Published on February 13th, 2017 | by Guest0
What Investors Look for in Startup Companies
An injection of cash at the right time can spell the difference between struggling to survive and taking charge of the next big opportunity. For startup companies, it can all depend on your ability to attract investors. Most business investors with any experience are both smart and naturally skeptical. They fully evaluate the opportunities that come along. For the best outcome, it helps to know what investors look for in a startup.
1. A Large Market
The size of the consumer base for your product or service is a good indicator of its potential. Investors will want to know the extent of your market audience; bigger is usually better. But this can also take into account forecasts of market growth, and what influences are driving that growth.
One of the key factors for growth is to identify and promote the elements that give you an edge over similar companies. This can persuade investors that your brand has a marketing advantage. This requires providing some strong performance metrics, customer enthusiasm, or other evidence to support the belief that your company can capture a significant market segment.
2. Build a Great Team
Investors will want to see that your team is capable of building and executing your company vision. Strong teams abandon their egos and work together to be productive and deliver quality results on time. Be prepared to explain the unique skillset your team has and how that can help develop a leadership position in the market.
An important aspect of that skillset has to be an efficient and innovative process of design, product development, and sales and marketing expertise. The enthusiasm and cooperation of your team are also indicators of their value. A team that’s willing to work hard and remain positive about their roles and contributions is a strong clue to their potential for achievement. Your team should share your passion for the brand, its mission, and your customers.
3. Your Leadership Ability
It’s important that you provide the leadership to drive growth. Clear and capable planning is critical to success in any industry. Building a talented team, acquiring customers early, and managing resources to deliver optimal value show that you have the willpower and intelligence to keep things moving even with minimal capital.
It helps to display vital business skills and any experience, special training or technical knowledge you have gained. The better you’ve built your company, the more likely investors are to consider how much more you could accomplish with strong financial backing. Investors must have confidence in an entrepreneur.
4. Commercial Traction
Investors will be eager to see whether your market audience is already engaging with your brand and providing positive feedback on your product or service. Social media analytics can prove that you have market appeal. It allows you to present real data to support your claims. Investors are always looking for a good opportunity, but they won’t commit a penny without proof that your ideas are going to make an impact.
Proof that your product or brand has begun gaining traction with your market shows that you’ve gone beyond planning stages and are actively building your company. Identify and explore creative marketing ideas to expand on, such as viral videos, SEO, story telling, or any proven strategy you’ve adapted in ways that will set you apart from business rivals.
5. The Investment Amount
Before considering the amount you ask for, investors will want to know where your company is financially, and how much you need to fund your ideas. Larger amounts involve greater risk, while lower amounts indicate smaller returns for the investor.
Either way, they may feel you haven’t planned wisely if your request is outlandish or insubstantial. Have a calculated, realistic estimate of the amount you need before discussing it with investors.
6. The Best Fit
The source of funds should also be a good fit with your business model. If an investor’s strategy aligns with yours, the investor is more likely to recognize mutual advantages. It’s critical to do some research and find out the type of projects an investor prefers before contacting them.
Come up with a list of potential investors that are located in your area, have strong connections with your industry, and a history of startup investment. Look for a point in the discussion where the investor’s attitudes and opinions click with yours. Even if all the figures are in order, some investors will still decide based on how they feel about you.
In conclusion, attracting investors requires having market potential, a sound business plan, and a team with the skills to see it through. Investors will expect proof of your competitive advantages and leadership abilities. Obtaining the capital often comes down to you as the business leader. Investors want to see great ideas from talented and passionate entrepreneurs.
About the author:
Josh McAllister is a freelance tech writer and business consultant based in New York. His passion in life is to share growth hacking tips for SMBs. Find him on Twitter @josh8mcallister