4 Traits That Attract Venture Investors To Startup

It’s Artem Vershinsky, Co-founder & Head of Research at Arch Town Labs, a nonprofit organization based in London that conducts research and compiles innovation rankings. We are thrilled to introduce the World Innovation Ranking 2024 showcases the most innovative projects and highlights their contributions to various fields.

Key Considerations for Investors

All investors – be it funds, accelerators, or business angels – communicate in the language of finance. They not only have curiosity about the idea but also the project’s profitability and future company value. Most importantly, they are keen to understand:

• Primary objective and strategy of the project;
• Identified target audience;
• Allocation of the attracted funds;
• Approach to meet the planned KPIs;
• Strategy for investment return.

Indicators to Be Determined

Before engaging investors, it’s essential to prepare a comprehensive business plan and calculate all pertinent financial and operational indicators, even at the initial stage.

Here’s what you need to do:

1. Understand the market: Learn from the triumphs and setbacks of similar businesses.
2. Estimate revenue sources and expenses: Determine what’s required for staffing, rent, marketing, etc.
3. Figure out the product’s key KPIs: Metrics such as user count, subscriptions, and average spend.
4. Develop a roadmap: Map out the product’s development and market launch.
5. Risk analysis: Consider industry, economic and currency risks, especially if foreign purchases are necessary, and strategize on mitigation.

Beyond Excel computations and an attractive presentation, it’s beneficial to showcase the product to potential investors. Prepare a prototype using Adobe XD or Figma, and present screenshots. However, creating an MVP and offering investors a demo version is even more compelling.

Guidelines to Get Ready for a Pitch

You can pitch a project on an accelerator demo day or at a startup competition. Sometimes it’s possible to arrange a separate meeting with investors or even present your idea in an informal setting. Such practice, for example, is common in Silicon Valley, where one might invest in a startup during a coffee shop meeting or at a pizza meetup.

No matter the circumstances in which you’re talking about the project, the main thing is that the listeners believe in it and want to invest their money. Therefore, the pitch should include:

• Project goals: talk about the problems it solves and who will be interested, prove that there is a market need for this product or service;
• Relevance: explain why it is important to launch the product now;
• Competitor and audience analysis: assess the situation in the global and local market, describe target segments;
• Value proposition: show the product in the form of a prototype or screenshots and explain what makes it unique and distinguishes it from competitors’ offerings;
• Product metrics: talk about the monetization model, unit economics and key metrics such as ARPU, conversions, LTV;
• Company valuation: state how much money you want for a stake in the company and explain why;
• Team information: talk about the experience of the employees, show that they have unique expertise that makes your technology groundbreaking.

Even if the startup idea initially seems crazy to those around you, don’t give up on it. Perhaps there will be an investor who is willing to take a risk and wants to invest. The cases of some successful companies prove this. For example, the business model of Airbnb made many investors uncomfortable, but Y-Combinator founder Paul Graham believed in it.

Essential Skills for a Startup Founder

To conduct a proper investment evaluation, it’s important to:

• Understand the basic approaches and methods for company valuation depending on the stage of business development;
• Be able to plan stages of achieving financial indicators: draw up a product roadmap, understand which KPIs to assign at each stage and how to measure them;
• Master the classic tools for project efficiency analysis: be able to calculate payback and profitability;
• Know how to measure specific metrics for project efficiency analysis: elements of unit economics and non-financial indicators;
• Know where to raise funding and what types of investors exist.

These skills will give confidence in the financial aspect of the project and will help convincingly prove that investments in it will be justified.

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Website: www.archtown.org