Startup Investment

7 Ways to improve on your startup that will lead to investment increase

There is something to be said to gaining experience through real-life problem-solving in your business ventures, but you can save time by not learning lessons the hard way and fast-track your path to business success.

Experience is largely listed as the single greatest attribute an entrepreneur can cultivate any time they begin a new path to improve the overall odds of success. While that isn’t exactly groundbreaking, the data behind the difference that experience makes is significant:

Founders who have successfully cultivated a business previously have a 30% higher chance of success in their next venture.
Founders who failed at prior businesses have a 20% chance of succeeding the second time around.
First-time entrepreneurs have an 18% chance of success.

Spend Investment Capital Wisely

Again, not groundbreaking advice, but you’d be surprised that this is one of the most common pitfalls for a young company managed by an inexperienced entrepreneur. Early on, companies can be funded through small groups of angel investors, but it’s often the entrepreneur’s own savings.

If you’re fortunate enough to gain investors and raise investment capital through private funding, don’t let it lull you into a false sense of security. This influx of money can help you beef up your team to meet aggressive growth goals, but it can also help you spend ahead of need. Aggressive expansion timelines are more often than not overly optimistic, which can burn valuable resources much more rapidly than a young company can afford.

Most industries already have formulas to work through this, so do your research. Whatever money you end up asking for should be completely planned for and put to good use.

Don’t be scared to invest in your team, but focus on A-players who can play multiple roles early on. Choose quality talent over quantity.

Protect Company Assets

If you’re inventing, intellectual property can be invaluable. Spend early and often on protecting your property. Legal can be invaluable in the product-based business and even in service-based or knowledge-based industries to protect intellectual property.

If you’re attempting to acquire capital, you want investors to feel secure in the fact that their money is going to be relatively protected and that the capital is going to good use. Be prepared to know if patents or trademarks exist and who owns what. Giving investors an understanding of what and how you’ve reached product-market fit is important as well.

Spend your money on attorneys who can provide protection to company assets. Hire a lawyer to draft a solid client contract- poorly worded contracts will cost you.

Spend Time Creating Revenue-Driven Solutions

Services or technology that easily demonstrates ROI in a direct manner is low hanging fruit for young companies. Plenty of companies succeed by focusing on solutions that drive savings to their clients, prospects get more value (and buy more frequently) when solutions are revenue-driven.

Understand Your Timeline

When working on bringing transformative technology to the market, it’s important to remember that often, this solution is disruptive. This can create a situation where users have to adjust their systems and processes in order to experience the best results possible.

This is challenging- people don’t like change. No one does. But big and meaningful change takes time which can present a challenge, as clients won’t experience results immediately. If your business is built around disruptive tech, it’s important to set expectations at both the client level and the boardroom level. The potential for reluctant transition with clients is absolutely there and you must set reasonable expectations at all levels about delayed returns.

These are not easy conversations to have as they’re difficult realities to accept when real dollars are being spent and you’re burning through capital every month.

Invest In PR Early

Many founders consider public relations and media outreach to be fluff- something that is a lower priority until you have a bigger budget. However, securing placement in reputable publications when you first hit the market can help a young company in a number of ways. Targeted exposure is extremely effective in getting the word out, driving an initial wave of leads.

Articles in respected publications can enhance buy-in and help prospects convince stakeholders to take a leap with new tech or a new process. Press can help substantiate timeliness, but more importantly, it can help educate prospects.

Build Outside Relationships

Building relationships with third parties will allow you to establish relationships that can vouch for your work. This provides ongoing value for a young company and its emerging technology or services. This can take the form of validating success through white papers, third-party research, or case studies.

Have Reasonable Expectations

People assume that launching a tech company brings overnight success and riches, but it doesn’t typically work that way. Most things of value take time and it’s incredibly important to remain resilient and flexible. Learn quickly from failures and mistakes and then regroup as necessary to press on towards success.

Building a successful business is incredibly difficult. By taking your time, doing your research and starting from the beginning can help you get your startup off the ground. Make sure you do the proper steps to plan the remaining steps to launch the company and prepare yourself so that you’re ready to raise money.

Without proper financial planning, your business doesn’t stand a chance. Make sure you’re network is on point too- you’ll want to surround yourself with the right people. It’s incredibly important to find people who can help you in areas that are not your strongest point of expertise.

Placing your business in the best position to establish a steady clientele will help to grow your startup. Launches are never perfect- you should always prepare for unforeseen circumstances. Proper planning is absolutely crucial to help you clear and anticipate any hurdles.

Five things every investor looks for in a startup

Here are a few things investors seek in start-ups while taking the decision of investing.

For an investor, it is important to know what he’s getting into while taking a decision of investing in a company. No one wants to invest in a business which isn’t profitable and viable in the future.

Here are a few things investors seek in start-ups while taking the decision of investing:

A strong team

An investor looks at a start-up as a team which works together and not as a one-man show. The management team’s capabilities and history is very crucial for an investor because it helps him assess what the team is capable of doing in the future.

You might portray a very colourful image of your team but if an investor can break through the rosy portrayal and see the rifts and lack of unity in the team, he might not invest in your start-up even though he liked the idea.

Hence, it is crucial to have a strong founding team in which everyone is sure about their roles and responsibilities.

Related Post: How to form the right startup team

The business plan

The investor doesn’t know everything about your business so you need to let him know about the most important things like the break-even point, financial plan and the marketing and sales plan through your business plan. Because your business plan is a major factor the investor judges you upon, make sure it is made properly and consists of all relevant and required details.

Also, try charting milestones so that an investor has a better idea of your business.

Company’s uniqueness

If your idea is the same as the one being offered in the market, an investor will not be interested in investing in your business. He is looking for a unique idea which will appeal to the customers and give him enough profits. VCs often look for competitive advantage and propriety features over the financial structure.

For instance, the most unique ideas are often sponsored in Shark Tank over ideas which are done and dusted with already.

Effective long-term Business Model

A start-up might be doing extremely well in the initial stages and making profits but what is important to judge is whether the business will survive in the future as well. A number of companies are closing down due to mismanagement of finances, low sales, no profits etc.

Amidst cut-throat competition, all an investor wants to know is if your business is likely to withstand the test of time and continue doing well in the future.

Growth potential

It isn’t enough to be a sustainable business; the company must also have growth potential because no one wants to invest in a company which is standard and stagnant in terms of profits. Your company should be able to growth at a fast pace and introduce new products and services to the mix and attract more markets in a short time. A potential market size is a great way of determining the potential growth rate in the future.

How to get investors for your startup?

These tips can help you not only locate investors for your startup but will explain methods on how to encourage those who are interested to invest money in your startup.

Starting a new business is an exciting time, yet too often new business ventures are unable to succeed because of lack of capital in the first two years of operations. Rarely does a new business owner have the personal assets or funding sources to start, grow, and maintain operations when starting up a new company. It may be critical for you to find investors for the capital necessary to keep the business operating the first few years. Unfortunately, few people know how to get those investors. These tips can help you not only locate investors for your startup but will explain methods on how to encourage those who are interested to invest money in your startup.

Develop a Business Plan

The first step in getting investors for your startup is to create a good business plan. A business plan should clearly explain what your business does, who your target market is, projected sales for at least the next five years and any industry reports that may indicate how your idea may meet an unfulfilled need. There are many online templates available that make it easy for you to create a business plan but keep in mind that it needs to appear professional. It should (of course) not be handwritten, but typed and put together in a folder or binder when you present it to a potential investor. You should also know the plan thoroughly and be able to answer any questions the investor may ask when you present the plan to them.

Start with Friends and Family

The best place to start presenting your business plan is to your friends and family. However, it is important that when you present your plan, you treat your friends and family as you would a business professional. Dress in business attire and present the plan as you would to a business person you do not know. Answer any questions they may have and keep the conversation focused on the business plan, not on the big game, your cousin’s latest job, or any other personal matters that might come up. Many times, friends and family are reluctant to mix money and personal relationships, but by discussing the matter with them with a business-like attitude, they may be more willing to keep an open mind. Be sure that your friends and family will receive the same benefits as an outside investor, such as stock options or repayment of their investment with interest.

Consider Working with an Expert

If you have never successfully started a company, you may need to add someone to your startup team that has experience in order to attract investors. Most investors want to put their money into companies that they know have a chance of giving them a big return on that investment. Therefore, if you can afford to hire a consultant who has had success with startup companies, you may have a better chance at convincing an investor that you will succeed. Understand that an investor is not happy until they begin to see money coming back to them, so anything you can do to better position yourself to succeed is beneficial.

Demonstrate Why Your Startup is Different

Investors want to know why your startup is different than that of your competitors. If what you plan to produce is a trade secret or a patent, you will have much more success finding investors as this would indicate a new invention or innovative idea. However, for many startup companies, they are not necessarily developing a new invention, but are creating a business that is similar to others. In those cases, it is critical to explain to an investor why the product or service you offer is better, different, or meeting an unfulfilled need in your community. By demonstrating to an investor that your business plan is unique from the competition, you will have a better chance of convincing them that your company is worth their investment.

Every successful company began with someone’s idea and the majority of those companies succeeded because they were able to present a business plan to investors that convinced them that the project or idea would meet a need that was not currently being met. By keeping a professional attitude and developing a business plan that completely and competently describes your company, you will be able to begin taking the steps to making your dream become a reality.

Forget unicorns – Investors are looking for ‘cockroach’ startups now

2015 was the year of the “unicorn” – private technology-driven startups that reached a valuation of $1 billion or more.
But tech and startup investment is going to be defined by a very different beast in 2016 – the cockroach.

“Everything is about resiliency now to weather the storm,” says Tim McSweeney, a director at technology-focused merchant bank Restoration Partners. “Unicorn, it’s a mythical beast, whereas a cockroach, it can survive a nuclear war.”

A unicorn is characterised by superfast growth, fuelled by VC money. They’re not profitable but the idea is that the business will reach “scale” first, before concentrating on making a money once it’s won plenty of market share. Uber is a prime example.

Startups that joined the unicorn club last year include TransferWise, Lyft, Zenefits, SoFi, Hellofresh, Prosper, Oscar, and Farfetch, according to venture capital data tracker CB Insights. There were many more.

A cockroach, by contrast, is a business that builds slowly and steadily from the get go, keeping a close eye on revenues and profits. Spending is kept in check so that it can weather any funding storm.

McSweeney says: “For the investment side, it’s minimizing the risk. Let’s find a company that can survive a nuclear war and then come back to fight another day or pivot and do something different – it has the right team, the right customer base etc.”

McSweeney mentioned the concept of a cockroach company to me at the launch of the Virtual Technology Cluster (VTC) Group recently in London and jumped on the phone later on to discuss it.

Restoration Partners doesn’t invest itself but offers banking services to business-focused technology startups. As such, McSweeney and his colleagues have a good view of the investment space.

McSweeney didn’t coin the term cockroach and isn’t the first to highlight it. The investment theory is an old one and Flickr founder Caterina Fake penned a blogpost on the idea last September.

Unicorns are going out of fashion for many investors.

But the idea of the cockroach vs. unicorn captures a widespread mood in the investment community right now. At a recent conference in London on fintech – one of the hottest subsectors of technology that boasts plenty of unicorns – I found investors and bankers worried about “froth” in the market.
McSweeney says: “I think the unicorn element is coming to an end anyway and the bubble in the market is just sloping off.”

McSweeney’s boss, Restoration Partners’ founder Ken Olisa, told me much the same thing. At the VTC Group launch, he said: “There’s a unicorn industry and they can play around with each other but all it will do is end in tears, because it’s not about the customer and it’s not about adding value to anything.”

So why are investors looking for cockroaches rather than unicorns now? The answer is funding.

2015 was characterised by free and easy funding for startups, thanks to record low-interest rates driving more and more cash into venture capital and poor stock market performance encouraging the likes of Fidelity and BlackRock to try their hand at VC investing.

But 2016 got off to a very different start, with venture capital funding drying up amid wobbles for the global economy.

This has revealed problems in the business models of many unicorns and other fast-growing tech businesses, most of which rely on easy VC money to fund their growth. Businesses like Twitter and Birchbox have all been making layoffs and Fortune’s Dan Primack recently noted that both private equity and venture capital performance declined in the first quarter of 2016 for the first time in years. Zenefits, one of the 2015 inductees to the unicorn club, has imploded pretty spectacularly.

McSweeney says: “In terms of chasing growth and growth and growth – it’s not about sustainability. It’s just trying to grow as quickly as you can without looking at the fundamentals of the house. That’s what I feel a unicorn is – chase growth so investors give you money. It’s kind of a reinforcing cycle.

“Google didn’t growth hack, they just provided a service to the internet and build a business around it.”

He adds: “Look at Powa. It’s the bubble – I wouldn’t say it’s bursting, but it’s sloping downwards. There’s frothiness.”

London-based Powa Technologies raised at least $225 million in debt and equity over the last three years and at one point claimed to be worth $2.7 billion. But the payments business went bust in February, with debts of $16.4 million and just $250,000 in the bank.

McSweeney says: “I still think there’s capital out there but the application of it is more judicious. People are looking for smarter businesses to apply their capital to.”

This article was originally published in Business Insider

Image credit: Reuters/Andrew Kelly

Investments in Indian startups are back and how!

Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.

Here is some cheer for startups this year after funding slowed down significantly in the last quarter of 2015. According to a report by venture capital and startup research firm Xeler, Indian startups raised $1.73 billion during January-March 2016.

Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.

The largest funding rounds during the first three months of 2016 were by online travel venture Ibibo ($250 million), e-commerce major Snapdeal ($200 million), online grocery retailer Big Basket ($150 million), online automobile classified portal Cartrade.com ($145 million) and online retailer Shopclues ($75 million).

“On an average, we have seen at least 4 startup fundings per day between January to march 2016,” Xeler said in a report. Read full report here.

eCommerce, SaaS and health tech have emerged as the top performing investment segements this quarter with a cumulative investment of over USD 810mn across 103 startups that accounts for 47% of the cumulative deal value.

Image credit: www.livemint.com