What Do Investors Look for in a Startup?
Every startup founder wonders what it takes to attract investors. If there was any obvious strategy, everyone would use it. While there is no secret sauce for finding the right investment partner, gaining their trust throughout the process may not be as elusive as it seems.
What do investors look for in a startup? A good investment that delivers a healthy ROI in a reasonable time frame along with a founding team they are confident can execute on their goals. Countless variables factor into that determination, but the decision to invest comes down to the ability to make money off that investment and the confidence in the team who will achieve their targets.
That might sound obvious, but it has important implications for founders. Attracting investors isn’t only about having a revolutionary product or exuding charisma. It starts with something much simpler: proving you can make the numbers add up.
Showing Investors What They Want to See
Smart investors will take a deep dive into any startup they might fund. They will ingest a ton of information, but they’re looking for two things from the start:
- Transparency – Every investment is a gamble, but investors make the safest bets using extensive due diligence into a startup’s financials. They want to see a strong financial foundation and thesis in place that can support the startup’s ambitions to scale successfully. Assertions aren’t enough – investors want to see the numbers. Startups that are transparent about their financial position, as well as opportunities and weaknesses, and are forthcoming with any and all information requested will have an easier time securing funds.
- Vision – In pursuit of calculated risks, investors are looking for startups that have the means to grow in spite of all the obstacles they face. Most startups fail, and the path forwards is often unclear and never assured. Therefore, investors want to fund startups that have a vision for growth combined with a realistic plan to get there. Ambition and practicality are equally important. Startups with a well-developed strategy in place, supported by as many constituent pieces as possible, can get more investors onboard with their vision.
Startup mythology around companies like Uber and Airbnb makes it sound like audacity is what matters to investors. The reality is a lot more ordinary: investors want to put their money into companies with founders who they can trust along with a business model with a sound financial strategy, and a viable business plan. Deliver on all three, and many investors are eager to get involved.
The Easier Way to Attract Investors
Founders in the driver’s seat of startups don’t always (or often) have the resources – time, staff, expertise, technology – to put their financial house in order. Consumed with countless other obligations and ambitions, balancing transparency, vision, and financial fundamentals can be a struggle. The same resources startups need to attract investors are in short supply.
Savvy startups overcome this deficit by relying on a trusted advisors or firms to support their goals and provide strategic financial insights. With the right partners, the transparency that investors insist on happens automatically. At the same time, the vision for the startup develops organically to capitalize on every opportunity.
Proseer helps startups turn potential into results. Make your startup a magnet for investment by contacting us.
