When would I find my Angel?
This is not a story of a frustrated single person looking for love of their life. This is actually a story of a start-up looking to find the right investor to invest in their business. Actually, on second thought, there seem to be a lot of similarities between a frustrated single person looking for love and a start-up looking for an investor and getting frustrated.
From my own experience, there are few fundamental questions that a start-up needs to answer to be able to catch attention of an investor. Many of us, without truthfully answering these questions to ourselves, approach investors. Many of us, also feel that investors are a rude community that do not understand our business. I would agree to an extent that often investors try to show who the boss is, but more often than not, if they see value in your business, they will be very willing and co-operative. After all, they do not want to miss out on a wonderful money making opportunity for a little ego boost.
So what are those questions..
- Are you solving a real problem? - I have observed that many times start-ups try to find problems that their idea can solve, rather than starting at the problem and finding a solution. If there is even a hint that you are not solving a real problem, investors might walk away from you.
- Do you have something unique? - No, you yourself are no match to a unique. If and only if, your company possesses something, that cannot be replicated. A patent, a brand (which most start-ups are unlikely to have) or a process that is unique and cannot be replicated, investors would be interested. If your passion for the cause, your previous experience and your team are the only unique things you have, investor will walk away. Can they hire someone like you and your team and create a same product with the valuation that you are asking? a Yes to that question will mean a No to your investment proposal.
- Do you really need money? - The best answer to this question is that I have hell lot of demand, but I do not have resources to fulfil that demand. If you need money to generate demand, investors are likely to dislike your company. A mere proof of concept, may not be ultimate nirvana for an investor. Sustainable demand that entrepreneur is not able to fulfil owing to lack of resources is a trump card that answers scalability.
- Is it simple? - Few entrepreneurs may disagree, but simpler your idea and execution of your idea, easier it is to generate interest. If you are building equivalent of a space-ship, it might be difficult to explain and it might be difficult to understand for the investor and hence they may not find it interesting. "This is really really complicated" is not something you want to hear from a prospective investor. You can still overcome this if you have 1,2 and 3 above.
There are various other factors that investors would consider, but for me above 4 are the most important questions that I would seek an answer to if I were investing.
- Nilesh Gadre ([email protected]).