanding of the competitive landscape in order to achieve long term success. A disruptive technology needs to scale and a through analysis helps gage those risk and rewards.
4. Entrepreneur / Team
CEO is the captain of the ship; and at NIN.VC we start with an entrepreneur because entrepreneurs build companies and not the other way around. Some of the qualities VCs look for in an entrepreneur are ability to dream big with ideas that scale, certain personality traits and work ethics like being focused, disciplined, and hard working. It’s important to have industry expertise and knowledge or surround yourself with people that compliment. However, flexibility and choices an entrepreneur / the team makes determines the future of the company.
5. Execution Strategy
An amazing entrepreneur with a disruptive technology, a solid revenue model, and good understanding of the competitive landscape goes to vain, if the company does not communicate effectively or has a good execution strategy.