Attracting Investors
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For the first-time entrepreneur or founder, looking for seed stage funding may prove to be challenging. Many startup founders look for advice on pitching to investors while their idea is still at a concept stage. The biggest challenge most of them face is they don’t know how to attract investors and what factors influence their decision to invest. We’ve compiled a list to help you understand what investors look for in a startup before approaching them and we have also gotten input from Berytech, Chivas The Venture, Leap Ventures, and MIT Tech Review Pan Arab.
- Experienced Entrepreneurs:
The investors prefer more experienced entrepreneurs rather than someone who is completely new in the field; however, don’t be discouraged if you do not have the experience, as this is a completely new field and is not the only contributing factor. - Team:
Investors will check the entrepreneur and the team, if one exists. They prefer entrepreneurs who are passionate and excited about their idea and their vision, who are tenaciously willing to stick to their vision through challenges and obstacles, who are willing to reevaluate and adapt their plans when needed, who are capable of working with a team, understand their market, and are coachable. Berytech agrees adding that the IDEA is very important but the team is as equally important! Finding the good mix of co-founders would ensure the IDEA gets tested and revisited and the IMPLEMENTATION is extremely well done! The drive to succeed is empowered and supported and obstacles are removed through training, coaching, mentoring, connection, etc. - Customers:
All investors are going to take a look at your customer base. You will have to consider the acceptability of the product in the market. What would compel someone to buy your product or service? What problems would your product solve and how is it better than the alternatives? Positive responses to questions such as these will be a major factor to attract investors. Leap Ventures added that entrepreneurs should have an idea that is at least average, for a very large and growing market, and be able to convince investors that you can make it happen and execute it. - Opportunity:
Investors are constantly seeking big ideas that can create an impact, change our behavior or our way of thinking. They also consider if the market is ready to embrace your big idea or if it is an opportunity that the world will not be able to recognize for several years, hence the payoff will be delayed. MIT Technology Review Arab Edition also added that Entrepreneurs should explicitly explain how their startup differs from what else is out there; they should prove that they have done extensive market research and are convinced that their offering would fit the market. - Business Model:
Investors will definitely look at your business model in terms of analyzing if the model is profitable, expandable, repeatable, predictable, and so forth. By studying where revenue will come from and challenging the expenses it would take to generate that revenue, the investor can decide if this investment is worthwhile. Chivas The Venture looks for exceptional social impact startups that use business innovatively to transform communities and solve global challenges. Moreover, your business model will assist the investor in creating a probable plan on when they would be able to generate profit and exit accordingly.
Self-evaluate your startup based on these tips, and if you find areas where you do not excel, work on improving them. The extra time you invest will significantly help your chances of getting invested in.
