7 things investors are looking for in startups in Nigeria
Startup investors are not altruistic beings; instead, they seek out certain cues that will sway them to part up their cash. This manual, prepared from the viewpoint of an investor, aims to assist entrepreneurs in understanding the crucial areas to concentrate on and emphasize when seeking money.
If you show me an entrepreneur, I’ll show you a person who needs money. Even while it could be challenging to create a better mousetrap, finding investors for it seems to be even more challenging. Entrepreneurs are always looking for the appropriate connections, whether it be a networking contact or a third party with credibility who can connect them with the ideal individual who has money burning a hole in their pocket. But in the end, it matters more for what you’ve got than for who you know.
If they want to receive funding from investors, they must learn how to attract them. With a discussion of the critical factors investors consider when making an investment decision and some suggestions on where to go for finance, I have compiled the lessons I’ve learnt from my personal experiences in this post.
Investors look for a firm that has a sizable market, a robust product line, and solid growth plans, among other things. The following eight points will assist you win over the right investors. What criteria will a potential investor use to decide whether to invest in your startup?
- An exceptional product or service
You must be certain that your product or service is a market leader because investors will probably be reviewing other companies at the same time as yours (or have a convincing plan to make it one). You’ll face competition from other entrepreneurs, so consider what makes your business unique.
- High growth potential
They will want to know that there are opportunities for growth and expansion if they are going to invest in your business. Investors will demand evidence that your product has room for expansion and that strategies are in place to enable it. The company should also have a plan in place for how it wants to expand.
- A great team you are working with
Investors will also invest in your staff in addition to your goods. They’ll want assurance that their money is going to a skilled, motivated team that is passionate about growing the company. Additionally, they’ll want to see that you and your team get along, cooperate, and have established strong foundations for your startup.
It’s a good idea to provide examples of your teamwork skills. Consider any difficulties you may have had and how you handled them as a team, as well as instances in which you succeeded (or even failed), and how you conduct yourself on a daily basis. This provides astute investors with a picture of the company’s founders and the potential influence they may have in the company’s future development.
It’s also crucial to think about your staff and whether the founders are committed to the project long term. You might already be an expert in a variety of fields, including sales, marketing, research, and development.
The firm may already function efficiently thanks to existing systems. Investors will seek confirmation that the startup will have a reliable, consistent, and strong base. A significant portion of this is the folks who are already there.
- Strong ethics and sustainability of your business
The firm may already function efficiently thanks to existing systems. A business that is ethical, has strong ties to the community, and has a positive influence on the environment is very investible. Investors will want the assurance that perhaps the startup will have these qualities. With generation z pressuring businesses to go beyond their profits, younger customers are backing enterprises that emphasize being “ethical.” This means that for a large portion of your target market, your company’s social and environmental responsibility, charitable giving, community involvement, and even how you treat your employees are significantly more significant considerations than price. oundation. A significant portion of this is the folks who are already there.
A company’s reputation can be improved via sustainability, which also increases its lifespan and consumer loyalty. Additionally, it may provide you an advantage over rivals who may place less of an emphasis on sustainability.
The global coronavirus epidemic has made addressing social inequalities and climate change more important. In the next five years, it is predicted that the market for data and services might reach a value of over 5 billion USD due to the demand for sustainability data. Startups in the UK should be aware of this trend. How sustainable and moral is your startup?
- A financial plan that is strong and sensible
- Investors will be curious about the whereabouts of their funds. To avoid financial trouble and be prepared for any potential problems, there should be clear plans for handling the financial parts of the firm. It is essential to have a solid financial strategy. It frequently includes:
- Projected turnover and profit – You should have numbers that illustrate how much you anticipate selling your goods for and how much of that is profit. These will show a potential investor how quickly your startup will expand.
- Project cash flow and balances – You need to know exactly how you plan to balance the money coming in and going out.
- Taking into account any risks – No matter how confident you may be in the success of the enterprise, there will always be a certain amount of financial risk involved. It is crucial to accept that some of your predictions might not come true.
The majority of investors prefer you to be clear about the numbers and any potential hazards rather than sugar-coating it, so be honest about your money. Any astute investor will value transparency as long as you have a plan for handling potential risks and the data to support your estimates.
An investor will find you more appealing as an investment prospect if you have detailed financial data that demonstrates that you understand the financial side of the business.
- Clear plans for the use of investment money
You should have specific plans for the quantity of investment you require and how you intend to use the money that is being invested in the firm once you have selected what you would like from an investor. Uncertain plans make it unlikely that an investor will provide money to your firm (or the full amount you are asking for).
The investor may better grasp when they could expect to see a return on their investment and the role they will play if there are clear plans for where the funding will go. Why do you initially need investment? Working capital can help with starting costs, such as the lag between orders, sales, or signups and any outgoings, such as paying suppliers, workers, and running costs. It can also be considerably more cost-effective for businesses than seeking for a loan. This is an excellent approach to give your company a “cushion” and avoid cash flow problems. You could also need to buy more assets as the business expands, like machinery, trucks, and IT equipment.
- An honest assessment of your risks and clear plan to mitigate them
There will always be some level of risk in startups. For fear of turning off a potential investor, you might assume it’s best to keep the dangers associated with your startup a secret, but it is a horrible idea. Risks may be something that investors look for before making an investment, therefore hiding them rather than disclosing them will appear more dubious and may turn them off.
You can never completely remove hazards, despite your best efforts, but you can be aware of them and know how to best manage them. Having this in place will demonstrate to investors that you have carefully considered every area of the company and are prepared to address any issues that may arise. Building confidence with investors requires being transparent and honest about any risks you may face and your plans to mitigate them.
Risks could include shifting consumer behavior, heightened competition, or even a pandemic on a worldwide scale!
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