As an entrepreneur sets out to raise capital for his venture, he often wonders – exactly what is it that an investor would look for in this opportunity? And that is one of the most important questions to ask. While every investor has their own checklist, there are some standard factors each one of them looks at while evaluating opportunities.
Investors have different fund sizes which drive their investments. The key here is to find a fund that matches the scale of your requirements. Moreover, the potential of a huge market never fails to excite investors. Investors may be unsure of a business struggling to grow beyond a few million dollars, but a venture looking at a billion dollar market is bound to pique their interest.
Much as entrepreneurs look for investors that fit well with their business and goals, investors, too, look for the right fit for their portfolio. To ascertain if you’d fall into that category, look at the investments an investor has made in the past and see if your business fits.
Before investors bet their money on you, they will want some evidence of a competitive edge. This could be unique supplier relationships, intellectual property, a superior product and so on. The goal is not to prove to investors a lack of competition. The goal is to prove superiority even in the face of it.
It is no secret investors listen to innumerable ideas every day. But the truth is, only a few of them see results. The best way to get an edge is to prove that your idea can or is already gaining traction in the market. If you’re determined towards your goal of creating a successful business, demonstrate this by bootstrapping, building your product, signing up customers etc. Even the small bits of traction matter in your pitch and your investors will be compelled to find out more.
Investors love dynamic ideas backed by credible entrepreneurs. A good idea by itself doesn’t do much. A solid backing that proves their money is in safe hands is what they look for.
A clear evidence that stakeholders believe in your idea and will back the merits of your business serves as solid social proof. Building social proof could start with having an advisory team of experts in your field. You could also launch pilots to gather testimonials from customers committing to buy it. If well-respected people in your field are confident of your business and don’t shy away from saying it, a major part of the investing battle is won.
Some final thoughts. Investors aren’t unapproachable so don’t be afraid of getting in touch with the ones you are interested in. Once you understand what they look for in investment opportunities, you will be well-equipped to effectively pitch your business.