What are investors looking for, and how can you secure funding?
Fundraising is a persistent challenge that all entrepreneurs face. You may have the best idea in the world, but without funds, it will remain a dream. Funding is a continuous need that arises throughout the lifespan of every project— 38% of failed start-ups cited a lack of capital or fundraising difficulties as their main reason.
As with all aspects of building a business, help is always available. At Adaverse, we provide young African start-ups with funding support to scale their businesses. But it isn’t always a case of ‘who you know’ — having your project investor-ready is essential for any start-up and getting there should be a priority if you’re ready to start fundraising.
In this article, we go through five qualities that attract investors to your start-up and look at why they’re so important for fundraising success.
1. A great pitch that nails your solution
By now you might have heard about the ‘elevator pitch’ — a very short presentation of the problem you want to solve and your solution to it, usually 30 seconds to a minute in length. With the average consumer attention span sitting at around 8 seconds, it’s not hard to imagine why a concise pitch is so important.
While your audience might not always be inside an actual elevator, the ability to concisely express your idea gives investors confidence that you’ve thought carefully about what you’re doing.
Coming up with an excellent pitch requires two things above all else:
1. A convincing description of a problem
2. Your concise solution to it
Your pitch may include other things, like market data and information about the team, but nailing these two points is essential — and not as easy as it seems. Take time to research and hone your understanding of these two things as they’ll form the basis of your project and inspire investors to pay attention to your solution.
2. A good team and passionate founders
You’ve convinced a potential investor that there’s a problem and that you have a solution to it — great work. But before you get any kind of commitment, there’s an essential question you must answer:
Investors aren’t going to give money to just anyone — you need to demonstrate that you and your team are the right people for it. If you’re building a team, how it appears to investors should be a strong consideration when choosing people. Think about:
- Core competencies
- Personal qualities
Above all, demonstrate to investors your trustworthiness. You want them to trust you with their money, so honesty goes a long way.
3. Researched data on your addressable market
Knowledge is everything, and knowledge about your potential market can make or break a deal. Understanding who your potential customers are demonstrates to investors that your product has a market and shows them the potential that your idea has to be profitable.
Be careful though: convincing investors about your addressable market is more than simply looking at the size of an entire market sector. It’s easy to find general statistics about the size of certain market areas, but not every customer in a market is your target. Get specific and show not just how much money is available, but how many customers you can specifically target, and how much each customer is worth to you.
4. Demonstrated product/market fit
42% of businesses fail because they don’t have any customers. This challenge is more complicated than it seems — even if you’ve researched your market thoroughly, understand who you’re targeting and have identified a strong need among them for your product, getting them to become your customer is an incredible challenge.
Of course, part of this comes down to marketing (and we’ve elaborated on NFT marketing and product marketing in other articles), however before marketing even begins your product/market fit needs to be analyzed. This refers to how well your product suits your market, and whether your customers will see your product as a solution.
There are plenty of famous examples of failed products — Segways, Google+, 3D TV — which all promised investors a solution to a clear problem, but which ultimately didn’t find many customers at all. Getting the opinions of as many people as possible is the best way to address this issue proactively, and once you’ve done your research, add it to your pitch to investors.
5. A clear exit strategy
Investors aren’t charities — they’re investing in you in the hope they’ll make a profit. Having a clear exit strategy gives investors confidence that you have a solid plan, and also ensures your start-up can survive a withdrawal of capital.
Again, this comes down to research and planning. Understand clearly how long until your product goes to market and how long until you can expect a profit and convey this clearly to investors. Give them a solid timeline as to when they can expect a return and show them how and when they can get out.
Get Funding From Adaverse
Once you’ve got everything together, it’s time to get looking. Consolidate everything into a concise pitch deck (aim for around ten slides), with each slide containing concise and important information. Start sending this out to potential investors and see if you can arrange some meetings.
Of course, fundraising is easier with introductions. At Adaverse, we not only fund the start-ups we incubate, but we also help them position themselves in the best light that is needed for seed funding.
If you need funding support for your start-up to grow, get in touch with us today. We accept applications all year round from crypto-native startups who are in their pre-investment and seed funding stage.
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