What Investors Look for in Startups & their Teams

Fundraising is no easy task for startup founders, but it is an essential process. One of the primary reasons why startups fail is that they run out of cash; raising capital is necessary for both the survival and growth of startups and being better prepared will at the very least ease the process.

Almost all investors — venture capital and seed funds, angels or personal — examine a number of factors before investing in a startup, therefore it is important that they be addressed before taking the plunge:

1. Market Opportunity

What is the size of the market that your startup is looking to serve — today and in the future — ? You should have a clear idea of the market that you are entering and its potential for growth and scaling.

2. Traction

Evidence of an early customer base — that you have already put your product/service out there in the market and have attracted your first customers — and of building ‘social proof,’ you are getting valuable feedback from customers and being customer-centric.

3. Team Capability

Is the team capable of executing their plans in the market and building a successful company? Your team members should have complementing skills that relate to the different functions of your startup: product development, sales and marketing, finance and operations etc. And most importantly, your team should have a shared passion and commitment to your mission.

4. Competitive Edge

How do you stand out from your competitors? What solid advantage do you have that the competition cannot easily outperform? This could be anything from a unique patent to significant partnerships or early-adoption of your disruptive technology. The point is to prove that what you are offering is sustainable.

5. Investor Fit

It is imperative that you do some research before approaching an investor. What startup stage(s) does the investor fund? Is the investor active in your industry? Does the investor have experience in your market? Finding the right investor fit will save you a lot of time and definitely pay off in the long run.

Sources:

1. 5 Things Startup Investors Look for Before Investing, Arie Abecassis
2. What Investors Look for Before Putting Money Into a Startup, Larry Kim
3. What Investors Look For, Fundable
4. The Top 20 Reasons Startups Fail, CB Insights
5. What investors look for before investing in a Startup, Nishant Rao
6. The 4 Roles Every Founding Team Should Have, Salim Ismail