By Ashish Bhatia and Mona Singh
The startup industry has witnessed an unprecedented boom over the past few years. The investments in these businesses have gone beyond mere monetary implications. The speed of growth and the gaping risks that come with investing in new-age enterprises, compel angel investors to probe deeper. There are several factors that make for a successful startup, and angel investors are examining multiple underlying layers to ensure the startup’s success and continued growth.
Once the desired objectives are met and doubts cleared, seed investing commences with capital being one of the primary deliverables, but not the sole. When an angel investor assumes command, they also provide the startup with guidance, support and elaborate feedback on various aspects of the business. This makes it a labourious, time-consuming intervention, which in turn justifies the elaborate process of clarifying certain pre-requisites. Below are some areas where startups will be required to provide clarity to their investors:
Motive of the startup
What is the underlying assumption of the startup? Are the founding members clear about the vision of the company? Is there clarity over the problem being addressed? How will the solutions be monetised? Is there a definite trajectory for the chalked-out business plan and is the team driven by passion and integrity rather than mere profit?
A well-articulated and cogent elevator pitch will answer all of these questions for the potential investor.
Personal interest of the investor
An angel investor sits through several pitches a week. Why is it that your pitch will stand out, and how will it persuade them to write you a cheque? The answer touches upon how much engagement a startup makes with the customer base, the innovation it brings to the market, the quality it delivers, and its expansion plan follwing a successful round of investment. The portfolio of the investor also plays a major role in determining the industry.
Finance and management
This is a fundamental question: how and where will the money invested, be utilised? How meticulous are the financial plans for the next few years? In case of substantial losses, what is the contingency plan? A startup that has its unit economics sorted is more likely to win in this case.
Along with the finances, investors also look for clarity in how the team performs; who are the key members (and how many), what relevant experience do they hold, how is recruitment planned and carried out, and how would the management structure evolve with expansion of business?
Strategies for marketing
This goes beyond how marketable a product is. As the founders, you will need to lay out the strategies for various online and offline platforms such as social media, print media, public relations campaigns, billboards, and so on. Budget plans, target audiences, and targeted outcomes need to be clearly outlined.
Assessment of the startup
With emphasis on market opportunities acting as a crucial indice for the business, the start ups are also appraised on their previous performance and USP. The experiences a company has accrued, its identification of potential competitors, and how it distinguishes itself from them—this is the story that can keep an investor engaged.
Providing clarity to the investor in the aforementioned realms will help create a sense of commitment and integrity for the startup. This will indicate an execution-focussed, customer-oriented business, that has identified its requirements accurately. This also sets expectations for the angel investor’s contribution to the startup in the near and longer run.
Ashish Bhatia is the founder and CEO, Mona Singh is the co-founder and Chief Accelerator Officer of India Accelerator