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We ask this question often – Is your startup investor ready?
I will reveal the most received answer at the bottom of the article. So read on……….
What exactly investor readiness means to you?
Considering every startup is distinctive in its own way, how do you generalize? We have been investing and have many friends in the investing space. Based on our conversations that we have had over the years with many startups and investors, there are some distinct elements which can be considered as investor readiness. While most startups have their own individual roadmap, the questions from investors have largely remained static, tired and………………….. boring.
Do you have revenues? What is your traction? ……….You are too early for us.
You get it, right? There is more to traction and revenues. When we said the above, we asked this question essentially to assess whether the founder and team have considered the multi-dimensional approach to create trust assets, which can help answer any question that gets thrown on to them; comprehensively and convincingly.
We, at DueDash, have identified 8 distinct aspects that can demonstrate your investor readiness. Rather, an indisputable momentum on all the 8 aspects listed below and your startup is reasonably prepared to talk to investors and has a good chance of raising capital. If not, the DueDash Community and DueDash team (Parul Madan, Michail Kosak, Markus Buck, and Nikhil Madan) are here to help. Without further ado, let us jump right in.
Aspect #1 – Pitch (Written & Verbal)
Just can’t emphasize enough. You have 60 seconds to convey the minimalist interpretation of your product, service, market and team. Make it count. When you get past this, you have a few minutes to impress and a day to respond. This will demonstrate your cognitive legitimacy and preparedness to overcome your “newness liability”.
Aspect #2 – Executable Vision
What is your long-term vision and how will you get there? Is this the next billion dollar business? Make sure your assumptions are backed by verifiable data. The good old – TAM, SAM, SOM still works. If the investors believe you that yours is a real deal, then you will get the attention.
Aspect #3 – Product Roadmap
As mentioned above, how you will get there is critical! What are your milestones and how will you reach them? Prepare yourself at a granular level on knowing what do you need to do to get there. Meanwhile, prove that your product (even a crude version or a non-technology play will do) is ready to be rolled out and the users are aligning with your assumptions.
Aspect #4 – Users and Customers
Demonstrate users and potential customers who are willing to engage with your product and company. Show the metrics that you track and why those metrics are relevant to your business. Additionally, be prepared to discuss the metrics which an investor may expect you to track. There is a general tendency for investors of a certain vintage to consider revenues alone as the “golden metric” which is not completely misplaced.
Aspect #5 – Marketing and Sales
Can you clearly show, how you reach your users and customers? You know how, right? Can you stick out data points to lend credibility to your claims? Do you know your multipliers and your true “customer acquisition costs”? Illustrate how users “convert” to customers. Knowing a clear path to revenue would help to demonstrate your preparedness.
Aspect #6 – Financial Preparation
We get a lot of fluff on this one. How will your business make money? What are your unit economics? Do you have financial projections and monthly burn rates? What are your key growth drivers, calculation models and assumptions? Most importantly, do you track the previous data and derive learning from them to do a course correction. Do you really know your true financing needs?
Aspect #7 – Data Room
Have you created one? Is it qualitative and up-to-date? The quality of your data room would make a pivotal difference. As one of the sophisticated investors on DueDash suggested – “Build out a data room very early on. Surround yourself with qualified advisors and consultants who can help”.
Aspect #8 – Complementary Team
The most important component of any startup. Why is this team the right one to execute this business idea? Knowing the complimentary capabilities of the team members, awareness of limitations and blind spots of the team is a confidence booster. Can this team demonstrate the ability to go the distance? Investors, generally don’t like solo-founders.
We have reached the end of the article and its time for me to reveal the answer to this investor readiness question. The most commonly received answer is YES.
