Last Updated on 2024-10-11
Are you an entrepreneur searching for โwhat do startup investors look forโ to secure funding? Step into the shoes of an investor and increase your chances of acquiring funds for your company.
Investors are like sharksโthey can smell blood from a promising startup. They are always looking for signs that your startup will be profitable.
Sure, you hear about those overnight success stories everywhere. Those startups that waltz into millions before you can say โstartup funding.โ But letโs be real, those are the unicorns. The rest of us face the harsh reality that funding is not as easy as it looks.
Most investors are skeptical of every pitch and proposal. Why is that? Because they know that many startups fail within five years for various reasons.
So yeah, they are cautious. They are jaded. But thatโs exactly why your priority is showing them something valuable that makes their eyes light up. And what do startup investors look for? How can you create a lean startup that can thrive for years?
6 Factors that Startup Investors Look For Before Saying Yes
Like in Shark Tank, startup investors need to hear that โEureka!โ moment. There are certain qualities a startup possesses that attract investors to bet on them. Indeed, these characteristics should allow the investors to see your startup ideasโ potential once they start the funding.
Letโs take a look at the hard-to-miss qualities that startup investors look for.
1. Passionate But Smart Risk-Takers With A Formidable Mindset
What do startup entrepreneurs and investors have in common? They both take calculated risks. Even more so, they are passionate about what they do.
And weโve all met founders with fire in their eyes. The ones who gush about their startup like a proud parent. They believe their product or service answers the universeโs biggest question.
But what separates the dreamers from the doers? The ones who bounce back from โNoโ with grit and determination, fueled by something more profound than just a promising startup business idea. Thatโs the passion that builds empires, brick by rejection brick.
As Tony Robbins said:
โYou must learn how to handle rejection. To succeed, you must learn how to cope with a little word โno.โ Learn how to strip that rejection of all its power. The best salesmen are those who are rejected most. They are the ones who can take any โnoโ and use it as a prod to go onto the next YES.โ
So, make every โnoโ an opportunity for growth and learning. Try to pinpoint what went wrong and improve it the next time you apply for startup loans or pitch an idea to a potential investor.
2. The Intangible X-Factor
Have you ever talked to a stranger at the most random of times?
Like while waiting for coffee at a coffee shop near the company or getting your convention pass for a local event? You expect polite small talk but find yourselves lost in an exciting conversation building up an intangible connection.
Sometimes, that magic happens in investor meetings, too. Maybe itโs a shared passion for the problem youโre solving or a glimpse of your genuine enthusiasm. That X-factor, you canโt force it; you canโt manufacture it.
But when it ignites, it pushes you toward startup business grants or seed funding.
The key? Authenticity. Ditch the polished pitch and embrace your true self. Be the confident entrepreneur, brimming with an idea that promises social or financial impact.
Talk with investors, not to them, and listen intently. Their questions and comments are whisper clues about what resonates with them. This active listening becomes your X-factor radar, guiding you toward the connections that truly matter.
3. Your Competitive Advantage
First, your business must have that extra edge over your competitors. It becomes a primary motivation for investors to grab a hold of your business. There should be something unique and cutting-edge about what you do for them to bank on.
It could be anything from the product execution, your talent pool, or the product or service itself. When you talk about that special something to an investor, there should be that feeling of affinity that ties your goals together. Overall, itโs the zinger about your startup that would cling to their interest in investing.
4. Company Talent and Capabilities
Most of the time, your best asset is your organization. The people and teams you work with can help sell your business propositions to potential investors. As mentioned, angel investors and venture capitalists are interested in everything related to your business, including people.
They will be interested in the people building your products or services and executing the plans you have laid out. If you equip your organization with competent experts with reputable portfolios, investors will likely bank on you.
For example, you own a software company and offshore software developers from the Philippines. The Philippines is one of the best countries for offshore software development. Thus, this gives your company the credibility to convince investors to help finance your business.
Read More About Offshoring and Offshore Development Here:
- What is Offshoring?
- History of Offshoring
- A Beginnerโs Guide to Offshoring Software Development
- How Offshoring Can Help You Save Time and Money: 6 Ways
- Companies Use Offshoring in Order to Do What?
5. Vast Market Opportunity
Time and time again, we stress how vital startup marketing is. You should emphasize what makes your product marketable. Additionally, you should look into what opportunities you can penetrate once you launch your product.
In this note, you should properly assess your product and where it stands relative to its market.
- Does this product already exist? If so, what makes it stand out from the rest?
- Is the market for this product already saturated? What can I do to make it stand out?
- Are we venturing into a new market? How sure are we that this market has a customer base?
Startup investors will be looking at this area more than the others. Why? You should be able to see revenue and return on investment. Investors need assurance that your product fits the market, leading to sales.
6. Concrete Business Plan and Exit Strategy
In business, all great things transpire with proper planning. After all, there is no substitute for a venture whose directions have been identified depending on its performance.
First, you should lay out your short-term and long-term business plan for investors in a pitch deck. It gives them an insight into whatโs also in it for them.
- How long will they be funding until youโre profitable?
- What position do they hold in your company as an investor?
- How will you execute your plans?
- How much do you need from them?
The answers to these questions should populate your deck.
Finally, create an exit strategy. It doesnโt mean that your company is bound to fail. Actually, this would give the startup investors an idea regarding your preparations however the cookie crumbles. Failing to set things up is a setup towards failure.
What Do Startup Investors Look For? Marketability, Profitability, and Sustainability
Like what a promising startup should be, yours must be a walker and a talker. Seek the perfect balance of having great people capabilities and high product marketability. You must also have a formidable mindset to move on from initial rejections and do better.
Donโt forget to highlight your competitive advantage just like a great salesperson does. Lastly, create a good exit plan to show that your foresight is better than that of other entrepreneurs competing for the startup investorsโ attention.
Full Scale Fills the Gap in Hiring A-List Talent
Are you thinking of building a startup company dealing with tech? Full Scale can help you hire the best talent in the industry.
We equip startup software companies with talented individuals as important assets. From product development to marketing, our talent pool will elevate your marketability through proven experience, expertise, and track record.
Great developers, testers, and leaders give your startup a competitive advantage. So what are you waiting for?
Hire the Best Software Development Talent Now
Matt Watson is a serial tech entrepreneur who has started four companies and had a nine-figure exit. He was the founder and CTO of VinSolutions, the #1 CRM software used in today’s automotive industry. He has over twenty years of experience working as a tech CTO and building cutting-edge SaaS solutions.
As the CEO of Full Scale, he has helped over 100 tech companies build their software services and development teams. Full Scale specializes in helping tech companies grow by augmenting their in-house teams with software development talent from the Philippines.
Matt hosts Startup Hustle, a top podcast about entrepreneurship with over 6 million downloads. He has a wealth of knowledge about startups and business from his personal experience and from interviewing hundreds of other entrepreneurs.