Op-ed: Why Your Startup is Unlikely to Get Funding Unless You Have These 3 Things
- Mark Gold
- May 9, 2016
- 3 min read
The simple reality is that investors are much smarter than they were 5 years ago. Too many burned opportunities and too much money lost on potential promises and paper plans.
I understand most people think it’s not that hard today to acquire an investment for a Startup - especially a high-tech Startup. What’s the big deal right? Create an app, a cool concept and get your business plan in front of the money guy. If you’re one of these people, oh boy, do I have news for you.
I call it "CVP". Today, it's all about Credibility, Visibility, and Profitability. Times have changed and here's the quick version.
Right now investors are focusing on innovative Startups that have established credibility, visibility, and an immediate path to profitability. That means a good community reputation among publications, developers, techies, and end-users; a very high engagement rating on social media as well as already being operational with specific traction like profit, partners, and customers.
In other words, acquiring an investment is a process that involves much more than just seeking the“money guy". Today, convincing the "money guy" involves a strategic, holistic, and integrated approach. Research shows an investor is 10x more likely to invest seed capital - typically the range of $250K-$500k - if the Startup has features on major media channels, major conferences, is operational and already has corporate partnerships on the enterprise level.
If you have Credibility, Visibility and Profitability but still having a hard time raising funds from Seed to Series A and beyond, here are some factors to consider as written in an article by Elad Gil.
Figure out or scale distribution. Your users may love your product, but you have not yet optimized all the ways to build a userbase.
Scale geographically or across verticals. You have a product that works in one market (Brooklyn, NY), and you want to adapt it to other markets (China).
Figure out a business model. If you are a consumer internet company, you may be getting lots of users, but may not have a clear business model that is working at this point.
Scale your business model. You need to hire a bunch of ads sales people, enterprise sales people, or the like.
Scale your userbase. You have a great business in the US and want to go after Europe.
Investors also want to see you have a team working in an office and a board of advisors.
In the scenario of being presented with 2 stellar investment opportunities, would you invest in A) new bakery that is amazing on paper or B) an operational bakery making sales with an amazing reputation among media and consumers?
Today there are 500 companies to 1 investor and 9 out of 10 Startups fail. Unfortunately investors don't need you as much as you need them, so the hard work is on you and must be made on your end, to attract them. They are not sitting and waiting for you, they are assessing "safest-protocols" in the "riskiest-investments" and if your Startup doesn’t meet their criteria, you are not getting funded.
Investors will simply Google Startups and evaluate their impact within a few minutes. Time is money and Google is a major time savor that helps separate the credible and compelling from the flimsy and far-fetched.
If I find no significant visibility on your Startup with no press, blog mentions, articles, social following or even a convincing website, from an investors perspective pursing does not seem reasonable, dependable, reliable, or trustworthy; making you suspicious, uncertain, and unlikely to get funding. And that’s just the gut feeling within the first 5 minutes on Google.
Wherever your project is holding, your pitch requires a well-rounded approach to become appealing to investors. That's why I believe programs like 2020 Startups are a Godsend where within 90 days Startups with different goals can get the visibility, reputation and connections to successfully launch, grow or raise capital.
In short, this is the new world we're living in. If you're featured at Microsoft, TechCrunch, top blogging sites, and can garner high-profile visibility to create an attractive package investors want to see today, you'd be 10x more likely to get funded by year end.
Thank you very much for reading this. I hope it gave you a little more insight into what’s required to get funded today and I hope you'll take the time to consider what 2020 Startups is offering you at our accelerator.
Remember this is just one man’s opinion. Feel free to forward this article and discuss it with your legal and professional advisers before taking further action.
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