As Perfectial has helped numerous startups to succeed with their technology products, we have developed our own approaches to choose a tech startup that we will be pleased and able to work with. But we’ve always wondered, how investors choose startup they will be working with and provide their funds to. It’s hard to predict whether a novel idea will succeed. Moreover, the fledgling entrepreneurs typically have no financial track record or tangible assets.
What about do investors care the most when deciding on a startup funding? As thoroughly investors are evaluating a startup they about to start working with, as thoroughly a startup should be preparing for investors’ evaluation. Be it venture capital firms or angel investors, your task is to look at yourself and your company another way. The investor’s way.
Below are items investors would definitely try to understand before making any decisions concerning startup funding for you and your business. Be sincere with yourself and try to think thoroughly upon all of them.
This is first and foremost factor for the investors. They will ask you for evidence that your business concept will work and the working business means the business that will be able to attract users. So, now it’s your task learn will your product easily attract users.
Explicit researches, conducted surveys, or expert feedback of a consulting company and all the data thoroughly organised into a report – might strike home with your investors. Try to make use of the practical advice we’ve gathered for you below.
Discuss your idea with people you trust. If you have close friends or relatives who have connections or work with business circles, do not neglect their advice. Consult with them and do not be afraid to hear that your initial plan requires improvement. Usually, improvements are made for the better.
Another and more practical option is to seek an expert advice. Now we are speaking about technology consulting you can get from a company experienced in software product engineering services. If you address a trusted company with fair track record in working with startups, you can expect to get:
Moreover, together with such a company, you’ll be able to decide on technical and business feasibility of the idea, work out the preliminary scope, and estimate for your idea to come true. In such a way, you’ll get what every investor wants – an immediate and honest truth as to the startup idea relevance. In the worst case, if it appears that you are the only person to see how your idea rocks, then it’s time to change something in that idea.
Before switching to the most important yet the most expensive part of a startup idea validation which is a coding of your product’s prototype, try something least expensive but feasible. Something like creating a landing page for your product. It should not be a full-fledged website but rather a shell for your product testing. With the help of landing page you can:
By having a landing page, you can gather an essential information to be included into an MVP or PoC which will definitely be of special interest for your potential investors, However, the importance of a product’s prototype for the startup investors we will discuss in later in this article.
In fact, it’s not that much about the product, but it’s more about how will you sell this product. Let’s change the word problem into a need and try to understand that a user without a need is a user that won’t buy from you. Basically in a consumer world of today, almost everyone has a need and usually has dozens of them. Or at least they believe so. Even if the customers are sure they don’t have a particular need for this or that software product, seasoned marketing specialists can create this need.
Without going too deep into marketing strategies, you and your co-founders should be perfectly sure that there is a very specific business need that your software product will satisfy for a specified particular customer.
After you stated this need, you should be able to articulate it to your investors and make it very similar to a professional sales pitch so that they make sure on practice that you are able to address a real need of your future customer.
The more you can show your investor, the better. We have already discussed the business and marketing aspects of your startup and now it’s time to switch to your product. The ideal option is to have something tangible in your hands. The working product would be the ultimate option though it rarely happens so. Working demo is not bad too if it’s done in the form of MVP or PoC. If you have nothing to present at all except for your idea and only in words or on paper – be ready that it would be hard to amuse anyone in such a way.
For this reason, it’s always better to start with someone to help you implement your ideas, someone who can quickly make you an MVP or PoC, so this is a task for a great team even is this team means just several people. This last but not the least important factor to help you grasp investor’s interest we will discuss below.
Even the brightest idea can be shooted down by the mediocre implementation. Your investors will definitely ask you about the particular way you will bring your idea to life.Be ready to answer at least such questions to get a startup funding:
People are the most valuable part of any business. Professional investors know the fact that only the expert team of software engineers will make your product on time and on budget. On the contrary, if you are developing your product alone trying to recollect basics from your applied mathematics course in college, you have almost no chances to meet investor’s approval.
Try your luck with a potential investor by showing them a software development company that will bring your idea to life. Investors would appreciate the fact that you are accompanied by an established company experienced in helping startups to create their technology products. Moreover, the outsourcing is a well-established cooperation model within the technology world and has obvious and well-known pros and cons. Credibility in the eye of your investors is guaranteed. Your startup funding is much closer now. We have previously discussed the success of these startups that used outsourced development, so definitely outsourcing a startup product development is quite a common practise.
Here at Perfectial we’ve developed a special program for the different types of startups to suit their divergent technological needs. Just check it out below: