WHAT DOES AN INVESTOR LOOK FOR WHILEINVESTING IN A START-UP?
If you are a first-time entrepreneur, it is going to be a toughtask to raise capital from outside. Investors have the expertise to reviewinvestment proposals. They get a lot of founders' approaches. To select anystart-up, they have fixed several criteria, the founders, who fulfil theircriteria; investors take interest in them and invest their time and money.
These selecting factors include the qualities of the founder andteam. The other factors are the competence of the founder, the ability to holdthe team together and the history of success. They also see if the founders areoperating ethically or not.
Qualities of the founders are one of the major parts of theassessment process before making an investment. The other vital part isevaluating the market.
Once, they are fine with the founder, they look at the marketsize, whether the country is ready for the product or the service. The consumerexperience for the product or service is the driving force to tap potentialinvestments.
How big is the market your company is looking to serve?
Asking about the market opportunity is very common and almostinvestors ask about it. This question is mainly about the current scope andfuture expansion.
If you're targeting an existing market, your answer should be howyour offerings are different from the other players and how your start-up willdisrupt the current market. In case, itis an emerging market, shed light on how big the market is expected to flourishin the coming day.
A seasoned investor will be curious to know how well your team ispositioned to build and execute the business idea and lead the market. That iswhy; they mainly ask questions like what is the domain expertise of your team?
Does the team have important skill sets? How is the bondingbetween the members of the team? Answer each question smartly and confidently;here you need to present your team as strong, dedicated and skilled because theteam plays a major role for the success or failure of the start-up.
Investors ask for traction history, to ensure that the market hasalready started engaging with your service or product; it differs as per thecompany and the industry like revenue, channel partners, and clients onboard toname few.
Keep in mind that when you present commercial traction, itprovides you an upper hand over your competitors. Try to have the real data tosupport your claims and you can adjust the assumptions you started with.
When there is mutual connection between the investor and thefounder, the investor probably invests.
In order to find a relevant investor, consider the stage of yourcompany, the industry you're targeting, and the investor's experience in therelevant field.
Do your research before approaching them and remove the ones fromyour list who're not a good fit.
The Click Moment
There is always a click moment between the investor and founderthat influences the investment decision.
Sometimes it's as simple as connection, based on the sharedworkplace, common background, college or a mutual connection. Examine theinvestors' background to present any common connections out of the meeting.
While fundraising is a hurdle, these points will support you to engage with the angel investor. Often it is not possible to receive the funding immediately but then, even a second meeting is equal to having done a great job.