There are two types of investors: actual and potential investors. Actual investors are those who are investing in the business while potential investors are those who are planning to invest in the business. So it is very necessary to have such plans which attract investors towards the business. Investors attract and appreciate passionate entrepreneurs and the person who is willing to invest personal savings. The investment criteria that you should include or What Investors look for in a Startup are –
What Investors look for in a Startup?
Human resource is an asset to every organization. Humans are the ones by whom work is done. However, humans are going to decide the future of a startup. The crucial element for every startup is decision making and humans are going to make the decision making. Better the human resource more chances of future growth. It is necessary for every startup to have Co-Founders with relevant skills and Knowledge. Co-Founders must have the power to make decisions and solve the problem.
Product or Service
Every startup is set up either to provide a product or service. What Investors look for in a Startup is valuable metrics in a product or service before investing. If they do not find something good then their decision depends on gut feeling or their past experience. It is not necessary that a good product or service will lead to success but sometimes a startup fails by not solving the problems. In short, a Startup must have a good product and service with valuable metrics and solving problems too like distribution channels, unemployment, etc.
Size of the Market
What attracts the most is market size. A Startup is generally set up on a small scale. So, it is not possible for them to compete with big companies. However, investors look at the market share and demand for products and services. If a startup is at the initial stage might not capture a big share in the market but the product or service is in demand may be possible to capture it soon. It also attracts investors.
There should be something different and better in your product or service than competitors. It is important for a startup to do a SWOT and Porter’s five force analysis. For making your product or service better, a startup tries to maintain high quality at a low price than competitors.
The Stage or Valuation
Valuation attracts investors the most. If venture capital came to know the risk is high with a startup then they will try to own the assets. Thus, reducing the valuation and vice versa.
So, Investors will assess all four factors before investing. Then they will assess their interest.