There are many factors that make a startup investable. Some are tangible while some are not. Investors do like to see proof both in the form of past sales and experience in conjunction with the right economics and market conditions in order to maximize scalability. Growth potential is a huge motivating factor when deciding if one should invest in a startup and a proven track record is extremely beneficial as well.
Regardless, there are many factors that play into an investor’s decision as to what makes a particular company good for investment. Many are relatively obvious while others may be surprising.
First off, is the company poised for growth? Meaning, are market conditions favorable for that specific business and does it have a history of sales with incremental increases in gross revenue? If so, it will definitely catch the eye of potential investors with the goal of helping expand that growth; thus generating more revenue.
Do the company’s founders have experience? Is this a first time entrepreneur or someone whom comes from a background of multiple successful startups in the past? Investors will very much take this into consideration when deciding to fund a startup. This is very common in industries such as Silicon Valley, where many CEO’s and founders of technologies companies are often involved in several startups or recruited to aid in the successful launch of a new company. A good founding team is worth its weight in gold.
Does the company offer a unique selling proposition? What do they offer that’s different than the competition? Investors will be looking for something new, fresh, and different from the “norm.” Creating that niche market for a product that only 1 startup develops will definitely stimulate interest in that company due to a lack of competition within that space.
What about timing? Does the timing for this company just “feel” right? There have been countless business ideas that were all great in their own right that failed miserably due to poor timing. There have also been seemingly simple or moronic business ideas that went viral because of their perfect timing. Launching a business at the proper time cannot be ignored and is extremely important.
Does the company have a solid and proven marketing plan? Having previous sales is one thing, but continuing to grow can sometimes be difficult if existing marketing avenues are tapped out. A startup needs to be aware that they will need to divulge into different marketing techniques as they grow and should have this already outlined before approaching an investor for funds.
Lastly, does the investor simply like the business idea and the people involved in founding it? As simple of a concept as this is, it’s an extremely powerful one. People in general gravitate towards people they like and get along with. If parties are constantly clashing heads, the business relationship will most likely fall apart. Investors want to provide capital to people whom they genuinely respect and can see themselves working alongside. If that fundamental human trait is not there it’s safe to say that no investor will give a dime.