What are investors looking to invest in your startup?

These are the three factors that stand out in the eyes of investors.
What are investors looking to invest in your startup?
Image credit: Depositphotos.com

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4 min read
This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.
Opinions expressed by Entrepreneur contributors are their own.

Getting investors to notice a startup and also want to invest in it can be a challenge; however, there are certain factors that help these companies to be more attractive and to get the financing they need to expand their operations and be competitive.

According to Víctor Aguirre López, founder of BlackBox Startup Law , one of the factors that played in favor of investment in national startups was the pandemic, since the confinement meant an acceleration in the adoption of technology throughout the country.

In Mexico, according to data from Statista, startups are mainly focused on software and data issues (31%), followed by Fintech (23%), e-commerce and retail (13%), and social and leisure issues (9 %), mainly.

In its various strands, startups generally do not resort to classic financial institutions due to their innovative nature, a behavior that, Deloitte points out, is oriented towards financing schemes and business models different from those of traditional companies such as crowdfunding. or the colloquially called 3F (family, friends & fools)

The lawyer for BlackBox Startup Law adds that, given their nature, investments in startups always represent a higher risk, but that they have the potential to generate large returns and radically change market conditions, consumer preferences and the investor vision.

In this regard, Aguirre affirms that there are various factors that investors evaluate when investing in a startup, but there are three that stand out:

The traction of the project. Investors look for projects that have a lot of traction; In other words, a clear business model that has the potential to impact the market and place itself in the taste of consumers.

Investments in startups always represent a higher risk, but they have the potential to generate large returns / Image: Depositphotos.com

Disruptive innovation. Another fundamental factor for investors is disruptive innovation. According to the BlackBox specialist, this point is key because it means allowing many people who were not in a certain market to eventually access it.

Disruptive innovation is present in many sectors, even before the birth of startups. For example, Henry Ford, innovated the automotive industry by inventing the mass production of cars and thereby lowering costs. So more people were able to access these products.

"That is what disruptive innovation does, as a product or service becomes more sophisticated it can reach other markets and generate benefits that they could not otherwise obtain," adds the litigant.

The trajectory of the founders. Finally, the track record of the founders is vital for investors to make a decision on project financing.

Among the aspects that investors consider are the experience of the leading team, the previous projects in which they have participated and which of them have been relevant, among other points.

“At the end of the day, investors look at different edges to have a clear idea about the economic potential of the company, but the legal one is also fundamental. There what worries them is that there is clarity in the regulation of the project, who is the owner of the brand and what prestige it has as a professional ”, he concludes.

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