G-Squared Partners: The Top 10 Traits that Attract Investors to Your Startup
This is a guest blog post from our friends at G-Squared Partners
Startup investors are looking for the next great opportunity, an innovative company with a potential for high profits. Do you think your startup has this potential? If you’re looking to secure funding for your business, you need to understand what attracts startup investors. Based on our work in assisting companies with their finance and fundraising efforts, we’ve compiled the top 10 things investors desire in their next opportunity.
1. A Market They Know And Understand
By choosing an industry they comprehend, investors reduce the risk of squandering their investment. When it comes to pitching potential investors, familiarity is generally the safest option. Startup investors are searching for opportunities in sectors that fit their expertise. Investors already have an idea of how businesses become profitable in this industry and what it will take for your business to yield a return on their investment.
Some investors may exhibit signs of familiarity bias. If your startup exists in a world unfamiliar to potential investors, it is your job to explain the industry in terms your investors will understand. A well-thought-out, detailed explanation of your industry, its relation to historical markets, and buyer personas research should be presented clearly and thoughtfully.
2. Strong Leadership Teams
Leverage your leadership team’s professional experience for increased investor interest in your startup. Those in leadership positions exhibiting demonstrable success in the past indicate their dependability and capacity for success in the future. To secure startup investor funding, show that you have intelligent, strategic, successful leaders with strong financial discipline. Highlight the competency of both your company founders and leadership team by providing engaging bios or CV’s.
3. Investment Diversity
Often, startup investors provide funds for several companies to diversify their investments. How does this work to your advantage? You will differentiate your company from others when you show that investing in your business is a unique opportunity with high growth potential. If your company provides investors with an opportunity like no other, they are likely to be interested in investment.
When client needs arise, your startup must be prepared to grow and meet them, and you must show this potential to investors. Investors do not want a company that will be stagnant. They want to invest in startups that will thrive and eventually provide a return on their investment. Your business should be built with scalability in mind. Building a company that does not scale is one of the most common mistakes startups can make. Be prepared to discuss scalability and adaptability in the short and long term.
5. Promising Financial Projections
Show investors when they are projected to make their investment back and the promising possible dividends for the future. While it is not easy to accurately project your gains 5 to 10 years into the future, your leadership team must demonstrate to investors that the growth potential is there. Back up your potential with a financially viable business model. The more time you spend perfecting your financial projections, the more comfortable startup investors will feel about getting on board.
6. Demonstrations Of Consumer Interest
When you invest in a company, you want to know that it has potential in the marketplace. Show investors proof of consumer interest in your product. Have you sold your product to anyone yet? Have you polled your persona base for their interest? Show investors that your product has a built-in market and how that makes turning a profit a possibility.
7. Clear, Detailed Marketing Plan
Whether you are starting your business or you need to secure startup investor funding to get to the next level, investors want to see a marketing plan that demonstrates two things: you know your audience and how to reach them. Investors may want to know about the software you use on a day-to-day basis. Are you using (or planning to use) a robust, all-in-one marketing tool? Or several software platforms? At the minimum, prepare to have an email platform, social media scheduling program, website performance software like Google Analytics, SEO software, and a CRM.
Along with a well-defined tech stack, a clear, detailed marketing plan should include the following:
- Targeted campaign strategy
- Content marketing strategy
- Buyer persona research
- A lead and email nurture strategy
- Social media strategy
- Paid social/PPC strategy
- Conversational marketing strategy
- Regular reporting
Present your marketing plan to investors and show them the different channels you plan to use to increase your visibility in the market.
While revealing the complexities of your startup to investors isn’t completely necessary, you do want to be as transparent as possible to increase their trust in your business. No startup investor wants to enter a deal when they do not feel like they have all the facts. Be open and honest about the state of your businesses, the challenges you are facing, and how you plan to overcome them.
9. Realistic And Reasonable Startup Costs
Over-projecting the value of your startup repels potential investors. Ensure that your startup costs are reasonable for your size and current client base.
It’s essential to communicate how you plan to use new startup funds. Will you be utilizing these funds to expand operations? Invest in new machinery or equipment? Launch a series of campaigns? Your startup must use these funds wisely and reasonably, avoiding non-essential expenses.
10. Long Term Vision And Plan
Where is your startup going? Investors want to get on board with a startup that becomes the “Next Big Thing” in the future. What do you want your startup to grow into ultimately? Do you want to service a worldwide market instead of your current local market? Do you wish to employ 50,000 team members and have your product in every household? Paint a picture for your potential startup investors of where your company will be in the future and make them optimistic that you will achieve these goals.
Attracting startup investors to your company is a necessity. So, you need all the pieces in place to show that partnering with your business is a smart move. Highlight the best parts of your startup and share your challenges openly. Investors will get on board when you demonstrate you have high growth potential.
If you have a strong business idea but need help finding financial support and navigating the funding process, we’re here to help. For professional guidance or sell-side advisory, schedule a free, no-obligation meeting with our team of experts.