Finding outlined lists about what should start-ups look for in investors can be easily searched for on Google’s browser. However, the opposite side of that conversation “What do Investors Look for in a Startup?” tends to come up a little empty handed. Let’s look at a few steps that investors follow when searching and researching new startup companies.
Essentially if you’re a new startup CEO there is a 7-factor plan to know. This 7-factor plan includes passionate, traction, significant market size, competitive advantage, exist strategy, main factor, and teamwork.
We will breakdown these factors more below:
What is Traction?
This doesn’t mean a company can just throw things together and start selling a product, traction is all about providing proof of the concept or idea to show potential investors. By all means this does not have to be the final product but something that is well rounded out and gives investors a correct view at what the company intends on contributing and selling.
Competition Based on Advantage
Describing to investors why this company will succeed and provide that their competitors does not, needs to be addressed. And something simple like “working extra” will not cut it. The company will need to identify what cultural impact could benefit from the product. What about strategic advantages play out for the company rather than against it. If a company shows that they understand all aspects about what their company is capable of and why, this goes in favor of the company securing the right investor. But then this works for the investor to know why they should invest in said company.
If a company is not passionate about their product, then why would anyone buy it? This is a sentence and belief they can easily slip from a startup companies’ agenda. However, having this passionate focus can allow investors to see that if an individual is passionate about their own company, then the investor can see that the entrepreneur has made their own sacrifices and financial commitment.
No one wants to back a CEO that is too naïve and doesn’t have a balanced idea about where the company is headed in the future. An exit strategy will be one of the first things investors look for in a startup company. Because any new company must start thinking ahead at least in a given year or 2-year cycle.
Charisma goes pretty far in the market world; this is also a major factor needed in business. Investors will want to gauge the entrepreneur they intend to back finically. Any odd or sudden strange behavior can play on whether or not an investor will be secured for a startup company.
Investors tend to stay away from one-man operations when it comes to businesses. Instead, showing investors that the company has a team to fall back on, does make all the difference.
Market Size and Value
What does the market look like? How high is the frequency in buying customers, is the market grand or small? Investors want to see a growing market not one that is small and shows barely any growth. If a startup can consistently show how their product or brand’s production has had to increase based on market growth… this is a high winning solution to an investor.