The 4 Core Pillars Investors Look for in a Startup
As a startup founder, getting seed funding can be a challenging process. To help you secure the funding you need, it's crucial to understand what investors are looking for when they evaluate your pitch.
It’s no secret that the fundraising process can be challenging, and one of the main reasons for this is that every investor is running your startup against their own criteria. So, as a founder, it’s crucial to understand what investors are looking for when they evaluate your pitch.
Based on my experience having worked with many founders as a startup consultant, I have identified four core pillars that go into the equation that investors are generally looking at. These are not the only pillars, but I believe they are the ones that you should focus on first:
- Founder Credibility: As a founder, you need to convince investors that you are the right person for the job. They want to know how credible you are, how experienced you are, and what’s your origin story to this problem. Most importantly, they want to see what you can do to prove that you are the right person to go execute the plan. In the words of Paul Graham, the founder of Y Combinator, “The most important ingredient in a startup is the people.”
- Problem Area: Investors want to see that you are tackling a monstrously large problem. They want to know that if they make this investment, the chance of payoff, if it works, is going to be fantastic. They don’t want to see a red Ocean strategy, where you are trying to compete in a crowded market. Instead, they want to see a blue ocean, where you are going into a new market with untapped potential. As Jeff Bezos, the founder of Amazon, said, “We’re willing to be misunderstood for long periods of time.”
- Solution: Investors want to see how your solution is a good fit for the problem. They want to know that you can pivot with your learnings and adapt as you go. As Reid Hoffman, the founder of LinkedIn, said, “An entrepreneur is someone who jumps off a cliff and builds a plane on the way down.”
- Strategy: Lastly, investors want to know what you are going to do with the money and how you are going to execute your plan. They want to see a well-thought-out strategy that demonstrates how you will achieve your goals. As Peter Thiel, the founder of PayPal, said, “Competition is for losers.”
Raising seed funding is a challenging process, but understanding what investors are looking for can help you prepare a compelling pitch. By starting on the four pillars I have outlined, you can already increase your chances of success in securing the funding you need to turn your vision into reality. Remember, as a founder, you are not just selling your product or service; you are selling yourself and your team as well. Good luck!