When investors look at a startup, they’re essentially assessing its potential for growth and return on their investment.
Each aspect we’ll look at plays a crucial role in building investor confidence. Understanding these can give you a clearer picture of how to present your startup in the most appealing way possible to potential investors.
Financial Forecast
-Investors expect realistic assumptions regarding unit economics, such as an LTV/CAC ratio above 5 and a CAC payback period of less than 12 months.
-They look for a clear path to monetization with cash flow turning positive by the first or second year.
Exit Strategy
-A clear and realistic exit strategy should be in place, capable of delivering a significant return on investment, ideally a 5x multiple.
Proposition
-The business model should be highly scalable, such as SaaS models with recurring revenues.
-It should be defensible with high gross margins exceeding 80%.
-The business model should be sustainable without spreading resources too thinly across too many products or revenue streams.
Traction & Proof Points
-Market validation should be demonstrated through milestones like building an MVP, acquiring pilot customers, and retaining paying customers with low churn rates.
Market
-A thorough understanding and communication of the Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) are critical.
-The market must be large enough and the startup should have a realistic plan to capture a significant market share.
Team
-The experience, qualifications, and founder-market fit of the team are crucial.
-A balanced number of founders and the presence of advisors or Non-Executive Directors (NEDs) enhance the startup’s credibility.
The Deal
-Investment terms, including the valuation and equity on offer, should be justified and attractive to investors.
-The capitalization table should be clean, avoiding over-dilution of equity, especially during the round.
Competition vs Defensibility
-Possessing patents or performing a thorough competitor analysis can significantly strengthen the startup’s market position.
-A unique selling proposition (USP) that clearly differentiates the product from competitors is essential.
Bonus
Here’s the map for you! Focus on the aspects investors like to see (marked in green ✳️), and steer clear of the potential pitfalls (highlighted in red 🔴).
