Tech Startup Investment

As a startup founder, at some point you will meet potential investors. First-time founders usually don't really understand how to choose investor and how to prepare themselves before meeting them. This article summarized some books and articles about investing in tech startups, and hopefully it helps founders to make better decision.

Not all people who have a lot of money to invest are good investors. There are five qualities of good investors:

1. Money. Good investors provide you more than enough money to scale up your business, so you can focus on executing your vision and strategic plan.

2. Time. Good investors will always have time with the founders to discuss very important issues. Moreover, it would be great if the time horizon of their investment suit your growth plan.

3. Network. Good investors provide meaningful customer and more investor introductions.

4. Expertise. Good investors give actionable advice that saves the founders time and money – or keeps them from making mistakes. They should know your business model and industry.

5. Chemistry. Good investors are good partners. Do the "airport test", whether you'd be able to handle being stuck in an airport with the investor for an extended period of time.

Five qualities of (startup) investors

When investors meet founders for the first time, they usually want to understand your business by asking you questions in these three areas:

1. Motivation. Why has this founder chosen this business? How commited is this founder?

2. Probability of Success. What are this founder's chances of succeeding in this business – and in life?

3. Potential Gain. What does winning look like in terms of revenue and investment return?

Three areas that investors need to understand about your startup

Therefore, these are the questions that you should be able to answer efficiently as founders before meeting your potential investors:

1. What are you working on? It's about the company purpose, value proposition, unique selling points of your business.

2. Why are you doing this? It's about your background story that tend to be personal and relevant to the problems that you want to solve. It shouldn't be just about money or opportunity that bigger company didn't see yet. In addition, tell the story of your co-founders and key team members.

3. Why now? It's actually an implicit way to the question "Why will this idea succeed now?" In some ways, “Why now?” is the most important question about the business because there are many folks constantly trying the same ideas over and over again. It's not who gets there first. It's who gets there first when the market’s ready.

4. What's your unfair advantage? Said another way, this question is asking, in just four words, “What makes you uniquely qualified to pursue this business? What secrets do you know that will help you beat both the incumbents and your fast followers?”

5. Tell me about the competition. Who are your direct and indirect competitors? Show that you have a plan to win.

6. How do you make money? Show your business model. How do you intend to thrive? How much do you charge customers? How much does your average customer spend? Combine it with the market potential.

7. What are top three reasons why this business might fail? Tell the risks honestly and show them that you have contingency plans for the bad things that might happen. However, you should expect the best case to happen and believe that your overall plan will be successful.

Bonus Reference:
Pitch Deck Examples & Best Practices for 2019

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