At the inaugural SF East Bay New Tech Meetup last week, Lawrence Coburn, the founder and CEO of Rate It All, gave aspiring entrepreneurs some valuable tips for “getting out of the coffee shop” and getting VC funding. Coburn’s venture – Rate It All, an online distributed consumer rating company, that allows users to find, share and solicit opinions on any topic, completed a $1.4M raise in September 2008.
Here are 4 key elements, according to Coburn, that a venture needs in order to get funding:
Solid Team: When Coburn initially kicked off his venture, he had meetings with many VCs who liked his business plan but weren’t ready to invest in his company because he was a one-person operation. The reality is that it’s risky for VCs to fund solo operations because if the entrepreneur got “hit by a truck” tomorrow, the venture and their investment would go down the drain. So Coburn made the point that VCs are most likely to fund a venture with a solid team and a clear game plan for succession to keep things going if anything goes wrong.
Product: A key point that Coburn brought to everyone’s attention was that VCs will no longer fund business plans or concepts, so the venture needs to have a solid product or service that’s marketable. Given the competition for the VC funds, having a plan is just not enough as the funding will go to an existing product or service with a clear marketing strategy because that translates into lower risk for the VCs.
Traffic: Even when Coburn was working out of a coffee shop, Rate it All was revenue generating, making over $200K and yet, he couldn’t get funding right away. So, while revenue-generation is great, but it’s still not a guarantee that your venture will get funded. Having a revolutionary product or service is a good first step but to get funding, entrepreneurs need to make sure they’re focused on generating traffic right away (and revenue would be nice too).
Comfort level and Trustworthiness: Last but not the least, VCs want to fund someone they trust and are comfortable working with. This was a very insightful tip by Coburn and that was VCs need to have a certain level of comfort doing business with you - the entrepreneur. It also helps to be known in the industry and connecting with influencers who can help your cause. Some ways of making those connections and increasing your visibility is through speaking engagements and attending networking mixers where you have the opportunity to meet some of the influencers. He also said that inviting some of these influencers as advisors on your firm’s board will also add credibility to your new venture.
Overall, it was a brilliant talk by one of Silicon Valley’s best and brightest entrepreneurs. Coburn also went on to list several key technologies that are revolutionizing the online space including – Facebook Connect,Posterous, and the very well-known micro-blogging site - Twitter. Despite all the new technologies on the market today, Coburn reiterated that email still remains widely popular and is the primary way folks share online content today. He also pointed out that 90% of Rate It All’s 1.3million traffic comes from natural search so businesses shouldn’t underestimate the power of SEO either.