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Entrepreneurs

6 Questions Entrepreneurs Should Ask Themselves Before Looking For Investors

Before approaching investors, the need is to be able to conclusively prove that the product is commercially viable
6 Questions Entrepreneurs Should Ask Themselves Before Looking For Investors
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Global Speaker, Entrepreneur and Author
4 min read
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In the world of start-ups, securing external investments is regarded by many as the ultimate form of success. Many fail to understand the massive implications of taking on additional commitments before having a viable business model. Investment is a means to an end, and not an end itself, and people who set up businesses for the sole reason of “cashing out” or getting bought over, have no right to call themselves entrepreneurs.

One of the most common questions among aspiring business owners, is, “When is an entrepreneur ready for investment?” Here are six questions entrepreneurs must be able to conclusively answer before approaching venture capitalists:

Is the Product Viable?

A viable product or service is something that solves a pressing issue, adds value to the user’s life, improves efficiency, or is more convenient than its alternatives. If the offering accomplishes any of the above, then the product is good. But having a good product is only one part of the equation. The real challenge is to create something that isn’t just good, but that customers are willing to pay for, to the point that it becomes profitable, if not lucrative. Before approaching investors, the need is to be able to conclusively prove that the product is commercially viable.

 

What Do the Customers Think About The Product?

Before looking for investors, first, compile a list of customers whose lives your offering has improved. Customers should always be the first priority, and their grievances, if any, should be addressed satisfactorily, to improve the quality of your product or service. Customer testimonials make for an invaluable tool to prove to investors (and to yourself) that the offering is indispensable enough to people to warrant positive feedback. Remember, customers have their own lives, and the very fact that they’re taking time to express their satisfaction is a sign that you’ve gotten things right.

 

Is There An Effective Marketing Strategy In Place?

The product may have all the secrets of the universe, but if nobody knows what it is, you have nothing. Marketing is a fundamental part of the business and is crucial for generating new leads. So, before seeking investments, one must ensure that the marketing strategy isn’t just effective at acquiring new customers at sustainable costs, but can also be scaled once you have additional financial resources at your disposal.


Does The Business Have A Clear Organisational Structure?

Functioning as a one-man-army is not a long term strategy for any entrepreneur. One needs to invest time and money into developing a second line of leaders to spearhead the company’s day-to-day functions. Before approaching investors, a proper organisational structure needs to in place, where responsibilities, roles, and accountabilities, are clear. The attitude of jugaad needs to be let go of, in favour of a more professional and systematic structure.

 

Is Business Optimised?

While money is very easy to spend, it is extremely difficult to earn. As such, when money is borrowed, taking on the responsibility of making sure it’s spent well, and only when necessary. An entrepreneur must have proper systems and processes in place to eliminate inefficiencies that cost time and money, while simultaneously optimising the use of resources, capital, and labour.

 

What Should an Entrepreneur Plan Do With The Money?

Taking on investment significantly changes the way the business operates. It increases the stakeholders and gives others a say in how an entrepreneur run’s the business. It is therefore imperative to know exactly what is intended to do be done with the new capital well beforehand, and whether or not the pros outweigh the cons. Chasing venture capital without any plan for the future is the equivalent of a dog chasing a car, with little idea of what to do once they actually catch it.

Investments are necessary to take the business to the next level, but they’re not a guarantee of success. Thus, before taking on investments, it is crucial that an entrepreneur first creates a business worthy of investing in.

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