For every startup founder, the most significant pain today is the lack of funds to run the operations. Even though there are ample opportunities, but still, 94.3% of startups struggle in securing capital.
Do we really know as a founder where we lag, or what the investor actually looks for when investing? It is important to remember that every investor has a different checklist when it comes to investment in any startup.
Many important factors attract investors. Let us have a look at some of them.
Are you passionate enough?
Many angel investors look for passionate founders who invest in their own money to kick-start their startup. If an investor sees a founder has invested their own money in the initial phase to build the product, they might feel more inclined to invest. This is then followed by the experience of the founders.
Validation
Investors look for validation! Before pitching for investment, a founder should validate their product in the market. Thorough market validation will surely save a lot of capital of both the founder and investors. In this day and age, there is a very less chance that a market is untapped, and therefore, it is easier to validate than before. A startup has to be disruptive to get the immediate attention of any investor whether an angel or a VC firm.
Every founder should talk to as many mentors, VC firm heads and other entrepreneurs and share the idea briefly, which will surely help in validation. Any startup should build a minimum viable product with a website, and a social media presence on Facebook, Twitter, and Instagram, which is considered the minimum nowadays. Then they can carry on the market research before pitching, which also helps in the validation of your idea.
Do you have the best team?
At an early stage, the investors look for a great team.
“A great team and an average idea are preferable as they will be able to execute it instead of an average team and a good idea” says Mr. Sanjay Nath, Co-Founder, and MD Blume Ventures. Therefore, at an early stage, the executing team is the top priority of investors.
Defensibility and Competitive Advantage
A founder should know their competition, and how better they are from them. Defensibility helps you to sustain and stay longer in the market-facing that competition. Unique team, patents, engaging content, and capital buzz, are some of the defensibility advantages. When the market size is enormous and majorly untapped, then more than two players have to compete for an extended period to acquire more customers and retain them, as we see in the case of Zomato and Swiggy in India.
Scalability
A startup should have a scalable model. VCs and Angel investors fund in those businesses which are highly scalable, which means they have a high growth rate in the next few years. Therefore, it is critically important that those ventures that are in a position to exploit a massive market opportunity, do so without fail., Many companies fail because they run out of money or because they were unable to scale profitably. Scalability is important for most investors since it gives the investment the best chance of multiplying quickly.
It’s risky for investors!
Profits or ROI do matter. Every founder should understand that the investor community is the most risk-taking community. Fewer investors hesitate to fund any non-funded startup which ensures the risk is minimum. Even idea stage startups are funded by many angel investors and early-stage investment firms. If we take the reference of mentors and ecosystem enablers, they play a significant role in helping the founders convert these investors. The founders should focus on the quality of funding. Rather than going for a higher value of capital, one should go for a better investor who adds a higher value to the startup.
How perfect are you at pitching?
A bad pitch is not a huge concern for investors if you have a solution to a problem, and you have the right team to execute it. But pitch decks play a very important role in attracting the investors virtually before the first meeting. A founder should ensure the deck should perfectly convey the story of the startup in as little time as possible.
Exit Strategies
The last, but not the least thing that investors look for is the exit strategy. Every investor expects hefty returns, which they can take and exit the startup. This usually happens when the startup gets acquired or achieves another level of funding. So, an exit strategy is also one of the major factors that make an investor invest in your startup.
Getting investors to invest in your startup will be difficult, as numerous startups are pitching against each other for funds. It is a matter of patience and how your startup can bring a change. It is important to be pitch ready before you pitch to an investor and it’s no harm in outsourcing a pitch deck as it saves both money and time of the founders.
Easy To Pitch (One stop solution for pitching) is an organization backed by IIM Alumnus that have served 200+ Startups pan India. They help all stage startup founders in India with a perfect deck and also in reviewing various important aspects of your startup like Business Model, Target Market, and Financial Projections. With Easy to Pitch, you can be assured that the first impression you leave on the investor through your pitch deck will be the best impression.
Contributed by:
Volunteer- Headstart Network Foundation