how investors evaluate your idea
do you have startup-investor fit?
Hey there,
A topic we have discussed with founders over at Project Arrow this week is how investors assess whether an idea is interesting for them or not.
Good professional investors come across multiple startups every day - their brain is trained to evaluate and make quick decisions: it’s either a pass or a further deeper dive. Particularly when you do cold pitching, you should optimise for them asking for more i.e. make sure that you attract their attention so that they want to learn details about what you do.
How do you do that? Here’s a few pointers:
familiarity - are the investors familiar with your industry? The business model? The problem you are trying to solve?
interestingness - you may not be on a familiar territory for them but is what you do interesting? If it’s intellectually challenging or simply something in a hot space - that will get their attention.
the stage - are you asking for the kind of money they’re able to deploy?
how big can this be - investors’s job is to multiply money, the higher the return you can provide the better. A back-on-the-envelope calculation on your potential will suffice.
how fast can it grow - do you have a smart go-to-market approach? Is the evidence of demand for what you do high?
your accomplishment to date - traction level or a KPI indicating progress.
Those are some strong signals in the investors world, and that’s how they quickly assess if your startup is the kind they look for. At your first interaction, remember that you don’t need to provide all the details at once, just the right teaser mix in order for them to ask you for more. Just like in a game - you want to get them to the next level. :-)
Not least important, don’t forget that getting a no from an investor is not personal - sometimes they have better options than what you are selling. However, doing your homework and understanding what investors are looking for will help you customise your sales pitch to their profile and increase chances of building a dialogue and/or a relationship.
PS1. Yes, cold email works - but you need to craft it well and cover what’s above. Doing proper homework is key here and will take you a long way.
PS2. Have a teaser already and want a second opinion? Shoot me an email and I will have a look. Or, better yet, join other founders for getting personalised advice from here.