5 Things That Investors Look For In Startups
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Starting a new business? Need investment? The first advice that every investor will give you is, do not ask for it. Yes. Bootstrap, always. Second, do listen.
You could throw the suggestion to the bin later but do hear them out first. Third, if you are still looking for monetary assistance read on as we meet top investors at our Startup Kickoff where they brewed up some coffee and tossed up a perfect game plan to take your idea to next level.
Investors are sharp to look at the corners and under the rug to spot a start-up with potential to invest in. Most will not only drop hints towards what they’re looking for but also suggest in clear words.
Follow these simple rules to woo your investors and increase your chances to get a good deal.
Have a kick-ass team:
Yes. That’s what investors look for. “An A-class team can elevate B-class product but a B-class team can’t do anything even for an A-class product,” says Shiv Babbar, Associate, Indian Angel Networks. Aayush Jain from Unicorn India Ventures is looking for the management.
“A single entrepreneur is a disaster. There should be a team of around three at the top because a co-founder could help you during bad times. Sushanto Mitra, Founder and CEO, Lead Angels, couldn’t agree less. “Entrepreneur’s life is a lonely one. You will hear a lot of rejections. Only a great team will help you to believe in your idea,” says Mitra.
Watch your product’s placement in the market:
That’s probably the second question you are going to hear from an investor. “You need to ask yourself, whether your product is a ‘nice to have’ or a ‘need to have.’ The latter will always be a better proposition,” says Babbar. Find out how large is the market. “Market should not be crowded. Look for something different that you can offer,” says Jain.
Be open to pivoting:
Of course, the product is your baby but be open to criticism or suggestions. “Acceptance is a bigger challenge. Nobody is ready to listen to criticism. Entrepreneurs should understand that customers could want changes. A million dollar valuation needs a lot of hard work,” says Sudeep Singh, Founder, Padup Ventures Pvt Ltd.
“Naukri was just a normal classifieds website and redBus was just giving information bus routes,” says Mitra. “Even Instagram was a vacation photo sharing app earlier and Snapdeal was a coupon selling platform,” says Jain.
“They all became game changers because they were constantly pivoting, realizing the potential of the product. So you got to preempt. You have to think ahead and if you can’t, listen to people who can,” says Anurag Kapoor, Executive Director, GHV Accelerator.
Burn money cautiously:
Investors are watching you like a hawk. You need to consider VCs money as your own, hence spend judiciously. “Zomato did not need to open a plush building in a prime location in Gurgaon. They could have done without it,” says Singh.
“If a business is pre-revenue business for instance WhatsApp or any other social media, they need that burn,” says Jain. “If you have an e-commerce platform and operations are sustainable, direct expenses make sense. If your unit economics works without marketing, it definitely shows your capabilities,” further says Jain.
Have an exit plan for VCs:
“VCs are gamblers. They wait for that one round which could make or break the business. So you need to device an exit plan for them,” says Singh.
“We would give you smart money, mentoring, strategic leadership and global exposure but you need to tell us when the revenue starts coming in for us to take a leave,” says Babbar. “Get your hands dirty and work your brain to see beyond.
Monetize the investment and see where the idea is taking you. Bring in the best talent on board the first time you take an investment and better the product. After that you can offer the investor his first exit,” says Kapoor. You could also have VCs on board just for mentoring.
Just in case you are not looking for investment, Jain advises you to toss around your ideas with trusted investors for guidance because they are the people who have been in the market for long. “Listening and seeing the future of an idea gives us a kick for sure.
At 50, I am on a look-out for newer, interesting products which can change our lives. If you have it, we got to give it (money) to you,” says Mitra.