What goes on in Investor’s Mind? Part 2
The best thing about investing in startups is that it gives investors a chance to be part of something new and exciting. When they invest in a startup, they are investing in its future. Every investor needs to understand what motivates founders and how they think about business problems.
Investors play a vital role in the startup ecosystem. They provide an essential service when they offer up capital, but they also can be helpful in other ways. They have access to resources and contacts you might not at first think of, such as potential hires or leads for partners.
When it comes to the bright world of venture capitalism, investors have a lot on their plates. They must be insightful, research-driven and above all, clean slates that are passionate about being in the business. They try their best to make good decisions to make top dollar. Be it with your ideas or some other worthwhile cause that you support, these tips will help propel you one step closer to the greener monetary side of things.
Table of Contents
What Investors Look For?
The product is everything that a company can offer to its customers. It is what drives revenue and profit for the company.
• Idea • Solving current problem • Teck stack • IP / Moat • Entry Barrier • Innovation • Future proof
The idea: It is the most important element for an investor to assess a company. The idea can be simple or complex, but it must be a platform that solves some real problems in the market. If investors can see that there is a gap in the market, they will want to invest in companies that are solving that gap. That is why we see so many startups coming up with new products and services every day, as well as bringing out new versions of existing products and services every year. If you have an idea that solves a problem that people have, they will be interested in your business.
They also look at how the product can be improved over time. The more sophisticated and effective the idea, the more likely investors are to invest in it.
Solving the current problem: It is another important element for an investor to consider when investing. This means that you have identified an existing problem in your industry and found a way to solve it using your product or service. If you can solve an actual problem, then it will make your company more valuable and help you grow faster than other companies that don't have this unique advantage over their competitors.
You should always ask yourself if there is a big enough market for your product or service. If you're solving a problem that can be solved by an existing product or service, investors are going to want to know why you think your idea is better than what's already in the market. They may ask: "How does your product uniquely solve this problem?"
Teck stack: It refers to all the technologies involved in building your product or service, including software development languages like Java, HTML5, and CSS3; database platforms like MySQL; web servers like Apache HTTP Server.
Investors consider what type of tech skills startups have. Do they understand how things work and have experience using them before?
Investors want to know that their money will be spent effectively by the team. An increasing number of startups are focusing on building technology companies instead of traditional businesses because it makes more sense for them financially and from a risk-reward perspective.
IP / Moat: Investors want to see that your company has intellectual property (IP) or moat around its product or service, so they can feel confident about investing in your company. An IP is anything that gives an advantage over competitors such as patents or trademarks.
The product that a startup is developing is crucial for any investor to consider. Investors want to see if the startup has something unique that other companies don't. They want to see if there's something that makes it easier and more efficient than competitors or if there's a way for them to differentiate themselves from the competition.
Your idea should be novel enough so that others cannot come up with something similar without having access to your idea or patent rights. You should also have patents covering inventions related to the problems you are solving using technology-based solutions.
Entry Barrier: A barrier that makes it difficult for competitors to enter your market and compete with you or the level of competition within your industry that must be overcome when entering the market. A startup that has a high barrier to entry can potentially create a monopoly if they are successful and have no competition.
For example, Microsoft’s Windows operating system has been largely unchallenged since its introduction in 95′.
Investors want to see how easy it will be for competitors to enter your market with their products or services. If new entrants can come in easily and cheaply, then it's likely that your competitors will do the same thing and beat you on price. This also applies to markets where there are already established competitors who have better resources than you.
For example, Google is the search engine.
Innovation: Investors need to see if you have made any significant improvements over existing technology or products like they have done with previous startups' products so far. You need to show them how your product or service will be better than theirs at some point in time as well as how profitable it will be for the startup once it gets into mass production.
Future Proof: Investors also look at the market opportunity that the startup is going after, and how they plan on achieving this. They want to see that there's a real need out there, not just an idea in someone's head. Startups should also be thinking about how they will reach their target audience and bring them on board with their product or service. You need to show them how your product is going to change the way people do things and make their lives easier in the future.
Investors also look for startups that can develop products that will be relevant in the future. They want to see if the company has made plans on how they will incorporate future technologies into their products or services so they can stay ahead of their competition while they are still young and growing. They also want to know if there are any plans laid out by the company on how they plan on making sure their business stays profitable as they grow larger over time.
At the end of the day, investors will be looking for a combination of things when they evaluate a company. The most important thing is the product. It is the only thing that you get paid for, and that you need to be able to make money out of.
Investors are looking for a product that has the potential for significant growth. A company that can't show that it can scale is unlikely to get investment and will find it difficult to build a successful startup. Startups need to think creatively about how they can grow their business, as well as what problems they have solved for their customers.