Questions

Which markets (or market factors) should I seek out if I wish to build a startup that will likely get funded?

For example, as noted by Andrew Chen in his post "Why investors don't fund dating"(http://andrewchen.co/why-investors-dont-fund-dating/), dating startups, in general, seem to have trouble getting funding because of high churn, among other factors. Also, by and large, markets exploiting newer technologies, and those with a high growth rate seem to be favored (by investors, and by success). So, generally speaking, which other market factors, or even markets as a whole, might make fundraising/success more difficult (or, conversely, play to my advantage)?

3answers

Firstly, you should seek out solving a problem that you are passionate about and have useful expertise in. Building a business with the sole intent on making it appealing to investors will often have the opposite effect.

With that out of the way, markets that are getting a lot of attention from VCs tend to be areas that are ripe for disruption by hot technology trends. At the moment, two of those are AI and Blockchain technologies.

AI is opening up new opportunities in lots of areas: eCommerce, cybersecurity, marketing automation,, business intelligence / analytics (and the interpretation of that data), healthcare, and finance. If you can find things that can be made cheaper, high quality, more personalized or faster through the application of AI, there's potential for VCs to be interested.

Blockchain technology has the potential of disrupting many markets. Just be careful not to use it simply as a buzzword; investors are wising up to shallow uses of Blockchain that are designed merely to attract investment. Some markets that Blockchain will disrupt is finance, cybersecurity, transactions that need to be secure such as real-estate, supply chain management, voting and elections.

AI and Blockchain technology can also be paired up in a complimentary way, so there's ample room for innovation that is also interesting to investors here.

But in the end, the main thing is finding a problem that needs a solution, rather than building a solution then looking for a problem.

If you're looking for advice on evaluating and vetting startup ideas that investors can get excited about, I'd be happy to dig into it with you on a call.


Answered 2 years ago

I am currently running my second startup and we have just received our first round of seed funding from an external investor. Though I'm based in the SF Bay Area, I found the hard way that most investors invest in what they know -- which is great because you can target your investment pitch to a much narrower and more informed audience.

I would focus less on "getting funded" and focus more on building and operating a successful business. The question you should be answering is "What do I have a core competency in and what is the market opportunity in that core competency?" That could be anything from an internet social media startup to a fast food franchise location. Plenty of businesses exist in the world, and a very good number of them have had some kind of external funding. Once you've found your core competency, put a business plan together, determine how much (if any) external funding you will need to get the business off the ground and start searching from there. Your first round of funding is overwhelmingly likely to come from a) you b)friends and family c) a business partner or d) someone who is from the industry of the business that you are trying to start. Even firms that are funded by VCs are typically funded by VCs who have operating experience in the subject area of their own business.

As for the Andrew Chen article above, I suspect that dating sites don't get a lot of funding because they are commoditized, members have a lot of customer churn, don't have a sticky brand, and are extremely price sensitive businesses. That said, I would not let that deter you if you want to start a dating app ***IF*** you have particular expertise or experience in the field and understand the opportunities and challenges in the space.

For example, Thomas Petterfy started Interactive Brokers, an online stock broker, much later than Schwab and Etrade and took zero external funding. By executing on his business plan, he was able to build it into a $25 Billion company. He still owns 80% of the company because he never took external funding.

I'd be happy to discuss further or see hat is needed in order to get you going. Please feel free to contact me for a call to ask further questions. Thanks!


Answered 2 years ago

I specialize in helping people find business ideas. I can help you find the right business concept and help you become successful.

First, think what are your passions, talents, and skills. Such authenticity is an important personal factor in attracting investors. What kind of special skills and talents do you have? What you can do to make life easier, more pleasant or more enjoyable for other people?

You can expect the following questions from the potential investors:
Why you? What kind of skills and experience give you a competitive advantage compared to other startups with similar ideas?
Why is your project important to you? How committed are you to it? Have you invested your own money in it yet?
What kind of return should I expect on my investment? Investors want to see that your skills, knowledge and unique business ideas will provide a fast return from the investment in your company.

Feel free to contact me and we can work on this together. We can discuss further how to find business idea which can attract investors and clients.


Answered 2 years ago

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