If you're not planning to build or invest in venture backed businesses... ignore this post. It's only intended for entrepreneurs and investors who are trying to figure out what the next big venture backed business will be.
The secret that many entrepreneurs and new investors DON'T know is that the ongoing capitalization of the business is crucial to it's success. Ok, so everyone probably knows that. but what does that mean about the company you want to build or invest in? That's the secret.
Through the course of the interviews for my book on angel investing I learned the incredible importance of thinking through all rounds of fund raising. Btw, if you want pre-release content from my book sign-up here. As your business grows, you need to continually find deeper pockets who are interested in making bets in the space your business is in. Andy Kessler talks about this in his book and my interview with Bob Bozeman really crystallized this for me.
Getting a few angel investors to put some money in for your great idea is wonderful; however, you still need to convince VCs and eventually the public at large or an acquirer to make a much larger investment if those early investors are ever going to get a return. Believe me... they want a return (that's the definition of investing).
The question then becomes... what are those future investors looking to fund? What products, markets, and so on are they interested in investing in 12-48 months down the road?
It's likely not a dating app, sorry if you've recently pitched me a dating app. There some great tools available out there to better understand what investors are interested in funding. Y Combinator, Homebrew, and even a16z has posted the things they want to see come through their doors. The places where they've seen some interesting things but have imaginations for things much, MUCH bigger.
Ok, on to the secrets... what does everyone want to fund?
You'll notice Paul Graham mentions dating in 2008! In fact, if you look at the ideas from Paul in 2005 & 2008 and look at the businesses that were created in the few years to follow you'll see a correlation. This is part of my point. Investors are trying to be more transparent with entrepreneurs before entrepreneurs engage with them.Does that mean they won't invest in anything else? If you really did build the most amazing dating app ever, would you be turned away? Probably not if you had some incredible evidence (strong enough data over a long enough period of time) to back up your claims.
For the ideas listed in 2014? You'll see some similarities in the financial disruption space across all of the interests (personal favorite of mine). IoT, enterprise software, and AI are also common themes for the 2014/2015 wave of "what we want to fund" lists.
Are you building something in one of these areas? I'd love to hear about it. If you're still early in your development of the ideas. I have another tip for you... Techstars Seattle application deadline is April 26th!