NJConnect held its fourth meetup last night in Princeton, NJ at the historic Nassau Inn.  The topic, “Approaching Investors to Fund Your Company,” was presented by guest speaker Joe Allegra, General Partner at Edison Venture Fund.

Allegra provided compelling insight on the different aspects of angel and venture capital (VC) funding to an audience comprising of entrepreneurs and early-stage start-ups.  He also shared interesting perspectives on how to prepare for the funding process, and more importantly, what not to do.

According to Allegra, VCs look for the following characteristics in entrepreneurs and start-ups during due diligence:

• Sound Business Model – recurring pricing model and high gross margins
• Proprietary Technology – how hard will it be for competitors to duplicate?
• Attractive Market – does the solution meet an urgent need?
• Strong Management – have they done it before?
• Potential Buyers – why do they need this solution?
• Market Leaders – are you the leader or number two in the market? If not, spend time closely defining a niche where you can differentiate your company
• Valuations – angels like them; VCs hate them (how do you value your company?)

Another interesting point Allegra discussed was the need for entrepreneurs to have a healthy understanding of their market and where they fit within it. VCs often refer to this as “What aisle and shelf?” using the metaphor for how a supermarket organizes products on their shelves. “You need to be able to articulate where you are positioned within the array of companies, products and offerings in the market,” Allegra noted.

Keep this in mind when you start shopping for funding.

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