What Startup Investors Are Looking For

what investors are looking for business startups

If you’ve been looking for ways to finance your business idea for longer than five minutes, then you’ll know there are a hundred different choices available to you. On the one hand, you have fundraising options like bootstrapping, crowdfunding, finding a partner begging your family and friends or robbing a poorly-protected bank. However, if these aren’t viable options for whatever reason, then you know that you are going to have to attract an investor of some kind. 

Banker, angel investor, venture capitalist, it doesn’t matter. If you want to squeeze funds out of them then you are going to have to pitch to them, which can be even more terrifying than squaring off with a Silverback Gorilla that's fallen out of the wrong side of the bed. 

That is why your best bet of surviving this intimidating process is to empathize with them. You need to put yourself in the investor’s shoes and think about what they may be looking for in your and your business that will make them say, “sure thing, you can have my money, mate, no problemo.” 

The best way of doing this is to know exactly what a potential investor will be evaluating and scrutinizing when you step into the arena with them, and to help you with this we have come up with a list of the most important variables. These are the things every investor of every kind will want to know about so they can accurately work out the risk you pose. Without this, well, you can kiss any hope of leaving that meeting with a big smile and an even bigger sack full of cash bye-bye. 

1. You Have Got To Know Your Numbers 

We can’t stress this enough. Seriously. Know your numbers inside and out like Shark Tank's Kevin O'Leary stresses time and time again to pitching entrepreneurs. You’ve got to crunch your numbers, crunch them again and then crunch them once more and, even when you think you know them better than the layout of your TV remote, you should crunch them again. This is because every potential investor is going to scrutinize this area more than any other, and so it’s your job to stand up to that task and prove that your company - or idea - will be a success with the right funding. To put it bluntly, your financial performance is the make or break moment of your pitch, especially with regards to a small business loan from a bank. S for a Venture Capitalist, they tend to look for opportunities that offer a potentially high return and easy exit opportunity. 

As such, you will need to be prepared to feel the heat and answer every question tossed your way. Details, details and more details. It isn’t enough to just say you are starting a transportation business that will make money. 

You need to explain which niche you will hit first, where you are going to spend your money right down to the ball screw selection, how you will ensure financial stability, and how you will handle growth, from issuing shares to borrowing further. You will also need to be meticulous in the way you present your debt repayment plan and show that you will be able to fulfill your side of the deal, which will include proving how much your current assets are worth as a means of liability. 

2. You Need To Prove You Are A Safe Bet 

Another area that will have a huge amount of influence over an investor’s ability to sleep well at night is you. They want to know that you will have everything needed to keep the ship running smoothly because, let’s be honest, no one wants mistakes to be made when it is their money on the line. That is why you need to be prepared to hop under the microscope and prove that you are the right person. This is usually done by proving your experience. Previous business ventures, leadership roles, managing teams, producing positive results. However, if this is your first venture, then you are going to need to sell yourself in other ways. That could be done through your knowledge of the market and your experience in terms of employment. Oh, and no matter what anyone tells you, being passionate about your idea or your business will always help prove your commitment to the cause, and tends to be contagious enough to put a little boost of confidence in the people on the other side of the table. 

When it comes to filling a potential investor with confidence, make sure you can offer than the kind of attraction they are looking for. It could be that you have found a way to lever a competitive advantage, or you have something that will make you stand out from the crowd and give you an advantage in that sense, such as great distribution or exclusive agreements or even just a patent that could get you ahead very quickly. That is what an investor wants to see in you. They want to see that you have a business mind; one that will give you the upper hand. That will fill them with more confidence than anything. 

3. A Model Made To Generate Profit 

Another thing investors will want to see is a great business model. Why? Simple. This is your strategy for success, the approach you will use to generate profit and the very blueprint that will see your business keep growing. Strategic value is of the utmost importance in the eye of the investor. Of course, creating an attractive business plan that will allure investors of every kind is no easy task because each investor - bank, individual or whatever - tend to place different emphasis on different attributes of a plan. 

What does this mean for you? It means you need to do your research beforehand and then tailor your model to meet their wants and wishes. Some investors may place more emphasis on areas like the current state of the market, while others may focus more on finance issues and others could simply want to know about your plans for growth. The good news is, you can stereotype the needs of investors depending on what kind of investing category they fall into. Just make sure you do your research beforehand. Think of it like writing a resume; you should always answer the questions posed on their job description instead of having a generic one-size-fits-all option. 

4. Stand Out From A Large Market 

This is where a little balancing act comes into play because you need to be able to prove to all those in the room that your idea is unique enough to stand out from your competitors, while also being mainstream enough to enjoy large market potential. That is what is going to make investing worthwhile for them. The other thing worth mentioning is the fact this will require proof and we’re talking the concrete kind. 

For most investors, they want to see an idea that will address a problem, and the bigger the problem the better. They want to see that your idea is going to help address the issues of a large chunk of a consumer market because that is what makes their investment less risky and their chance of generating a nice return more likely. To put it in layman’s terms; the larger the potential market and more secure this market is, the better your competitive advantage, which is a seriously good thing to demonstrate you have when it comes to pitching to any kind of investor for any kind of reason. 

The reason why investors want to see this is because they want to know that there is a market that expands outside of your original idea; service or product. If this is the case, then your chances of growing quickly are much higher and so will your chances of landing a backer. Basically, what they want to see down the line is numerous sources of revenue because a business with options is a far safer bet than a business with all its eggs in one basket. 

Invest With Success 

It hasn’t deviated away from what we said at the start: you need to put yourself in the investor's shoes so that you can adequately prepare yourself to meet their needs. So, if you want to show them that you are the right person with the right idea, then you need to make sure you focus on five different areas before you walk into a room, secretly sweating and crossing your fingers. 

1) Research - you need to demonstrate you have done your market research, so much so that you can back up your claims with real data. 

2) Detail - you need to have a plan that goes into far more detail than just the core idea and delves into the core functions of your business 

3) Contingency - you should also be able to show you have at least one contingency plan in place as a means of reducing the amount of risk they label you with. 

4) Experience - the investors in front of you will want to know why they should invest in you, and what it is that you have that can guarantee the success of this idea. 

5) Progress - Apart from this business plan, what else have you done? That is what they will want to see also. They will want to see how proactive you have been, what deals you have managed to secure, what business partnerships have been created and just about anything that will demonstrate that you really mean business.

Investing Insights

Now it's time for you to show those potential investors what you can do! Invest with success!

digital media startup guide

I hope you enjoyed this article about distilling what investors are looking for in upcoming entrepreneurs and startups.

Interested in more articles about starting your startup?

Read My Related Posts:

- Buy An Existing Business Or Start From Scratch? 

- Five Lessons Learned From Top Startups

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