What Are The Investors Looking For? An Entrepreneur’s Guide To Early Funding
An idea can change the world but in the world of startups if an entrepreneur does not have sufficient funds, it could eventually lead to financial blocks. Most entrepreneurs initiate their business with self-funding but it’s important to note that investors take their business to the next level. But then what are investors looking for? There is no one, correct answer to this.
Some investors decide based on solid facts, some might connect with the idea on a more personal level, some might be willing to take risks or play it safe. All that’s good but still, investors like to scrutinize your business model to know the prospects.
So, it’s better to be prepared beforehand and cover all the important aspects according to the investors.
1. Concise Business Model And Business Plan
Work on your pitch. You don’t have to craft an essay but be concise and stick to the central theme of your idea. Your business idea is a well-defined structure which explains how your business will work and earn a profit. On the other hand, the business model is a detailed calculated plan showcasing plans. It states your business’ future goals and the strategies the business will take to attain these goals. Now, the investor just focuses on one thing and that’s the profit from your business so you make sure that you are well versed with your priorities and in sync with your idea.
2. Teamwork And Experience
When you are working with a team, investors tend to focus on your team’s managerial skills, good interaction among your team and expertise in your domain. A strong team is a backbone for any startup as its success rests on the shoulder of your team. A diligent team is what you need; whoever you hire should be clear in their goals and expert in their domain which will be a beneficial point in the eyes of investors.
3. Market Size
Investors look for your market research and see the value you will create in the existing market and if your startup has enough resources to participate and accommodate a new growing market. It has been witnessed in the past that companies that can transcend above the blockages, loopholes and earn monetary benefit over the early investment period in the market are the ones that are mostly preferred by the investors.
4. The Level Of Commercial Traction
Startups have been trending in recent years which means that investors hear out the business ideas of many entrepreneurs. What can you do to make your idea stand out from the crowd? You have to show that your team has already worked on your business idea and model which identifies progress and this will encourage the investors to invest in your idea.
5. Competing With Your Peers
Apart from all the technicalities and theories, it’s about listening to the gut voice and here, we are talking about investors. What do you think is that one unique quality of your idea that will compel the investors to leap of faith? Amidst all the business ideas, it’s your X-factor that will give you an edge, maybe you have a unique patent on a new product that can give you a secure position as a market leader in the coming years, maybe it is your aggression in the marketing strategies that enable you to cut deals with partners in contrast to your peers. The point is to show some leverage points in your business model that will convince the investors to assist you in funding.
6. The Final Act
Every investor looks into the exit strategy of the startup which means the startup brings in the money and the investors get their share of profit.
Now, the investors mostly acquire their profit in two ways —
a) A bigger organization collaborates with the startup for enough money OR
b) The startup develops and grows its business and sells shares of stock to the public over a public stock market.
This consistent growth in the market shows that the investments made are developing quickly.
Having said these things, at the end of the day, investors are also people like you and as you are listening to your gut voice. They too are investing with the same strategy most of the time. So, give them something to hold on to.
Visit us at Higgle to start your business with zero investment. Follow us on Instagram for the latest updates!
