After a turbulent few years, the venture capital (VC) market is expected to stabilize. In fact, some venture capitalists view 2024 “pretty optimistically,” according to Crunchbase, creating possible opportunities for small businesses that are looking for outside support to grow and scale their operations.
Before brand leaders seek investment from a VC firm, they should determine whether it’s better to get that chunk of change up front, or if it’s better to take “a slower-growth, higher-profit equity path,” according to Sonia Nagar, General Partner at Pritzker Group Venture Capital. If operators do decide to pursue VC, they can follow these tips for success.
Tip 1: Find your business advantage.
“It’s more important than ever to have something proprietary and unique about what you’re selling to differentiate in a sea of sameness,” Nagar said. “Those customer acquisition advantages matter.”
Lindsay Lightman, Principal at RevTech Ventures agreed, adding that a brand’s advantage could be its core product, a service or even the backend tech and operations that power business operations.
Tip 2: Create a clear and distinct value proposition.
Brands need to show how their products and services tie to a larger value proposition: “Build a strong brand identity, experience and loyalty with your customers from day one,” Lightman advised. “Ideally, cater to an underserved target customer with a specific beachhead.”
In business terms, a “beachhead market” is a place where you have gained dominant market share and can then use your strong leverage and position in the market to break into new and adjacent markets. Lightman gave the example of Pressed Roots — a company that has created a tailored hair salon experience for women with textured hair: “They are now at three, soon to be four, locations. All locations are at capacity with appointments due to high customer demand and have close to zero marketing spend. This is all because of the incredible word of mouth driven by the uniqueness of the product and experience.”
Tip 3: Reduce your CAC.
A strong customer base, which is measured by customer acquisition costs (CAC) and overall lifetime value, shows to possible investors that you have the “fundamentals” in place and that you have a clear path to revenue, according to Nagar. This is especially crucial as we’ve seen many fast-growing, VC-pumped brands struggle to achieve profitability.
Tip 4: Develop a roadmap for expansion and diversification.
While having a strong current position is great, brand operators also need to have a clear vision for the future. Lightman recommended building a long-term roadmap for diversification, whether through new sales channels, new products or new services that drive recurring revenue, such as subscriptions or VIP clubs.
This article was adapted from a piece initially published on Retail TouchPoints.
