Kipp parses HSBC’s most recent report...May 4, 2015 12:21
Entrepreneur Diaries: What do investors look for in entrepreneurs?
A ‘behind the scenes’ series to help entrepreneurs in the region find potential investors.
September 15, 2013 6:00 by kippreport
The truth is that every professional investor has a different perspective on what’s important in an investor, so some background research and getting into the ‘psyche’ of particular investors will help.
LinkedIn is an incredible source of information for this, as are other social networks, so this is a good place to start.
Don’t worry about investors being angry that you’ve ‘profiled’ them, after all, they wouldn’t be publicly available if they weren’t interested in you (a potential investee) finding out more about them.
So here is a snippet of what most investors want to see in entrepreneurs:
1. Previous experience with one or more startups: Admittedly, although investing in an 18-year-old tech genius is not necessarily out of the window, the fact that he is able to drive and source an older, seasoned executive to join his team says a lot about him and his idea. As an investor, you don’t want people to learn the hard way with your money and there is no substitute for entrepreneurial experience. Even if you have failed in previous startups, you need to prove to investors the lessons you have learnt and how it has changed the potential decisions you made as a ‘fresher’.
2. Big dreamers: This is difficult to demonstrate, but at the same time is simple. Investors love ambition, so to succeed you need to have a vision of what your idea/company could be for what you can build and imagine how you can change the world. Do something that people love you for, make the world glad that you exist. This may sound cheesy, but it is important. It shows the investor that you are willing to go the extra mile and put in extra effort to be a success. It also shows that your idea could build a $100 million+ size company.
3. A solid foundation: It is important to be genuine. Values such as integrity, hard work and trust go a long way. And if you can communicate that during your pitch, you’ve won half the ‘likeable’ battle. You need to be able to motivate your team, drive them to newer heights and absorb the pain away.
4. Storytelling: You don’t need to lie or exaggerate, but you need to come across as someone who is passionate and driven. It’s not enough to just build on a need, you need to tell a strong story of that need and a story of your solution(s). This is what builds loyalty amongst employees, partners and vendors.
5. Customers: Enough on putting emphasis on the revenue numbers, after all these are just projections. And like anything else, it could go wrong. But by focusing on the customer, you are building a vision for your enterprise and idea. Here are a few questions investors often ask, which you should try to answer:
– What compels your customers to buy this product or service?
– What problems does your product solve? Why is it better than other alternatives?
– Why is it worth the price it’s been set?
– Are your customers asking if they can be investors in your company?
6. Your team: Your team will always be a strong part of the equation, but you as the entrepreneur are just as important. Here’s what investors are looking for in you and your team:
– Passion: The entrepreneur must be able to communicate or drive a contagious excitement about their vision for the company.
– Tenacity: The journey of an entrepreneur is rife with failure, well before it could become a success. You need to prove that you have the stamina and willpower to stay with you vision, when all you have in the bank account is less than AED100.
– Flexibility: Changing market conditions force you to adapt. But you need to have contingencies worked out well before those market conditions come across. You don’t need to be forced, you need to be willing to re-evaluate and refocus your plans in case things don’t work out as you anticipated.
– Commitment: The entrepreneur must have ‘skin in the game’. You must be willing to invest enough of your own money in the project to convince your investors that you are serious.
– Teamwork: Your entire team has to work effectively together and the core team should be in for the long run. This should not be a stepping stone to a better opportunity.
– Learning: You and your team need to learn and be willing to learn. No team knows everything they need to succeed. They need to learn from other entrepreneurs’ experiences and be a sponge for knowledge.
7. The business model: This is the final point of engaging with the investor, assuming you’ve completely tanked all of the above. Will your numbers map out? In other words, once you sit down with the financial gurus of the investor and if they take a sharp pencil and trace every revenue dollar versus the expense needed to generate that dollar, will you have:
• A profitable model?
• A repeatable model?
• A scalable model?
• A defensible model?
The reason many entrepreneurs fail is because they don’t do this exercise with a real-world view. You need to be able to tackle the above coherently and be prepared before you pitch to an investor.
So how do you and your company match up? If you were honest and found areas that were lacking, find someone immediately to fix those problems before you approach anyone to invest in you. And finally, never believe that this list is the only one you should focus on. It’s important, but every entrepreneur is different and so is every startup.
Gladwyn Lewis is the co-founder of Pixel Vector Media (Digital Media Agency Dubai), a digital media agency dedicated to helping startups establish themselves in the online world and the regional partner of Oriel Capital (Seed Incubator Dubai), a hybrid VC firm that specialises only in seed stage investing.