From an investor's perspective, for any Startup to be Investable or Fundable, it means that venture really excites and they're pretty much convinced that the venture has potential to reap in around 20X returns in the next 5 to 7 years horizon.
Being Investable (as per Paul Graham) also means to:
Identify/create key factors, which makes the startup worth investing.
Create a great story, which convinces the investors to invest in the startup.
As easy as it seems, in reality barely 5% excel in both of the above elements!
Article: Why, Investors Say No?
What Investors look for in a Startup?
Investors (VC Analysts, Angel Investors) review the pitch decks to assess all the prospective startups based on the below factors:
Team: Is this the perfect team to execute this venture? Do the founders have the vision, passion and wherewithal to build a long-term enduring business out of it?
Problem: Are Investors able to empathize or relate to the problem? Is this really a problem and relevant to a large target audience? startup efficiently resolving a big problem / pain area or catering to any unmet need?
Solution: How are they (founders) solving this problem? What is their unique value proposition of it's product/service, and would customers pay for it? Is it scalable?
Target Market and Dynamics: Size of the target market, is it large enough (more than $500 million excites Investors)? Does the team really understand this market in and out? What are the underlying trends, dynamics and regulations, which may impact it?
Why Now: Why is now the right / great time to start or scale-up this venture? What is the specific FoMo (fearing of Missing Out) for Investors?
Competition: How large is the competitive landscape, and how many players currently exist? How easy/difficult is it for the new entrants in this market?
Unfair Advantage and Moat: What's the startup's unfair advantage/s over the competition? Is this defensible (IP protected, network effects, key partnerships, etc) and sustainable for over 5-10 years?
Business Model: How is this startup making money? Who is paying, and what are it's existing or planned sales distribution channels? Is it positive unit-price economics, now more relevant post Covid-19?
Go-to-Market Strategy: What's the startup's Go-to-Market Strategy plan? How will it reach the first 100 (or 1,000) customers? Do the founders truly understand their customer acquisition costs and lifetime value? How do they plan to grow this venture?
Existing Traction & Fundraising Ask: What are it's current traction metrics i.e. number of customers, monthly / annual recurring revenues (MRR/ARR), monthly burn rate, churn / retention rate, etc? What are it's 3-5 years financial projections and most precisely, what is for me i.e. investors?
In my view, startups must resolutely address all of below 10 factors (or questions). And, if it flounders on any 2-3 of these areas, then the investors would ignore it's funding request and in turn could also potentially doom the venture.
Once the investors are convinced about it's potential, will they explore other elements:
How much funding they need and at what equity?
Is there any 12 to 60 months roadmap in place?
How will they use this money to scale-up their venture?
Empowering your startup, to be Investor-Ready!
Assess/Review: Honestly and truthfully audit your startup against all the above 10 factors. Be wary of any cognitive biases. Ideally, hire the services of a mentor or startup advisor to do the review for you.
Take Corrective Action: Figure out ways or get outside assistance to help mitigate / resolve all such prevailing gaps.
Continuous Feedback: Request the potential investors, who declined for investment, the reasons they passed you over? Work on those feedback, and connect with them sharing the progress made!
Get Anchors to Succeed: It's even better to source for the right co-founders, who can fill those gaps and strategic investors, who the bring in additional value (hiring team, corporate and network connections, partnerships, etc.) besides funding.
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