Sugar, Spice and a VC’s advice
Over our 10+ years as investors we’ve come to look for specific aspects of startup companies applying for investments. We thought sharing our Point of View – key investment criteria as we see it – would help startup companies that are currently trying to raise their next (or first) round.
So you have a brilliant idea, the best team, a solid business plan and the hopes of turning your dream into reality. What you’re missing now is (probably) money, thus setting our on your next mission to get an investment. For this mission to succeed, you will have to prepare yourself.
The first step is getting to know potential investors. Check their portfolio and interests and look for an investor that has invested in projects similar to yours – whether if in their stage or industry focus. Don’t ask for financing from every firm you identify, but rather choose carefully. Then, find a way to contact: usually an application form or a designated inbox, or even better - a right networking contact that is credible and willing to introduce you to the investor.
Once a relevant and potential investor is found, you might be asking yourself, what do investors actually look for in a startup? The short answer is: every investor is different, and each has their own set of criteria. That being said, there are certain factors that most investors take into account when evaluating opportunities. Here they are, as we see them:
Can-do Team and Proven Results
Investors invest not only in ideas, but in teams. Investors look for dedicated teams that are skilled and focus on execution, but whom are – more importantly – good together. Each member of the team must have a role that compliments the roles of other team members, in a way that creates efficiency and cohesiveness, and covers most critical aspects of running the venture.
Investors will usually look for passionate founders who are confident that their venture is an improvement over existing products, or is a new way to address an old problem. To stimulate an investor’s interest, you should have a bit of work done so it demonstrates your team’s abilities and what you are capable of. If investors see that great results with limited resources, they just might be keen enough to join your future journey. For investors, it can help minimize risk.
Investors will invest in a team they can see themselves working with: establish a team that is proactive, productive and professional.
Market Share and Competitive Advantage
Investigating the data behind the products or services that are part of your industry of choice will help you have a good understanding of your customers, your market and your competitors, and will give you the possibility to identify new opportunities and trends, as well as spot any areas where you might have a weakness compared to your competitors.
Remember, understanding what your potential customers need, want and think is crucial: ultimately, they have the power to make your venture sink or swim. Moreover, market matters as it signifies growth, and nothing says growth like a growing cliental.
Emphasize your strengths over your competition and demonstrate your loyal clients – this way you will show potential investors you’re a game-changer.
Know Your Numbers
Your business should have a structured, credible, clear and profitable business model, that shows just how much future potential you’ve got. The business plan reflects your future plans and shows the way you see your future as a company in the market – as well as your vision of it. Rest assured: no investor will epect all business plans to succeed no matter what; you’re allowed to fail or pivot, but a good plan is a good start.
One of the most important parts of a business plan is cash flow—incomes & outcomes. Your business plan must demonstrate your ability to cover your expenses without having to turn to the investor for more money, or sinking into debt. The investors want a good return on their investment, and your financial projections on the business plan are there to give them an idea of how long it will take for you to make a profit and “return the favor”. It’s important to remember though: investors won’t always look for return in money – they can gain value from their portfolio companies in many different ways, which vary from investor to investor.
Think you’re ready? The last thing that remains is to convey everything you’ve worked on properly to your potential investors. When presenting your venture, emphasize your uniqueness and explain why customers in the marketplace will choose you over your competitors. Be authentic, Talk with the investors and not to them. Don’t be afraid to show your enthusiasm and reveal your motivations behind the idea.
Talk about your future plans, in the near future as well as in the distant future, show the investors your aspirations. Be honest about your weakness, talk about overcoming difficulties you’ve had. Investors appreciate Founders who know what they don’t know and seek for solutions.
Be prepared for criticism and remember criticism can be extremely useful for your progress, it ensures you move on to the next opportunity in a stronger position.
We invest in bold startups that are trying to improve, inspire and impact our lives. We are dedicated to taking ventures from the very basic stages to greater heights, and to later connect them to the Japanese market. We are looking for early stage startup with B2B enterprise solutions in the specific following verticals (focusing on software technologies): healthcare, construction, logistics, blockchain, clean-tech, fintech, insure-tech, MaaS, Retail, Sensor-tech. We provide Pre-seed investments of up to 500K USD and we are able to join rounds.
Think it’s a match? Apply here : https://www.samurai-incubate-israel.asia/application