Practically speaking, entrepreneurs would know that if there isn’t an Angel Investor or a Venture Capitalist, however grand the Business Model is, the idea often goes for a six, if not always. It is also very true that a great idea doesn’t always fetch a great investor. But, optimism always does well to all. Pitching the right attitude and right words always works in favor of the promoter who is on a mission to convince an Angel Investor or a Venture Capitalist about his Business plan.
The ten most important parameters that decide whether a startup is worth funding are:
- A vision that can be mentored from ideation to profit – An idea is not a great idea until and unless it can be turned into a profitable venture by the entrepreneur. Profit potential is one of the most important parameters to make the investor interested in the business idea.
- Financial predictions for at least the next five years – Investors have a long term view and gone are the days where one or two years prediction would have got the required money from an investor.
- Total capital outlay – The required decisions about the total money being involved should be made beforehand to get a raw idea about the total application of funds into the project.
- Small amount of capital invested by the promoter himself – It is always important to prove to the investor that a promoter is confident about the success of his own project.
- Business model applicability in the current scenario – The relevance of the proposed business model in the current market condition and the product/service fit with the target market.
- Return on Investment Projections – One of the most important factors, accurate predictions are necessary to make the investor aware of the future results. Agreements should also be made beforehand about the payback norms to the concerned parties involved.
- The management team – “A captain is as good as his team” is a relevant saying in this context as well. An efficient management team is the crux for the success behind any startup.
- Clarity in Operational Excellence – Operations such as idea generation, development of an idea, testing of an idea, product development, market testing, product launch etc. should have a clear and concise schedule and the implementation of all the above steps in a pre-fashioned manner proves the operational efficiency of the team.
- Market Analysis – Projections of market potential, sales and revenue, market share, performance analysis falls under the domain of Market Analysis which is very essential to a company.
- Creation of a legal framework – A legal framework is very necessary as it determines the finer aspects, considers government policies and regulations and implements them in consultation with other teams.
These parameters may vary from startups to startups depending on the niche they’re willing to operate in. Just as always, there is no one-size-fits-all rule, here too!
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