What do investors look for in a startup?
First and foremost, it’s all about the team. It’s essential to be able to relate to a team, connect with a team and build that relationship – and perhaps most importantly, respect the founders and have the confidence that they know how they’re going to drive the business forward.
You can get insight into a team’s rationale and strategy by looking at their business plan, but everyone knows that business plans don’t necessarily survive the tug with reality. Investors need to be comfortable and believe in the team to be able to execute as the market changes and unexpected challenges crop up.
The second priority is the idea, the product – the actual solution for the problem being solved, and people are now looking increasingly at business model innovation. Have the founders really explored their market, and have they got the right kind of business model that could be more compelling for the target market?
From a more personal perspective, is this a sector that the investor is interested or expert in? That can get people excited and engaged more than anything – and from a venture capital perspective, is it something they’ve been tracking or examining data on, and that’s a growth area or market that’s ready for disruption?
Once again, you can never underestimate the importance of the management team.
Investors and accelerators typically look for companies in their first year of trading; they like them to have a product and they like to be able to see sales traction – real cash coming into the business – but in the case of a B2B proposition with quite a long sales cycle, then understanding the proximity to that first sale is also important.
Investors really love founders with domain experience, because they don’t focus on one particular area of technology – they expect the domain experience to come from within the founding team. They look for teams and qualities around a market opportunity that they believe could be scalable and a growth opportunity for the businesses.
But when it comes down to it, what’s really essential is difficult to quantify. It’s about the conversations you have with people, and that means looking for individuals who are humble and willing to take on mentorship, guidance and feedback – while also being ambitious enough to build a business that will grow to make a real difference. Maybe even change the world.
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