What Investors See Before Investing In A StartupLeave your thoughts
When it comes to collecting external capital for the first time, many entrepreneurs get nervous. As most experienced investors appear to be smart, skeptical and vigilant in evaluating opportunities presented to them, the process is not for the meek. The truth of the matter, considering the broad range of start-ups they can see, is that there are some boxes that just about every investor likes to check before investing, either capital or extra time.
- Dynamic opportunity in market
This is where the majority of investors will begin. How wide is the addressable market your business is trying to serve?
Big is described in terms of not only today, but the future as well. Be prepared to spend a lot of time discussing how your approach is different from your peers, whether it’s a market of current solutions. The emphasis will be on how large the market is supposed to get and what drives its growth if it is a new, emerging market. Investors know that all vessels are raised by rising tides many of them will look to position bets in new, promising sectors.
- Execution skill of the team
A prospective investor may look closely at why your team is well placed to create and implement a strategy to become a market leader.
What sort of domain information does the team have that makes them an authoritative business figure? Will the team have additional expertize in terms of sales and marketing, product creation and activities? Does the team have a good chemistry and do they all play along with each other?
These are some of the requirements that investors will be searching for, so it is important to highlight as much as possible of these strengths.
- Traction advertising
An significant way to de-risk an investment opportunity is to show investors that you’re not only dreaming about it, but have already started taking steps to develop the business. It will set your startup apart from many others who are still sitting in the laboratory to show that the consumer is already interacting with your product and offering valuable feedback.
Throwing real data into a discussion that supports your arguments can be very strong, or maybe even forces you to change the assumptions you’ve begun with. In addition, it represents the determination and effort that the team takes to make things happen.
- Relevance of Investors
Do not underestimate the significance of fit for investors.
There are many aspects to this, including: the stage of your venture, the sector in which you start up is involved, and the experience of investors in your market room.
Think of it as part of a puzzle piece. If there are many ties between the approach of an investor and your start-up, the investor is likely to get more deeply involved and the match becomes more evident. Doing your homework upfront will pay dividends and make sure you don’t spend a whole lot of time with an investor who is not a natural match in the end.
- A factor of X
For an investor and a founder who plays into the investment decision, there is always a clicking moment that occurs.
An affinity based on a common context, such as shared work or educational experiences, or even a co-investor who is mutually recognised and trusted, is often easy to identify.
In other situations, it might be more difficult to put a finger on, such as the entrepreneur’s likeability, or just an impulse or perception that the investor creates good or poor, that they have a hard time shaking. Either way, this is where it allows you to be honest or not too salesy when knowing your investor’s personal history to tease out any positive connections from a conversation.
Although the funding process can definitely be overwhelming, if you bone up on your pitch to tackle these sectors, you can put yourself in a great place to engage an investor. Bear in mind, even if you’re not quick to land a check and have paved the way for a second meeting, you have done your own job.
Categorised in: Startup Pitching
This post was written by SoCal Angels