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Whether the economy is doing well or in a period of uncertainty, the basics of building an investable startup remain the same. You don’t need to be a mind reader to determine what investors want to know.
Here are five tips to help convince potential investors that your solution solves a big problem for a big market and that your team has the talent, creativity, and personality to present your business plan in favorable or uncertain market conditions.
1. Be clear about the problem
It is more important than ever to be clear with investors about the problem your company is solving. The most important thing today is how quickly and clearly an entrepreneur can articulate what problem his startup is solving. Why? Because investors know that when a startup fails, it’s usually because there’s not enough demand for the product. What will cause customers to change what they currently do and pay specifically for your new product?
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2. Know your audience
Decide beyond any doubt that you are operating in an area the investor is interested in and that your vision and goals align with theirs. Investors in high-growth, technology-based companies are looking for excessive growth in specific industries, for example, advanced materials, information technology, or biotechnology – large markets with huge opportunities. If your vision isn’t driven by the risk and endurance required to build and scale these businesses, then high-growth entrepreneurship probably isn’t the right path for you.
3. Presentation of evidence
Nothing beats demonstrating your first-hand understanding of your market. Entrepreneurs who have experienced a problem in previous roles or in their personal lives uniquely understand the impact and potential payoffs of their solution. Assuming this is your background, great. If not, describing what you learned and how you turned out from surveys, interviews, and listening to customers builds credibility—especially when some of those customers are willing to become early adopters and go through multiple iterations to model your technology and prove your business model. Convincing customers helps convince investors.
Investors expect entrepreneurs to be excited. When that passion is combined with an understanding of customer needs and the effects your startup solving their problems can have on your bottom line, investors pay attention. Focusing on your customer’s pain points and the payoff of your solution encourages investors to focus on you.
Related: A good story is not enough to get your startup funded. This is apart from that
4. Understanding economics
What needs to happen for your new business to achieve 20, 50 or 100% year-over-year growth? Investors will listen when you demonstrate a clear understanding of your company’s business unit economics. Show how you can gain enough traction with the first-to-market feature set, early adopters, technical solution and market viability. Entrepreneurs sometimes become so focused on a particular solution that they become less open to a solution that could be better. Show that you know how to listen for cues and narrow the range or rotate if that’s what it takes to expand.
While there may be many long-term markets and product improvements, don’t reduce your team’s focus. Can you build the solution? Is there a gap in the solution? Can you deliver? Focus on business development, not product innovation. Demonstrate scalability in the first market and generate sufficient revenue to secure additional financing to support additional growth.
Related: 5 Things Investors Want to Know Before Signing a Check
5. Show your flexible mindset
Investors want to collaborate with entrepreneurs of high integrity and approachability. Every interaction with you affects whether you are someone investors trust and want to invest in. Balance ego with confidence. Be willing to admit what you know and what you don’t know. It is rare to find an entrepreneur who has not made mistakes.
In the end, almost every startup will need to have a flexible mindset to focus on some aspect of their business plan. Seek trusted advice, then follow your instincts. Successful entrepreneurship always goes back to basics – market validation, product/market fit, and business plan focus.
Trustworthy, confident, and connected entrepreneurs don’t allow an uncertain economy to distract them from executing their business plan.