http://quartsoft.com/blog/201303/getting-funded-by-venture-capitalists,
I decided to start blogging again. Please read their post first and then my response will make a little more sense.
Over the last twenty years, I have heard scores of VCs and Angels discuss this topic, not to mention the many personal conversations I've had. There are a couple of significant differences between what they say and what you state here.
The number one issue is "Team." Not an entrepreneur's experience. That experience is a part of "team", but rarely do individuals get funded.
Second, while business model is critical to the success of a startup, depending on the stage of the startup, business model has varying level of importance. The key component of business model of TAM, total available market. The size and dollar potential of a market must be big enough to support a potential eventual valuation of a company for a 5 to 20+ times return on investment. If the market isn't big enough, you may have a very nice life style or small business, but not one that generate's wealth. The purpose of VC investment is to generate wealth, not support personal cash flow needs. Obviously, in order for a company to generate wealth, a business model that includes market size, pricing, sales penetration rate and cost, cost of sales, along with management of general and administrative (G&A) expense, to support the proposition value generation.
Third, barrier to entry for competition is the general view that includes the intellectual property plan. Patents, trademarks, copyrights and trade secrets are a part of the strategy, but only a part. Further, very few startups begin with patents that have been adjudicated. Generally, provisional patents are filed first. If you wait for a patent to be granted, you may miss your market window for the benefits to be derived from the IP. Further, a single patent by itself may leave itself open to competitive attack through additional patents that leverage the first one. In business we call this a patent fence.
Entrepreneurs come in many forms. How they fund their business needs to match the purpose of their business as well as its potential. For example, I had one entrepreneur with whom I temporarily teamed threaten to keep the company private so my claim of equity would never have an liquid value. This was a single entrepreneur who had poured his own hard earned cash into building a technology company, evolved from an initial business into a service business, and relocated from the East coast to Silicon Valley, who had run out of money before he could launch out of beta. I came on as CEO to raise investment, launch the service product out of beta and build a team, but not necessarily in that order. Two months is too short a time to raise money, especially through the holidays, but panic ensued. There is more to the story, and he is a good person for whom I hold no ill will, but he is not the personality type of someone who will raise capital from professional investors.
Self assessment is important in these matters. Are you building an eCommerce site that will make money but is not really distinct? Then, go the friends and family route or limited partner or LLC structure. There are lots of doctors and lawyers who want to put their money to work. You still need to do the work mentioned in the article, but target the right audience for your capital needs.
