Investors Are Looking For These 5 Key Things

Let’s face it: starting and running a business is a huge financial commitment that very few entrepreneurs have the resources for. They would usually need to get financial assistance from loans, friends, family, or their own resources, and so it is not surprising that every entrepreneur’s dream is to get the financial resources they need from investors.

Business founders are constantly looking for the right connections, be it through the right networking contacts or third parties with credibility, that can introduce them to the right person who has money burning a hole in their pocket and is ready to give financial support to the next big business venture.

Just like everything else, this doesn’t come on a silver platter. Investors, like any other person, are very cautious about how and where they make their financial commitments. Every idea could look viable at first glance, but probing further, you can discover so many loopholes that spell certain doom for the business.

Every entrepreneur or business owner is looking to be the next big thing. They are looking to take their industry by storm and sweep up the market share while reaping millions in profit.

Sadly, only about 30% of businesses around the world get to that stage. Over 80% of businesses fail within the first 5 years, mostly due to poor execution of their business idea and model, poor leadership, and financial constraints.

Investors are very aware of the statistics too, and that makes them very cautious and doubtful by nature.

There is no real shortcut in the funding and investment space. Surely, there are a few Cinderella stories of companies that have raised thousands and millions of dollars from investors in record-breaking time, but this rarely happens.

To gain the trust (and subsequently the resources) of any investor, your business needs to be able to meet certain requirements. This differs from investor to investor. While some investors base their decisions on facts, others might be more inclined to invest based on the leadership and management skills of the business. Some investors like to play it safe, while others are risk-takers, and others like to wait to see how previous investments play out.

Regardless of this, there are certain factors that every investor looks out for when making the decision to invest, and these are what every business owner needs to be aware of when looking for funding. Here are five key ones to hold on to:

More Than A Good Idea

When a problem presents itself, several people try to create a solution to it. This is human nature. Of course, not every solution works, and not every idea can make it to the top, and that’s OKAY.

That is why it is important to keep in mind that whatever idea or solution you might have is something an investor might have seen somewhere before. What would differentiate you from the rest is your ability to convince investors that your idea isn’t just another swipe at solving a problem, but is actually something that can make it into the real world.

Social Proof

It’s easy to sit in the comfort of your room, think “Oh gosh, this is such a good idea. I need to start a business”, and go on to imagine all the possibilities and fantasies of your idea going big and making you the next big CEO. Unfortunately, the reality might shock your idea right into its grave. An idea is nothing but imagination unless it is backed by social proof.

It’s one thing if you and your best friend think it’s an awesome idea to create an app that synchronizes bird sounds and turns them into beats, but it’s another thing if your app has over 1,000 users and has been featured on TechCrunch or Forbes.

Simply put, social proof is the clear evidence that other people buy into your vision as much as you do and can see the merits of your business. This is an easier way to get investors to buy into your idea as well because remember, investors are looking for ideas that work, and social proof will prove to them that yours does.

A Great Team

Having an awesome idea is great, but having a team that can push that idea to reality, is an even greater asset. Many investors consider the team behind a startup to be more important than the idea or the product. And rightly so!

Without the right set of skills, drive, experience, and temperament, any business can go from 100 to 0 in a matter of months. And no investor wants to see that. For any business to succeed, it needs the right set of people. And once an investor can see that in your team, you have won half the battle. A typical example of this is the story of Reddit.

Reddit was launched in 2004 by Alexis Ohanian and Steve Huffman. They were funded by Y Combinator and were originally approached by Paul Graham. When Alexis and Steve first pitched their original idea—MyMobileMenu, a restaurant takeout app—to the Y Combinator team, they were rejected.

A day after the pitch, Alexis got a call from Paul who said, “We made a mistake. We don’t like your idea, but we like you guys.” He told Alexis that they needed to build the front page of the internet. Three weeks later, Reddit was born and a year later, sold for millions to Condé Naste. Be sure to build a team that is capable of pushing your vision as well as you do, and you can convince any investor to be on your side.

Significant Market Size

Investors are not looking for a monopoly. In fact, it is very hard to carve a monopoly in this day and age of constant innovation and quick thinking. What investors are looking to see is that your business has a significant market share and a competitive advantage.

If your idea doesn’t have the potential to grow past a certain level, it will be very easy for investors to turn you down. However, if it has the potential to scale and generate millions in revenue each year, it would be foolish for them to say no. this of course needs to be proven with facts, not mere assumptions.

Another thing investors are looking to see is a unique value proposition or competitive advantage. What is your business doing differently from other companies in the industry? What will make it hard for customers to overlook you and for competitors to copy? This is what determines if your company has the ability to grow. Before you jump into finding investors, make sure to clearly define this and refine it as often as possible.

A Pitch That Is Hard To Ignore

Investors are in it to make money. Your task is to show them that you’ll do just that – and that you’ll do it better than any business that has come their way. Investors hear a lot of pitches packed with hard data, but what makes them choose one over the other? The story!

Investors are people, not robots. A great narrative about why this business matters to you, where the idea came from, and where you’re planning to take it can sway them. What need is your business trying to meet? How will it change the world? What makes it special? In fact, opening your pitch with your story is a great way to set the tone and draw your potential investors in.

Remember, investors are people just like everyone else, and they want to be convinced that their investment is not going to waste. Give them a narrative that is compelling and foolproof and you can get them to give you as much as your business will require. Show your potential investors that you’re thinking about the future – because that’s their number one concern.

You can always employ the services of a business coach to guide you and your team through essentials like pitching, storytelling, and brand development. This way, you can always be ready to deliver amazing pitches to investors anywhere and at any time.

Bonus Key: A Watertight Business Plan

A solid business plan demonstrates to investors that you’re serious about your business and that you’ve given thought to your plans to make money (which is the number one reason why any investor will be ready to work with you), and while your business plan alone won’t be enough to convince investors to back you, no investor will put money in without one.

If your company has been up and running for a while, then you need to show that you’ve had excellent financial performance so far. If your company hasn’t yet started up, then you need to show what you can expect to bring in, when you’ll hit your goal numbers, and when your investors can expect to start earning their money back.

Among other things, your business plan should include:

• Your intended market, with data to show why that market is your target.
• Data-based, hard-number financial projections
• Sales channels, with data to show why those channels will be effective.
• Marketing plans and goals, with data to show why those plans will be effective.
• Analysis of the competition for your product or service
• Projected timeline for when you’ll start making money
• Potential obstacles and your plans for dealing with them

If you’re not sure your business plan has all the details and requirements to convince an investor, you can always hire the services of a professional business plan or pitch deck writer to ensure you have a watertight one on hand at all times.

It’s important to be on the lookout for funding opportunities and stay updated on funding updates and news, as this will enable you to prepare and be ready to pitch your business to potential investors at all times. Joining closed communities like Bloop’s FundDesk initiative on Telegram, Facebook, and other social media platforms is a good way to start.

You can also follow up on updates on popular platforms like Y Combinator or the Founder Institute and watch TV series or shows like Shark Tank or Dragon’s Den to get a keen idea of what it takes to deliver a good pitch that attracts investors.