Venture Capitalist Philip Moyer on What Makes a Winning Idea
This is the second in a series of blog posts about the Philly Startup Leaders Bootcamp.
Philip Moyer, senior vice president and managing director of Safeguard Scientifics, a Wayne, Pa.-based venture capital firm, kicked off the second PSL Bootcamp session — and offered his criteria on what makes an idea that’s worth pursuing.
Compounding Effect: More Problem Solving = Better Solutions
Repeatability is key. To get funding for your startup, you must be able to describe every detail of the problem, customer, market, competitors and business plan. Venture capitalists need to know that all of these aspects will remain consistent when considering if it’s worth investing. According to Moyer, customizing solutions or processes for different customers is labor intensive and doesn’t allow for consistent testing. Therefore, customizations don’t help in reaching the “compounding effect” — Moyer’s theory that the more you solve the same problem, the better the solution becomes.
Don’t Become an Entrepreneur to Sell Your Business
Moyer finds little to no value in having an exit plan at the beginning stages of a business. His motto is this: ”Don’t fall in love with the solution — fall in love with the problem.” There are many solutions to any one problem, so finding the right solution for the current market is key. Falling in love with the problem allows an entrepreneur to discover the best solution rather than pursuing something while having “blinders” on. The framework he laid out for the aspiring entrepreneurs is one of commitment to an idea that may take up to five years to come to fruition. And although he uses the word “failure” when explaining some of his own experiences, it’s easy to see that Moyer sees such road blocks as stepping stones to the repeatable solution.
“A Strong Team Will Always Figure It Out”
Moyer made it a point to address the importance of the team you’re building and the market you’re jumping into. Both are major indicators for VCs and founders when evaluating the potential of a business. Moyer admits there are many criteria analyzed when Venture Capital firms are scrutinizing a startup, but he firmly believes the product with the right team in the right market is more likely to get an investment. “A strong team will always figure it out.” Moyer’s words of wisdom for the teams that can’t quite decide on how to break up responsibilities? “Go out, grab a couple beers, and decide who is CEO.”
So here’s what you need to know…
- VC is the most expensive capital investment you can get.
- Customer dollars are way more valuable than venture dollars.
- Hold off on venture capital as long as you can.
- Build a company around a product, not a feature.
- Go out and sell to customers — the earlier the better.
Nick Cantagallo is a volunteer with PSLU.