4 Characteristics Investors Look for When Investing in a Tech Startup
Updated: Nov 2, 2017
Getting a #techstartup up and running may require seed funding, and this involves winning over investors who often have varied criteria for what they consider a successful startup let alone potential. In some cases, having the “IT" factor, a “gut feeling,” or the charismatic personality of a team member can win over an #investor. However, many investors skeptical eyes will roam and assess the information the startup team presents, and they will do so with diligence.
Here are some of the most common sought-after attributes that investors like to see.
The Solution. Can your solution satisfy the needs of a large market? Basically, is the market hungry for it? How does the solution compare with other existing solutions, especially in a mature market? Think of your product or service as a good meal, investors like to know that it will not only feed the market’s urgent need, but also leave it feeling satiated. If the product or service is appealing to a new or emerging market, they will want to make sure you know and fully understand what’s driving the growth. So, make sure to demonstrate this understanding and show some metrics for support.
The Team. Who makes up the team, and what’s the team dynamic? Investors like to know what each team member has to offer. What’s their expertise, and how are the skills of each member being employed? Do the skills complement the activities needed for the product or service to achieve successful growth?
Investors also want to get a sense of the behavior and performance of the team to gauge the member's productivity and ability to handle challenges. At the #DCDATACON conference in Washington D.C. in October 2017, investors on the “Investing in Data Science” panel indicated that they’d like to know that the team was the right one to solve the problem and that the team members truly understood the pain within the problem. Therefore, bios that accompany your pitch slide deck should include strong educational backgrounds, examples of how a team member was a top performer on previous projects, and unique and relative experiences that will propel the business forward.
Engagement. What have you done lately? They’d like to know what you have done without the help of investors, and how you have engaged the market.
Have you sort of participated in the market, like sticking your toe in the water to determine whether it's hot or cold? Or have you plunged right in? Investors like to know whether or not you’ve talked to the customer or demonstrated the product or service to the customer. The interactions and feedback from entering the market, and how your team has learned from the experiences will be helpful for investors to know. Also, they will want to know if you’ve built the momentum of interest for your product or service. This can help them see how their money will be put to good use.
Relationship Potential. How well do you know the investment group? If you’re the only one talking about your business, then you are not listening, and you are not having a conversation.
Your meeting with the investors may become the start of a new relationship, so while the investor will want to get know you, they also would like to see how well you know them. Like any relationship that involves a commitment, you will both want to ensure it's a good fit. So, naturally an investor will want to know that you’ve taken an interest in them and know what's unique and specific about their offerings.
Make an effort to get to learn the investors or the investment company's likes and dislikes, and find out what their values and goals are and what the two of you have in common to see if it has the ingredients to become a long-lasting relationship.
Whether it’s passion or traction, charisma or gut, or even a fat rolodex, a unified team that’s agile and presents smart and unique ideas that differentiates the business from the competition will be sure to impress investors.
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