Unless you have some terrific financial plan backing you up, your startup is going to need investors. Regardless of how good your idea is or how well you think you can execute it, you will have to work extra to attract investors. Fortunately, attracting one is relatively straightforward if you understand an investor’s mindset. And to help you out, we will go over six distinct traits (6 Traits that Attract Investors to Your Startup) that attract investors to your startup.
6 Traits that Attract Investors to Your Startup
The goal of an investor is to make money. At the end of the day, they won’t care about how engaging your startup is or how dedicated you are to it. What they care about is that they get a return on their investment and, hopefully, make a lot of money. This is why they rely heavily on investment appraisals and will look long and hard before deciding to invest in something.
Also Read: Investment Appraisal Techniques for Capital Investment Decisions
A clear understanding of the target market
For someone to become an investor, they likely had to first become successful in a specific industry. After all, to have the money to invest, they first need to earn it. Well, what happens is that investors tend to stay with what is familiar. They will most likely remain within their industry if they are pretty new to being investors. If they’ve had previous investments within a certain industry, you can assume they will keep investing in it. The more familiar they are with the industry, the better they can assess whether a startup will thrive.
Here it is also important to note that any significant changes in your startup can bring unrest to your investors. For instance, you might feel that expanding your business from Hong Kong to Australia is an excellent way to use a lucrative market for business. But, if your investors are only accustomed to working in Hong Kong, they likely won’t feel inclined to support you. The more comfortable they are in a specific industry, the more likely they are to invest.
Scalability implies that your startup can quickly grow if the opportunity arises. A common pitfall of most startups is that they focus mainly only on launch and don’t tackle scalability until it is too late. You cannot use a growing customer base if you don’t have good scalability. While this might not cause you to fail, it will cause your startup to stagnate. And in the eyes of an investor, stagnation is pretty much equal to failure. Don’t underestimate scalability as one of the most important traits that attract investors to your startup. Most will turn down a startup if it doesn’t show scalability potential.
Capable leadership team
Whether a startup is successful is primarily based on the leadership team. If a group of capable, responsible, organized people is managing a startup, you can pretty much assume that it will do well. Especially if team members have prior experience and know how to manage the obstacles all startups face. This is why investors insist on interviews and personal meetings, allowing them to truly see what the leadership team is like.
Demonstrable consumer interest
You being able to sell your startup is one thing. But, you being able to provide evidence of consumer interest is entirely another. Namely, while some investors may appreciate your confidence and excitement when explaining your startup, they will likely require a bit more.
Most won’t take you seriously unless you have verifiable evidence to show that your customers will be interested. If you have captured lighting in a bottle, investors will jump at the opportunity to back you. But know that such startups are few and far between.
It should be evident that no investor worth their salt will invest in something they don’t have complete oversight over. If you wish to attract serious investors, it is paramount that you are as transparent as possible. Your investors need to be able to see your financial affairs and know precisely how their investment will aid you. If they even suspect you are shady, know that you will be in legal trouble.
Promising financial projections
Finally, you need to have financial projections to show your investors, which need to be promising. You need to analyze the current market and show how your project your startup will grow in the years to come. Now, when it comes to this, there are a couple of things you need to keep in mind. First, understand that investors know better than you that your projections are not a promise you make to your investors. They don’t serve to pull the wool over their eyes but to show that you have confidence in your startup and knowledge of the local market.
Secondly, expect that investors will question you about your projections. If you don’t put much effort into them, they will easily find an element that can put your projections into question. If necessary, hire a financial analyst to aid you. Not only will you be able to speak on the same level with your investors. But you might also gain valuable information regarding marketing and branding in your industry.
Also Read: Next Level Technologies for Businesses
While plenty of other traits (6 Traits that Attract Investors to Your Startup) attract investors to your startup, what we have listed so far should give you a good idea. As we said, investors primarily focus on getting their money’s worth. As such, you need to find ways to ensure that your startup is worth investing in. You’d be wise to have a marketing plan to present along with a precise estimate of your financial affairs. Doing so will give your investors the idea that you are on top of your startup and understand what developing it will entail.
Plan on starting a new business? Then you better familiarise yourself with the traits (6 Traits that Attract Investors to Your Startup) that attract investors to your startup.