You’ll only strike a deal if you’ve got what they’re looking for.
Today, we’ve gathered the key factors that investors look for in a startup. While preferences vary, these are common criteria that you’ll want to show off:
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A strong and capable team
... because the people make the product!
Without a great team, why should someone trust you’ll be successful? Investors want to see a capable and experienced founding team. They look for entrepreneurs with a track record of success, relevant industry expertise, and the ability to execute a business plan.
Open-minded listeners
Investors know the value of a strong network and the presence of experienced advisors. They’ll often consider these to see how your founder interacts with others in the business.
How does your team get along with others? Who will be contributing strategic insights to the future of your startup?
Investors appreciate founders who are open to feedback and are willing to learn.
Compelling UVP (Unique Value Proposition)
Why should they invest in your startup? What makes you different from the hundreds of others they’ve been introduced to?
Investors look for startups with a clear and compelling value proposition that addresses a specific problem. They’ll assess your brand’s uniqueness and how well it differentiates from existing solutions.
Even if you don’t strike a deal, you’ll want to make your business memorable. That way, they might linger on your idea and come back around later.
Significant traction
Armed with a great idea, a clear plan, and an audience? Now investors want to see the numbers.
A brilliant idea is only the beginning of what investors look for. It’s important to demonstrate that your startup is gaining customers and generating revenue. They’ll be closely examining metrics such as your user acquisition, customer retention, and recurring revenue.
Whether through a freemium model, subscription-based revenue, or other strategies, a well-defined revenue plan is crucial to their consideration.
* Need a refresher? Check out our quick guide to understanding your Monthly Recurring Revenue (MRR)
Innovative technology
Investors are keen to work with startups that have a competitive edge. If you're leveraging new technology, you’re more likely to attract investment attention. Here are a few examples:
Artificial intelligence and machine learning
Robotics and automation
Clean energy and sustainability
Quantum computing
Edge computing, like the Internet of Things (IoT)
Market growth potential
Where does your business roadmap say you’ll go next? What’s the end goal? A compelling growth story will be crucial to attract interest.
Investors will be assessing your startup’s market positioning and strategic vision, so having a well-thought out business plan will be essential. They want to understand how you plan to navigate challenges and capitalize on opportunities.
Investors favor business models with the potential to grow exponentially, and to do it fast. Scalability is often a critical factor to achieve a high return on investment.
* We have tips on preparing for rapid business growth.
Exit strategy
Investors put their money where they expect a profitable exit. They’ll assess your potential exit strategies (such as acquisition opportunities or the potential for an Initial Public Offering).
Your startup’s alignment with its investment timeline and goals is crucial. Set realistic checkpoints and review your progress. Agile frameworks like Scrum and Kanban can help keep team members accountable and keep investors updated on progress.
Risk management
While investors are aware of the inherent risks in startups, they appreciate when a founder has already identified these risks and developed strategies to mitigate them. If you bring a risk assessment and mitigation plan to the table, you’ll be demonstrating thorough preparation.
Legal compliance
Startups with a clear legal structure, intellectual property protection, and compliance with regulations are viewed more favorably. Investors do their due diligence to make sure they're investing in a team and company that has all its paperwork in order.
This is a great opportunity to get back to the basics: write or review your employee handbook and organize all of your business structure's legal requirements.
