Of all things that you can show an investor, what is one of the most important items that will convince them to invest in your startup company?
To help entrepreneurs impress investors, we asked startup founders and investors this question for their best insights. From showing traction to your competitive edge, there are several important items that may help you convince investors and secure funding for your startup company.
Here are the 12 most important items investors look for in startups:
- A Five-second Call to Action to Drive Conversion
- Show Them the Data
- The Important Gap You Fill
- Your Business Can Generate Cash Flow
- What the Future Looks Like for Your Business
- Social Proof
- Awareness and Preparedness for Possible Failure
- A Good Team
- Money Security
- A Clear Vision
- Showcase Your Competitive Edge
Traction, in my opinion, is the most important thing you can show a potential investor. Keep in mind this doesn’t have to be represented via revenue. It could be daily website visits, active users, media attention, etc. People want to know you are on to something. Being able to represent this traction in some capacity is a great first step toward attracting your next investor.
Jacob Carter, Nurture Boss
A Five-second Call to Action to Drive Conversion
Crafting a strong opening statement for your executive summary will help you land more meetings with potential investors. Your opening statement is your opportunity to capture your investor’s attention and entice them to continue reading the rest of the executive summary. It’s like the 5-second rule in creating engaging content for your website or social media channels. The opening statement should only be a few sentences long and should get the investor excited about this opportunity. There are many ways to capture the reader’s attention and spark enthusiasm about your offer, but find one unique to your business. Doing so will make your brand stand out and get them excited about partnering with you as your new investor.
Chris Gadek, AdQuick
Show Them the Data
Of course, investors are interested in seeing the data and your predicted growth reports and strategies through original reporting. However, they also want to know what will set your startup apart from the competition. What makes your startup unique, and how do you plan to market those strengths? Seeing that you’ve effectively created product-market fit will also go a long way for a business owner.
Ryan Rottman, OSDB Sports
That You’re Filling An Important Gap
Show them that you’re filling an important gap. Fast-growing industries are great to glean inspiration from because onlookers have a unique opportunity to identify gaps. A great example of this is in the e-commerce industry. Magento (the e-commerce platform owned by tech giant Adobe) serves enterprise-level merchants, but it doesn’t offer a native way to manage subscription orders. Many developers took notice of this demand and built third-party software solutions to handle recurring billing.
I am also noticing this in my own company, where I’ve realized there is a big demand for virtual care models that center around hormone-related conditions. While Winona is focused on menopause, our model would work well for treating a variety of other complex endocrine conditions — like diabetes and hypothyroidism.
Nancy Belcher, Winona
Your Business Can Generate Cash Flow
The most important factor that will convince an investor to invest in a startup company is the company’s ability to generate revenue and profits. An investor wants to see that a company is able to generate a return on their investment, and the best way to do that is to show that the company is able to generate positive cash flow.
Matthew Ramirez, Paraphrase
What the Future Looks Like for Your Business
It’s important to show investors what the future looks like for your business. While it may be an attractive company at the very moment, investors need to ensure there’s a long-term profit. Present ideas on how the company can grow in five years, ten years, and beyond. Demonstrate future products or additional services that could make your business stand out from its competitors. Investors won’t budge for something that won’t benefit both parties in the long run. Show the potential the company has to offer to the industry and its consumers.
Dino Ha, Kaja Cosmetics
One of the best marketing tools available is social proof, in which the public provides testimonials about the quality of your products and services, however, reviews and surveys can also be the proof of concept you need to attract an investor. Sophisticated investors are presented with various ideas, and every entrepreneur that pitches them is going to tell them why their business is the greatest opportunity, thus they have little impact.
However, providing social proof, where you include positive reviews, testimonials, and even emails correspondence, can provide your presentation concrete evidence of how the public accepts your business. In addition, crafting surveys that address specific topics of interest to an investor can give them insight beyond the people directly involved, adding validity to your pitch for additional capital. By providing social proof, you can turn a generalized pitch into a convincing one.
Adelle Archer, Eterneva
Awareness and Preparedness for Possible Failure
It is true that no one likes the mention of the word failure when embarking on an entrepreneurial journey. But when a startup entrepreneur has explored every scenario and has also taken into account the disturbing yet plausible outcome of failure, it means this entrepreneur is indeed well-prepared. And the one thing that impresses an investor is an entrepreneur with a practical approach. Awareness helps entrepreneurs be realistic and prepare well, and investors will always choose this entrepreneur over another who only relies on optimism.
Krista Haws, Dripped Coffee
A Good Team
The people at the forefront of your company are the most significant indicators for investors. Your key team members speak volumes about who you attract to your company and who sees value in it. Your company will not be a one-person show at the end of the day, so having a top-notch, effective team can showcase your future ability to work well with different team members. People are the driving force behind everything that happens at a company; choosing the right ones will set you up for success and instill confidence from investors.
Sumeer Kaur, Lashkaraa
Good investors want to know their money is secure, so your job is to convince them it is. In a service business that doesn’t have a tangible product or asset to back the money, their security is only their confidence in your plan and in your ability to execute it. They will feel more secure and more likely to invest if you have intimate knowledge or experience with the business you’re starting AND if you have a well-thought-out plan.
That plan needs to include numbers that show them how you will get them the return they want and the timeframe. In a product or asset-based business, those assets can sometimes be the security. In real estate, for example, it’s incredibly easy to get funding for an investment project because the property becomes collateral. All they care about is that the property is worth more than they are lending me and my experience just helps in discussing the terms.
Phil Bryson, Desert Pro Home Buyers
A Clear Vision
Having a clear vision of what you are trying to accomplish will help an investor understand how they can be involved with your company. The more detailed the vision, the better because investors want to know exactly where they are investing their money. A clear vision includes knowing what product or service you are offering, your future plans, and how much it will cost to get there. It also includes financial projections that can help investors determine if investing in your startup makes sense for their portfolio.
Marc De Diego Ferrer, MCA Assessors
Showcase Your Competitive Edge
Show an investor your competitive advantage. Do this by highlighting what makes you and your approach different. They need to believe you’re the only person for the job. Inspire investors with your originality and how you’re going to conquer the marketplace.
Natalie Waltz, Tabu