Money alone can’t ensure business success – but it definitely doesn’t hurt. For a business to realize its full potential, it needs a comfortable foundation of cash upon which to build. And unless your business started with a large sum of private funds, that money will likely come from investors.
Investors may vary in title and institutional setting – you have venture capitalists (VCs), angel investors, big banks and crowdfunds – but their goal is typically the same. They want to see their investment pay off. They want your business to defy the frightening statistics to become “one of the successful ones.”
So how do they separate the success stories from the failures? Partly, they’re reading tea leaves, looking for whiffs of confidence around them and taking a leap of faith. But partly, they look to see if your business shows the early signs of success.
Want to attract investors? Here are the types of businesses that appeal to people with deep pockets.
Disruptive Businesses
Disruptive businesses are ones that fundamentally alter their industry, either by simplifying a process or significantly improving a product/service. In other words: they force people to take note.
For Regan McGee, founder of Nobul, that disruption involved simplifying the real estate transaction process. “Our platform enables buyers, and sellers to openly see the transaction histories, pricing, reviews and services of real estate agents. Agents can then actively compete for the prospective buyers’ business.” McGee told Superb Crew. “Anytime you bring innovative technology to the table that can make the process easier, it will be viewed as disruptive.”
Nobul hit its financing rounds running with that idea, capturing the imaginations of VCs and angel investors.
Businesses with a Compelling Market Size
The “market size” slide in your pitch deck speaks volumes to investors, who want to know that you are targeting a wide, addressable market opportunity.
But it’s a balancing act; go too big, and it may signal a tenuous grasp on your product’s relevance or the market at large. You want to hit a sweet spot, demonstrating that you’ve clearly delineated the boundaries of your market (to signal focus and expertise) while offering investors promising top-down and bottom-up market sizing reports.
Management-Savvy Businesses
You sometimes hear this referred to as “DNA” – the fundamental building blocks and logical structure of an organization.
Imagine for a moment that you have the two criteria above under your belt – you’re leveraging a disruptive technology and targeting a vast addressable market. But… Your management is green, your corporate structure is dysfunctional, and (to use a sports analogy) your bench of talent isn’t all that deep. That can easily frighten an otherwise confident investor.
MaRS, one of the largest startup incubators in North America, is clear on this: “Build a strong management team and attract investors.” They offer several tips (available in the link) for choosing management with an eye toward raising capital.
Low-RIsk Businesses
Finally, investors will look at the level of risk in your business. Your idea might be right, but is it right for right now? If investors sense legal, IP-related or regulatory issues may affect your business’ success, they might be wary of backing you. A great example of this is in the fledgling cannabis industry. Some investors see a world of opportunity. Others see potential regulatory issues, beyond anyone’s control, as too much of a liability.
It’s not easy ticking off all the above boxes – it will take ingenuity, determination, humility and strategic focus. But if you can craft your business like the businesses above, you stand a better chance of catching investors’ attention.
