Are You Sexy Enough to Attract Venture Capital?

This article was written by Dwayne Moyers and Crystal Detamore-Rodman of Entrepreneur.com and has been excerpted from Financing Your Small Business, available at SmallBizBooks.com

Does your business qualify for institutional venture capital? Run through this diagnostic test developed through an interview with John Martinson. He's the managing partner of the Edison Venture Fund, a Lawrenceville, N.J., venture capital firm with $420 million under its management.

1. Are you a technology company? Technology is the stuff of gods for venture capitalists. With proprietary technology, a company can dominate a market and protect its profit margins. Institutional venture outfits do invest in low- or no-tech deals, just not as often. This means that competition among nontechnology companies is keener than among technology companies.

2. Can you be a market leader? Martinson says institutional venture capital firms are hesitant to throw money at a company that is going up against a market leader with a me-too product or service. It's too difficult and too unlikely to succeed simply by stealing market share from the leader. ...