Startup Tip: What is an investor looking for in my startup company?

How do I get the investment funding that I need?

Sometimes a little experience helps here. I have been on both sides of this desk.

Some of these points below are stating the obvious . . . but maybe not. Remember. . . you need to stick your foot in the door first and you will have less than 5 minutes in a phone, video or in-person initial meeting (rarely used these days) to do so. Do not rely on a pitch deck or slick presentation. That would be the third or fourth meeting. . . if you get that far.

Below find your test items. Can you say all this in less than 5 minutes in a way that will captivate someone’s attention. Remember this investor has heard multiple pitches in one day and in most cases their ideas are more polished than yours.

In your 5 minute window getting the investor’s interest will be half the battle. You will then need to prove, beyond the shadow of a doubt, that you are not going to lose their money betting on you and above all you will make them enough money to cover all the previous losses they may have had.

Here is your test:

1. Are you in a market or space that no one else is serving. Easy to say. . . but hard to do. Let’s take an example of something as broad as the furniture market. Can you focus on a room. Then an item typically used in that room and then your unique feature. When you scale you can add additional features and items in that room. Apply this logic to your particular situation.
2. Is there a barrier to entry. This may be a protected right such as a patent. It can be a regulated industry. It can be that the cost is too prohibitive. It may be a time factor. But a clear barrier to entry is needed and that is why ecommerce businesses are such a bad play.
3. Local, national or worldwide market potential. This is rather obvious because when you can sell worldwide this heightens your chances.
4. Product or service type of market. If it is a product know everything about sourcing, fulfillment, customer service and above all your gross margin. If it is a service then you need to know about customer service, team productivity and ARR.
5. Can you scale your idea. If it is people dependent, where are those people and how will you obtain them?
6. Specifically. . . what are you using the money to do? Do not say words like marketing, but be specific, Example “ I get 10 customers for every $xxx I spend.

If after 5 minutes your potential investor is still asking questions about your market or your MVP that is a great sign. If they say they are not interested. . . politely give up.

Your Grade:

Good signs:

1. They want you connect with someone on their team or a third party such as the legal or accounting firm.
2. They are talking deal terms. Remember in today’s market you will have the less to say in any deal terms. Bluntly put . . . they have the money, you do not and you will not if you push the issue too hard.
3. They want a second meeting in the short term.

Bad signs:

1. “Send me your information and I will look at it.”
2. You get cut off before your time is up.
3. Suggestions are offered to improve your pitch.

Good luck and keep trying!