5 Checks Investors Make Before Investing in your Startup
Fundraising is difficult. Simply put, you have to ask an individual to part with his capital for a stake in your Company. Reaching out to an investor is not for the weak - most of the experienced investors are skeptical, diligent, smart and thorough in analyzing your proposition. Despite the wide array of startups & their investors, there exists a common checklist, viable across most of the industries. Investors keep a check before they invest their money or precious time.
Sizeable Market Opportunity
Your idea and plans to scale are redundant unless there is a market need. The first question an investor will pose is: What is the size of the addressable market that your startup plans to serve?
The size of the market is not limited by the current stats, but spans up to future as well. If an existing solution is available in the market, it is better to prepare in advance on how your solution differs from your competitors. If the market is new & emerging, the primary research pointers must be how big the market can get (expected) and what are the metrics driving its growth.
Behind every great startup, is an equally competent team. A potential investor will be quite receptive on why your team is best positioned to build and execute the plan, enabling your startup to be the market leader.
The expertise of your team in a particular domain, and what makes them authoritative in a particular market? Does the team have complementary skills, spanning across sales & marketing, product development & operations? Is there a resonance amongst the team members and does everyone like working with each other? These are some of the questions, investors might come up with before they move on to fund your idea.
Market Engagement Proof
Investors are skeptical on ideas with no actionable metrics. In short, if you have already started taking actions to build the business, chances are you de-risk the investment opportunity you propose. For example, you can demonstrate that the market is already engaging with your product where you can also collect customer feedback. These feedbacks will set you apart from the many others who are stuck in the development or at the MVP stage.
An investor is set to be interested in the conversation, if you can support your statements with actual data. Leveraging data might help you adjust assumptions you made earlier, when starting off.
In a fashion similar to product/market fit, you should not undervalue investor fit. There are many factors you should consider before selecting the investor to approach: the stage of your Company, the industry you operate in, and the investor’s experience in your industry.
Consider this. If there are multiple connections that lie between your startup and the investor’s long-term plans, the investors is more likely to engage with you and the collaboration seems feasible. Hence, it is recommended to research on your investor upfront, as it will save you both a lot of time, just in case, the investor is not a natural fit.
Sometimes, instincts beat convention, hands down. For example, you and your potential investor might be from a common background, may be a shared education or work experiences, or may be a mutual co-investor. Factors like these might play a major role in investment decision.
For other cases, it might be harder to intercept, such as charisma of the entrepreneur, or a minor review or impression the investor develops - these emotional stimulus are usually hard to shake off. At this point of time, try not be too salesy and attempt at deciphering the mindset of the investor before making any further advancements. You might tease out positive connections, or find a common frequency, out of the conversation.
The fundraising process is truly cumbersome and can certainly affect your growth prospects if things go awry. The turmoil doesn’t just end here: you have to opt for multiple services, get office space, hire new employees, and expand.
Imagine a platform that could get you the funding you need, and bring you closer to mentors that could advise you on growing your startup. Furthermore, you can avail services like finance, legal, HR, accounting, office space, etc., right here, on the iPRONTO platform.
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