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Aug 10
startup investors

What do startup investors look for in a business

You’re excited about your new business, your new product, your new idea. No doubt, you’ve worked hard to get to where you are today. All the sleepless nights, the weekends at home instead of hanging out with your friends. All the sacrifices you’ve made, all led you here: Time to launch your business.
 
As a startup ourselves, we know what it takes to work hard at developing a product that you know customers are going to react well to and love. We know that it takes hard work and dedication which is why, we feel that we’re in a good position to talk about this subject.
 

At this time, we’re not looking for investors, but when the time comes, we are confident that we will be able to showcase all the hard work we’ve put into our company. But, if you’re in a different spot and looking for startup investors, there are a few things you need to keep in mind that they’ll be paying attention to if they’re going to write you a check.

Let’s go over some of these things.

Are you a passionate Leader or simply a Manager?

In one of our blog posts, we talked about how to be a leader. We highlighted a few things you as leader need to focus on in order to separate yourself from those acting like managers. Startup investors are interested in knowing how you are as a leader of your organization. Can you motivate your people? Can you stay cool under pressure and not lose it on your people?
 
They want to know that if they’re not around, you can be counted on. One of the misconceptions of new entrepreneurs is that they have to know everything. Well, that’s just not true. Startup investors don’t always have the answers to everything either. They’re just imperfect humans just like the rest of us.
 

They want to see that you rely on others, that you are willing to learn from others to move forward. They want to see that you’re always willing to learn from your mistakes and above all, you have qualities like modesty and humility.

What problems are you trying to solve?

In today’s competitive world, it’s hard to think that someone else hasn’t already come up with “that” idea. For example, remember that viral video from Dollar Shave Club? The pitch was simple: They make great razors and they deliver them to you, for $1. Of course, razors are nothing new, but it was the problem that they were solving that made them so attractive as a new startup.
 
So, ask yourself? Are you solving a problem with your new startup? Well, maybe it’s been done before, but perhaps you figured out a way to make it better, to solve a problem. If you’re able to show that, startup investors will love you.
 
Another thing to keep In mind is that your new product should also have a story attached to it. Let’s face it, not all have us are good story tellers. But when your product as a story behind it, customers immediately feel connected to it and it’s just easier to sell. Startup investors once again will love you for that as well.
 

Let’s go back to dollar shave club. Not only they solved a problem, but they had a story behind their brand. The CEO Michael Dubin grew frustrated with the process of buying razors. At this stage, he reasoned that there had to be a better way to buy razors. Now the company is worth more than $1 Billion.

So, solve a problem!

Startup investors don’t like spenders

Startup investors will walk away if you’re not a responsible entrepreneur. How are you handling your books? How are you doing with paying the company’s bills? Are you living beyond your means? All of these things will be taken in consideration if they’re going to write you a check.
 
Keep in mind also that it’s not charity. Startup investors are here to spend money but also make a return on that money. If you get a check and don’t spend it accordingly, you are going to be in big trouble.
 
One of the things they’re going to look at carefully is your company’s financials. Your financials will reveal a lot about you as the CEO. It’ll reveal if your business is profitable or if it’s even worth their time investing in your startup.
 
Before sitting down with an investor, you should hire a bookkeeper or an online bookkeeping service to help you put together clean and organized financial documents to present to potential startup investors.
 

Granted, as a startup, any respected startup investors will not expect you to have millions of dollars in the bank and profitable day one. Realistically, 90% of startups will fail, however, that doesn’t mean you’re not going to do the best that you can to have clean financial records and keep track of everything, especially if you believe in your product.

Conclusion

Not startup investors are the same. Thankfully, some won’t require much, others will require more. So, it depends on who you get. Nevertheless, as a rule of thumb, as a startup you should always anticipate the questions and things that they’ll be interested in knowing. In the end, your goal should be to take your new startup as far as you possibly can.

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