Tuesday, May 26, 2015

Is Your Business Idea the Height of Innovation, or Just Weird?

Ready for a venture?


Why Some Venture Capitalists Go for 'Weird' Ideas


When you start pitching ideas to venture capitalists, one of the first things you learn is not to go in blind. Because VCs tend to stick to the same industries, it is vital that entrepreneurs do their homework thoroughly. It is a good idea to find investors who have previously backed products or services similar to yours. Also find out other factors, like the stage at which they make investments and the level of involvement they have. A lot of this information is available on company websites. But what happens if you have a product or a service that serves an industry that does not exist? 

Maybe you are a pioneer

Just because you are not finding an overlap in what you are offering and in the VCs' profiles, that does not mean there is no hope for your idea. Perhaps you are onto something genuinely innovative. Remember the investors who first backed 3D printing or wearable tech did not have anything like that in their investment portfolios at the time. A few years ago these multi-billion industries did not exist. 

From crazy to viable

Some investors out there are even asking for so-called 'crazy' ideas to invest in. Look at Braintree founder Bryan Johnson, who told Fortune recently: “I want to get a company from ‘crazy’ to ‘viable,'” He has already invested in drones that service third-world countries, AI computers and interplanetary mining. The question for innovative entrepreneurs with is how to find somebody who will back their novel ideas. Not everybody can rely on Johnson; he only takes on a very small percentage of businesses.

Take it everywhere and pitch it hard

Nothing sells like conviction. Talk to anybody who will listen and hopefully it will eventually resonate with a VC with enough flexibility and capital to launch your futuristic brainchild. In the 70s, a university student called Fred Smith wrote an economics paper about an overnight shipping service and got graded a 'C' for it. Smith ran with his crazy idea anyway and it is now known as FedEx. In the 90s a financial analyst called Jeff Bezos noticed a marginal increase in online sales, which at that stage hardly existed. He thought that books would be a logical product to start selling online and started a website to do that. It took as many as 60 meetings to get the capital together with venture capitalists Nick Hanauer and Tom Alberg, who were some of the first to invest. That website now attracts millions of users globally and is called Amazon. 

Even though your idea may end up being more crazy than constructive, you never know. Today's outlandish idea may be tomorrow's Amazon, Facebook, Dropbox, or even Crocs.