So, you’ve used Targeted’s platform to find the right investors, reached out and now what?
What will it take to convince investors to invest in your company? Here we outline the key factors that investors consider when evaluating tech startups.
1. A good match with the investors’ investment strategy
First and foremost – the type of company is the first thing investors look at. Some investors only specialize in young companies and invest in pre-seed and seed rounds. Others look for mature companies that already have a strong customer base. Many investors specialize in specific industries, technologies or business models. Reach out to investors that have experience and expertise investing in similar companies. Understand whether they will lead an investment round or join in after another investor led it, when did they last invest and with which company.
You also want to understand the role they will play after investing. How involved would they like to be? How helpful is their background in your target customers’ industry? Can they open doors for you? Remember: This is a two-way search. They need to fit your goals as much as you fit theirs.
2. Problem-Solving Potential
The first thing investors look for is whether your startup is solving a significant problem.
They’re interested in startups that offer innovative solutions to real-world issues. Your startup should have a clear value proposition that addresses a specific problem. The more pressing the problem and the more innovative your solution, the more attractive your startup will be to investors.
For instance, if your startup is developing an AI-driven healthcare app that helps patients manage chronic diseases, you’re addressing a significant problem with a potentially innovative solution. Highlighting this problem-solving potential in your pitch can make your startup more appealing to investors.
3. Market Size and Growth Potential
Another critical factor that investors consider is the size and growth potential of your market. Investors are looking for startups that operate in large, growing markets because these often offer the highest potential return on investment. If your startup targets a niche market, you’ll need to demonstrate how you plan to dominate
that market. For example, if your startup is developing a unique solution for renewable energy in remote areas, you might operate in a niche market. However, if you can show that this market is underserved and has significant growth potential, this could still be attractive to investors.
4. Scalability
Scalability is a crucial factor for investors. Your startup needs to have the potential to scale, meaning that your business model should allow for growth without a proportional increase in costs. Scalability is often linked to high margins, which are attractive to investors.
For example, software companies often have high scalability because once the software is developed, it can be sold to many customers with minimal additional costs. If your startup operates in the tech industry, demonstrating scalability will be a key part of attracting investment.
5. Strong Team
Investors invest in people as much as they invest in ideas. A strong team is one that has the right mix of skills and experience to execute the startup’s vision. It’s also important that the team demonstrates commitment and passion for the startup.
When presenting your team to potential investors, highlight the relevant experience and skills that each team member brings. Show how these will contribute to the success of your startup. Investors want to see that the team has the capability to execute the business plan and drive the startup towards success.
6. Traction
Traction refers to the progress that your startup has made. This could be in the form of user engagement, revenue, partnerships, or other key performance indicators (KPIs). Traction shows investors that there is demand for your product or service.
When pitching to investors, provide evidence of your startup’s traction. This could be user testimonials, sales figures, or data on user engagement. The more evidence you can provide of your startup’s traction, the more likely investors are to consider your startup as a viable investment.
7. Competitive Advantage
Your startup should have a competitive advantage that sets it apart from others in the market. This could be a unique technology, exclusive partnerships, or proprietary data. A competitive advantage is something that your startup does better than anyone else, and it’s something that’s hard for others to replicate. This could be patented technology, a unique business model, or access to exclusive partnerships. Show investors you know who your competitors are and be clear about the advantages and disadvantages of your solution in your space.
8. Financial Projections
Investors want to see realistic financial projections that show how your startup will become profitable. These projections should be backed by data and sound assumptions. Your financial projections should include income statements, balance sheets, and cash flow statements for the next three to five years. These documents will show investors how you plan to grow your startup and when they can expect a return on their investment.
9. Exit Strategy
Finally, investors want to know how they will get a return on their investment. This is usually through an exit strategy, such as a sale of the company or an initial public offering (IPO).
An exit strategy is a way for investors to sell their stake in your startup and make a profit.
This could be through a merger or acquisition, an IPO, or a buyout. Your exit strategy should align with your investors’ goals and provide them with a clear path to a return on their investment.
Understanding these factors can help you position your startup in a way that appeals to investors.
Finding the right investors can be a challenge. That’s where Targeted’s investor matching platform comes in.
Targeted is a unique platform that uses AI and a unique algorithm to match founders with the right investors according to the startup’s unique needs. By providing founders with a list of suitable investors, Targeted streamlines the fundraising process and increases the chances of securing investment.
Remember, securing investment is not just about finding any investor, but about finding the right investor for your startup. With the right preparation and the right platform, you can increase your chances of securing the funding you need to take your startup to the next level. So, get started today and take the first step towards securing the investment your startup needs to succeed.