3:40…three minutes and forty seconds…220 ticks of the clock. That’s how long potential investors take before deciding whether to even entertain a deeper discussion about funding a startup or next-stage growth business. Most entrepreneurs don’t get the funding they desire, with angel investor rejection rates around 90%.
There are plenty of examples of failed startups and next-stage growth companies out there, many of which were even dialed in correctly on a few of the items Dave McClure pointed out. But successful startups are not confused about their product, their customers, or how to make money. In order to position a startup properly in today’s market, getting the attention and commitment of investors early is vital.
So What Do Potential Angel Investors Look For?
Experienced angel investors start with four main questions that need to be answered in a way that makes them comfortable before they proceed any further with your idea and your marketing plan.
1. Who is driving the bus?
2. Who is your competition?
3. Does your story capture their interest?
4. When will they get their money back?
Who is Your Leadership Team?
The idea may be great, but to ensure a startup or next-stage growth company is successful, about 90% comes down to execution, and that’s assuming the product or service truly meets the market need. As such, one of the main questions any investor will ask is who’s leading the charge. This includes the executive team, the advisory board, and hires in key positions like R&D.
What’s the Competitive Landscape?
There’s a lot packed into this question, and the answer can be complex. However, you can boil it down to being able to articulate the market-level challenge and what companies are out there providing a product or service that addresses that challenge. You need to know who they are, what they offer, and why their offering isn’t truly satisfying the needs of the market or can’t effectively scale to meet growing demand.
Does Your Story Capture Their Interest?
Your product definitely needs to fill a need in the market, but even more than that, you need to be able to present it in a way that is relatable to your core audience and potential investors. Essentially, this comes down to you being an effective storyteller. Find a way to make them intrigued from the moment you walk in the door.
What’s the Investor ROI?
Once an investor has a baseline confidence in your understanding of the market and the team you have lined up to execute a strategy, they want to know the financial details, including the business model, funding requirements, financial forecasts, timelines, other funding factors, deal terms, and expected returns. Investors spend approximately 23% of their time reviewing your financial model, so you need to think this through and make sure it is in excellent shape.
Of course, questions that investors ask go much deeper than these three areas, so you must be prepared. Some of these topics include:
- Value Proposition – The “Why” for Your Company’s Existence
- Company Vision, Mission and Core Competencies
- Competitive Differentiation (Team, IP, etc.)
- Customer Segmentation Strategy and Sales Model
- Market Sizing and Growth Projections
Putting It All Together
Effective storytelling is everything when it comes to fundraising, so incorporating all of these points into a brief, high-level executive summary that potential investors can go through in less than four minutes is crucial. If they like the direction you’re heading, they’ll take time to probe deeper and ask follow-up questions. Whatever you do, don’t focus solely on your product or idea and drone about it incessantly. That’s the quickest way to get a “thanks, but no thanks” type of response from investors. They hear lots of ideas that people think are brilliant. They’re simply more focused on whether you’ve got the horsepower to make your idea – any idea, really – successful in a highly competitive market.
To learn more on how to create an effective 1-page executive summary and pitch deck for startup or next-stage growth company funding, contact me for a complimentary consultation by phone at 314-578-0958 or by email at firstname.lastname@example.org.
Ines LeBow is the CEO, Transformation Executive for ETS. She is a known catalyst for business operations, bringing 30+ years of hands-on experience. Ines has a long history of being recruited into senior executive roles to improve the execution of business operations and to drive revenue growth. You can see her LinkedIn Profile at www.linkedin.com/in/ineslebow, view the ETS website at www.transformationsolutions.pro, or email her directly at email@example.com.