As an active angel investor in the New York technology scene, I have had the pleasure of sitting on many 'investors' panels at events for entrepreneurs. And, without fail, I am always asked:"What do investors want?"
The answer is easy."Investors want what you should want."
I typically go through the key questions my board at KAYWEB Angels
asks when assessing applications.
However, these are questions that every entrepreneur should be able to answer for themselves before pursuing a startup venture.DOES A PROBLEM EXIST? REALLY?
Every business needs to be solving a problem. Sometimes, entrepreneurs are so entrenched in their business idea, they convince themselves that a problem exists without validating it. If it exists, prove to yourself that it exists, and if it does exist, prove to yourself that it exists for enough people that would command a market.
If you have proven that to yourself, genuinely, then investors will believe you. We will assess your validation techniques and results, and likely agree. If we don't agree, and we are people who typically invest in your type of business, then you should start asking yourself serious questions.
Remember, investors want what you should want.ARE YOU SOLVING THIS PROBLEM?
If you feel your prescribed solution will solve your defined problem, it is easy to ask your potential customers and tabulate the results of your research.
For example, if it is a consumer and business application, like Open Table, you must ask restaurants if they are happy to upload their open tables to your web application. And, you must check with restaurant-frequenting customers if they are happy to use your application.
This validation shouldn't just be done for investors. It should also be done for you, before you spend your time and money pursuing an idea that may or may not fly.
Remember, investors want what you should want.WHAT IS YOUR MARKET?
I often come across entrepreneurs who exaggerate their market. And sometimes, I come across entrepreneurs who under-rate their market.
Neither of these are good. If you exaggerate, investors will find you out. If they don't, you will spend their money and still be where you are. If you underrate, you may take less money than required... either way, you don't get anywhere.
Remember, investors want what you should want.WHO IS YOUR COMPETITION AND HOW ARE YOU BETTER?
This is key. Every entrepreneur believes they are better than their competition. But this needs to be more than merely a 'belief'. It needs to be evidenced.
If your competition is clear, ask their users if they will come over to your product if you implemented your proposed solution. If it is a yes, both you and your potential investors will be pleased.
If your competition is not clear because you are truly first to market, you will be relying on people who currently spend their time doing something... to give up some of that time to do something else. Talk to these people, and prove to yourself, and to us, that enough of these people are ready to jump on board once you are live.
Remember, investors want what you should want.WHAT IS YOUR BUSINESS MODEL?
Sometimes, entrepreneurs have pitched ideas which tick all of the above boxes... but they do not have a sustainable business model. How will you make money out of this? How will you charge? How much will you charge? Are people ready to pay? Prove it.
If you rely on advertising to make money... talk to ad agencies or potential advertisers and get their responses.
Prove your business model otherwise your idea will fall over. For yourself, and for your investors.
Remember, investors want what you should want.WHY ARE YOU THE RIGHT PERSON TO MAKE THIS HAPPEN? IS YOUR TEAM THE RIGHT FIT?
If you have done all of the above, chances are you are somebody worth taking a risk on. Unfortunately, on occasions, we have taken the punt on people based on this fact. But then we have realized that they are uncoachable, or their skills are more in putting a business together rather than leading a business.
In these circumstances, the business has to adjust. This results in loss of time and money.
You are the best judge of your own abilities. If you are not equipped with all the right skills, find those skills early in other people and make them part of your team. There is no shame in being the co-founder, but not the CEO or the COO. The earlier this is realized, the less momentum the business is likely to lose, which is good for you and your business.
Remember, investors want what you should want.
There you have it. These are some key categories that investors judge when assessing your startup applications for investment. But, as shown above, these should also be key categories that you judge - honestly - prior to jumping into a venture.
Keep in mind, investors want what you should want.