Building a startup requires a lot of effort, planning, and business acumen and still there’s no assurance that the startup will succeed. Many startups fail because they have run out of funds.  A little nudge through investments might improve the odds in startups’ favour.  Moreover, an investors’ expertise and network can be of huge help to startups’ early steps. However, it’s not easy to win the favour of an investor. Many VC Firms look at startups with their own lens of industry expertise and choose the one with higher probability of success. But, how can a startup get the attention of the investors?

In this article, we’ll look into some of the prominent factors that are primarily evaluated by investors. Though this list isn’t exhaustive, covering this checklist can improve your odds and secure an investor who can help you in the journey.

What is important to the investor?

Before investors would consider investing in a startup, they will look for a variety of criteria that the company must fulfill. Some of the prominent factors are listed below: 

1. Favorable Forecasts: Instead of focusing on the project and its potential, prospective investors will look at the industry as a whole first, followed by the project itself. Before you begin working on the project, you should do market research to determine current trends in your business. Based on your expertise and current trends, a startup can reposition itself in a market to address the needs of the present.
2. Product Need: You have to address a genuine issue for your startup’s end consumer. Prior to developing a prototype, it is necessary to interact with as many prospective users of your product as possible; and to learn how they respond to the numerous variants of addressing a certain need. This will play a crucial role in determining if your product is actually necessary for users. 
3. Scope of Scalability: A startup’s scalability is by default one of its most significant aspects. Despite the project’s potential for expansion, it must also be able to maintain or improve its margins with scale. Moreover, the need addressed should have significant TAM (Total Addressable Market) so that the business doesn’t hit its peak too early. It’s best if the startup has a good understanding of the TAM and SAM for their product and has a tentative scaling strategy. This can improve your chances of securing an investment. 
4. Skin in the Game: Founders frequently assume that they cannot begin their project without funding. While the investors remain apprehensive about such firms, they are curious: what can you anticipate from a project whose creators have no interest in investing? Generally, an investor expects the founders to have the willingness to invest at least a few thousand dollars in their own startup. For example, if making a good prototype requires a few thousand bucks, founders shouldn’t hold off on raising funds. It reinforces the founders’ belief in the startup and clearly demonstrates the impact of the product in the market.
5. Risk Assessment: An investor’s initial concern is the risks associated with a startup, which should be controlled in conjunction with the project’s value, development, and potential payouts. An investor will favor a startup in which the founder’s have a good understanding of the potential risks involved and a tentative plan to mitigate these risks. Though a startup may not know answers to all the questions, being aware of it is also a good sign to the investor. 

 
Broadly, some of the major aspects a startup can review to increase their chances of raising funds are listed below: 

• The product addresses the crucial need of the target segment.
• The founding team has the needed expertise and has a good dynamic amongst themselves.
• The startup has a good demo or a prototype that clearly highlights the need of their solution to the target segment.
• The startup has done risk analysis of their product and has tentative plans to address them.
• The startup’s products/services has good scope of scalability
• The startup is building a solution that is in line with the current industry trends and holds a lot of promise.

An investor needs to take many aspects into consideration prior to choosing to invest in a startup. It’s really hard to predict which startup will succeed, as the market keeps evolving every moment. However, with experience gathered by investors due to investing in many, and witnessing their growth and downfall, an investor has a good sense of which startup will make it to the end of the line.

Most of the startups will need to satisfy different checklists depending on their industry, scale, etc. However, there are many common aspects that every startup needs to address to at least reach the benchmark. We hope that this article gives startups a good starting point to make their initiative more attractive to investors.