What Do Investors Look For In Startups Before Funding?
You are probably curious to know what’s going on inside the brains of investors?
So basically you can read their minds and adjust your presentation accordingly 🙂
Here i’m going to share four signs that investors look for when investing so you can make sure you meet them all before
approaching investors to increase your chances of getting funded.
Richard Brandson says: a company is just a group of people coming together to build something meaningful.
So at the core of any organization wanting to be a family, a company or a football team, are people. People are the most important
asset any business can have.
Warren Buffet has many companies yet he does not run even a single one of them, how then they are still so successful? Because
he makes sure there are great leaders at the helm of any of his companies.
So when it comes to the startup world and funding, it’s not different that investors look at the team first.
Masayoshi Son, who invested in Jack Ma’s Alibaba when they had still no revenue or business plan, says i invested because of
Jack Ma himself and not the company, because of his charisma and vision.
So startup investors want to see a few things before investing:
1: More than one founding team member
This does not mean being a single founder means you have less chances of success, not, but investors feel more confident when
there are two or three founders who share the same vision, so their risk of losing that single founder reduces.
It takes a lot of work, not all individuals can handle that much work alone, so multi founders is a good sign that founders won’t be
overloaded or exhausted.
2: Founders with complementing skills
You don’t want to have three founders who are all from a marketing background or a tech background. What investors like is when
a founder is into the tech side and another one is on the business side, that is a great match.
3: Founders who get along well
You don’t want to tell your investors that you met your cofounder at the coffee shop a few days ago or just at a gathering. It’s
always best if founders have known each other from the past and history has proved they can get along well.
It’s also important how all founders met with the idea or their level of belief in the vision, you want to make sure everyone is on the
4: Founders who get along well
Investors also want to see if you are the right fit for the idea,
The question or assessment usually is if any of the founders has domain expertise, so that you understand your market, industry
and competitors well.
Or at least a way to relate your past experience to what you want to do now.
Jack Ma says: It’s not the idea, it’s the dream behind the idea.
Have you noticed that two people can have the same idea or two companies being in the same business, yet one goes to much
greater success than the other? It most probably has to do with the team or vision.
Your vision tells investors quickly of two things:
1: Your belief, energy and passion
This can not be made up, it has to be real and from within, experienced investors can see that in your eyes and in return it tells
them a lot about you.
It tells them how much confidence you have, how long is the journey and how far you want to go for it.
2: Opportunity size
Bill Gates’ vision was a computer on every desk in every home!
Mark Zuckerberg’s vision was to connect people together from wherever they are.
Now this is not an exact prediction, it does not mean it’s always true when someone says about a vision, but it can send some good
signals of information to experienced investors!
3: Market Size
You can have a great idea, but it won’t be that valuable until you know that a large number of people are interested in it.
It takes so much work and dedication to go from just an idea to a real business that continuously grows and you can’t do too many
things at the same time.
Therefore you want to make sure you have picked the right idea, so at the end of your efforts you arrive at something big enough to
reward you for your efforts and all your stakeholders.
So remember that the bigger the market size the more interesting the opportunity, so that your investors can expect some healthy
return on their stay with you.
Also note that venture capital is not an easy business, they have to place many bets and wait a long time to see the fruits of their
investments, and for an investment to pay for other failures, it has to be really big.
4: Real Problem or Problem Validation
This one is a big tangible boost for investors’ confidence.
Real Problem simply means a problem that is really faced often enough by a good number of people.
One major milestone after having an idea and researching an idea for a startup is the Idea Validation.
Idea Validation means you have proven that your idea is going to work out successfully, there are a few key strategies for
Validating your startup idea which again I go deep in my Infinite Growth Startup Coaching Program.
Having Validated your startup idea would give you an edge and make you readier and more matured for early-stage investors to
understand and believe in your vision.
So make sure you have validated your idea and that’s your first step to ensure you don’t lose the interest of potential investors.
Later i can add this also: