Starting a new business is no easy task; starting a tech company that requires multiple rounds of funding in a small market like Hawaii is even tougher. I recently sat down with Bill Spencer, president of the Hawaii Venture Capital Association, to talk about raising money in Hawaii and the challenges entrepreneurs face (see “Hi-Tech After 221” in our January issue). He said while almost all tech companies will have to look outside the state for later-stage funding to grow and develop their business, much of the seed money can be achieved locally.
Here’s what Spencer had to say about what investors look for in a startup:
“It starts with the people. You want a good team that has authority and knowledge about the business they’ve created. You want to make sure the team has surrounded itself with competent service providers, like attorneys and CPAs. You want to make sure that if they have other investors that they’re smart too. You assume the business idea meets certain criteria. For instance, you want scalable businesses. Investors want to know that the entrepreneur knows how to make money – what’s your explicit path to growth and profitability? They also want entrepreneurs to have a realistic understanding of the value of their idea and how much money they need to grow the business. You have to have milestones and the ability to measure progress. Sometimes entrepreneurs are all about the idea and haven’t really thought through the business. Inexperienced entrepreneurs think it’s all about risk taking. From an investor’s standpoint, that’s the last person you want to invest in. In the long run, every new idea that goes to market involves risks, but the key is to identify those risks and mitigate them. Entrepreneurship is more about risk mitigation than risk taking.”