We're not venture capitalists, but since our business involves partnering with companies to build and grow businesses, we end up in a lot of conversations with entrepreneurs who say they have a "great idea." We've written previously about why execution is everything and ideas by themselves are not all that valuable. Far more important is a solid business model that will make money.
It's astonishing how many entrepreneurs and even corporate executives focus on the great idea while looking past the fundamentals of how a business will make money and provide a return to capital providers.
Some of the entrepreneurs we've spoken with recently have pretty good ideas. All they need is $2 million to get it started.
First thing's first. We immediately ask them 10 questions to see if the idea is worth our time--just as any investor would. These questions usually distinguish the CEOs and entrepreneurs who have a good shot at being successful from those who will not:
Each of these simple questions can be answered in a sentence or two. Most seasoned investors will tell you that at least nine times out of 10, the average entrepreneur is too busy focusing on the "idea" to think through the basic business model. Those who have a solid understanding will easily find investors who are willing to back them.
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