Published On: July 8th, 2020
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As a Good Investor, you need to know these 3 Keys Investors Look For Before Investing in Startup
“Investors are always looking for great founders and startups no matter where they are from!”~ Alok Goyal of Stellaris Venture Partner
The idea of making an investment deal can break or make a business from its startup platform. Consider this notion from the standpoint of investors – There are a few factors that imbibe a sense of confidence and trust in your business. More precise, these are the keys that make him or her fund your business!
So, if you have a startup idea and are looking for investment options, or you already run a business and require an ideal platform for investment, then the following information is going to be valuable for you.
3 KEYS INVESTORS LOOK FOR BEFORE INVESTING AND THE STEPS TO ACHIEVE IT
1. PROFESSIONAL EXPERIENCE AND BACKGROUND:
Usually, investors trust and spend money for entrepreneurs who are already on-field with ample expertise. Not that first-time entrepreneurs are absent from investing, but individuals with professional experience can top the priority list of investors.
For Example – Swiggy
“It’s very exciting to get validation for the work we’re doing at Swiggy and thanks to the many people who’ve helped us get this far”, says Majety
Did you know that even our favorite food app Swiggy, started to attract external investors only after two years of foundation? Yes, this startup was founded in 2013 by Sriharsha Majety and Nandan Reddy, but investors such as Accel, Norwest Venture Partners, and SAIF Partner approached Swiggy only in 2015. The investment later was for $2 million. Upon reaching a neat space of professional background, Swiggy raised $15 million the next year!
Therefore, ensure that you hold the “Investor fit” board by gaining sufficient professional experience on-field. You can achieve this through:
- Gaining hands-on experience, ideally from entering the business markets.
- Possessing the “Right” skills your sector will demand.
- Marking a clear track record on your entrepreneurial path.
2. UNDENIABLE BUSINESS MODEL
If you think constructing office headquarters and building an all-inclusive network employee team comes first, then you must re-evaluate. Because the door-bell to approach any investor, is your Primary Business Model irrespective of whether or not you possess the team and office.
Say that you have a unique startup idea, but your business model lacks clarity in explanation. When you are unable to explain the features of your model accurately, then how can investors trust your business in the long-run?
Henceforth your takeaway here is straight – Submit a business model that cannot be neglected by the investor to fund. To help you out, make sure that your entrepreneurship model gets framed:
- Based on contemporary trends.
- On trying to resolve a social issue.
- By emphasizing on the finance and market values.
On a special note, if you are targeting a quite common domain, then research enough and choose only a growing sector to help you sustain on-field in the upcoming years.
FOR EXAMPLE – BYJUS
The importance of educating children is spoken frequently somewhere or the other and created awareness across India. But there was a Kerala guy who made it a possibility by building an online platform, in 2011 at Bangalore. Even though a majorly discerned scenario, education was the key to create his business model/program. And today, the Ed-Tech module is worthy of $5.4 billion (Rs. 37,000 crores). Moreover, kids are finding it interesting to work out mathematics and learn science from a different perspective, not witnessed before! Guessed what the startup was? It is none other than “Byjus” from Byju Raveendran.
“This is a segment where the real fun is not about creating a billion-dollar company, but helping millions think and learn better”, says Byju Raveendran
So, remember, even though your business model might be simple or common in structure, the impact it would command economically, will motivate the investor to sign the cheque!
3. STABLE CONSUMER BASE
This pain-point might be challenging for new-comers but not an impossible one. Have enough consumers or online users for your business since investors pick brands that are already preferred by people.
Furthermore, you have two perspectives to look at before WHOM to approach for investment planning:
Venture Capitalists (VCs) focus on investing in platforms that have a limited count of competitors.
Angel Investors prefer business domains that address a solution for any issues’ that is prevalent in a widespread population.
Got the difference? While Anglers look at large markets, VCs opt for brands with clean market characteristics. So, analyze, compare your stats with the data of investors, and then move forward on what type of investment gives you the highest perks. For first-time entrepreneurs, thinking out-of-the-box is the only direction to accomplish the point of consumer stability.
FOR EXAMPLE – INTHREE ACCESS
“Inthree Access Services Pvt Ltd.” is India’s largest rural last-mile network, started by Ramanathan Ramachandran. It is not like the traditional Indian startup rather focuses on targeting the rural village communities as its business users/consumers.
“They are aspiring but are under-served”, quotes Ramanathan Ramachandran concerning the rural markets.
The idea behind this startup venture was to deliver essentials and commodities for the rural Indian villages, transforming the lives of Tier III and IV towns. Leveraging its strength from diverse municipalities across Indian states, this was the CEO’s Disruptive Quotient of success. And today, with a net value of $5 Million and competing with big shots including Flipkart and Myntra, Inthree is an out-of-the-box startup, presented as a gift to Indian villagers!
“When you are approaching VCs, do some homework. Find out which VC is investing in which sector, what they’ve invested in, and what their thesis is rather than having a scattered approach of visiting every VC and banker!”- says Devang Mehta from Anthill Ventures
- Prepare solutions that investors usually expect from entrepreneurs.
- Focus only on the present Indian startup scenario.
- Submit references and models with an incomparable perspective.
- Learn anything and everything to increase your skill sets.
- Satisfy users to the maximum, for attaining a positive consumer base.