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What investors look for in a startup

Date: 02/27/2017 | Category: Business | Author: Petr Litavec

There are many people in the world pitching investors, with the hope that the investors decide to put their money in the company. Everybody who has tried to do this knows it is a tiring and difficult process – where success is never a guarantee. Even if you schedule 100 meetings with many potential investors, there is still a good chance you will fail to find anybody willing to invest. You have to realize that not only are they putting their money into you and your company – they are also putting in their time, which is often more valuable. Investors rarely give a company and its owners money, and then tell them to do whatever they would like. There is also a set of expectations from the startup founders that the investor will not only bring the money, but also the expertise, experience and contacts he currently maintains. That is why it is sometimes more valuable for a startup to bring in an investor who offers less money, but is the expert in your industry and can bring invaluable knowledge and experience to the company.

The first thing you have to take note of is your market size. Some startup ideas, while great, cannot make money investors are looking for because the existing market is too small. That is why a lot of startups often end up changing  their original product or service.  Investors do not want to invest three million dollars into a startup that can be then only be sold for one million. They are looking for much bigger numbers.

Investors do not invest into your company. They invest into you. When they see a great product, but they do not believe the people behind it are capable of bringing it to the level they expect, they will simply find another company. That is why it is easy for somebody with results – like founders who have already sold a company, or were at the company when it was built – to obtain money from investors. They see that these guys already did it once, so why would they not be able to do it again? In fact, there is even a study which says that people who already built a successful company have much a much larger chance of succeeding with their next venture compared to people who have never done so before. If there is something you can show to investors to convince them that not only your product, but you and you are team are worth investing in, you are much more likely to get funded.

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