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Do You Know These 3 Things All Investors Want To See? by Oladipupo22: 10:04am On Sep 16, 2015 |
You may have been wondering why your idea hasn't gotten the needed investor, well, here are THREE things that every investor wants in a start up: 1. Potential growth Usually that means products rather than services. The investor makes money when the successful startup goes liquid. Liquidity comes from either IPO–not likely these days–or getting acquired by some other company. That doesn’t happen without growth. Services, in general, are harder to grow than products because there’s not as much leverage. But that’s not true for all services. Web services, for example, can be very attractive to investors. As a quick test of whether a service might be interesting, ask yourself how many people you have to add to double the volume. With a lot of services–say business plan writing, for example, graphic artistry or limo services, you have to double the people to double the volume. Investors call that a “body shop,” and they don’t like it as much. 2. Potential Payoff In 3 To 5 Years They call that an exit. It means a way out. And just like prisons, investments without any way out are very confining. Investors want an exit strategy. Entrepreneurs take note: Investors don’t want to hold a share in your happy and healthy company that lasts forever and never creates liquidity. How would you like to put money into somebody else’s company and never see it produce any money for you? That’s why they call it investing. If you have that dream about building your own company and turning it into a lifestyle business, then passing it on to your children, be aware that this scenario is an investor’s nightmare. You’re happy, so you don’t want to go liquid. 3. Reassurance on Risk Investors know this is risky business. Nobody’s pretending you can produce a new business without risk. There are, however, factors that reduce the risk, keep it at a minimum level. For example: A good team: Founders they can believe in. People who know the industry, people with product development and market expertise. The best proof of intellectual property, better even than patents, is credible founders. Startup experience: Sorry, I know this is tough for first-time startup people, but having been through the process at least once before makes people on the management team much more credible. Defensibility: Might be patents, might be know-how, might be first-mover advantage, proprietary technology or maybe something else. Investors don’t want to see a good idea that serves the world only to point competitors in that direction. Source: https://angelstartups.com.ng//do-you-know-these-3-things-all-investors-want-to-see |
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