If you’re a startup who was or is still on a look out for a seed investment, you would know how difficult it is to charm those investors and seal the deal. While some investors look for one quality, others prefer something else entirely. It’s like a surprise test which you know will take place but have no clue about the syllabus. In such cases, the best you can do is to prepare yourself completely for whatever litmus test might be coming your way.
In order to help you and your startup top the class and get that seed funding, we bring to you a list of eight things that a VC can look for before a seed investment and for whom you should prepare your startup beforehand.
- Charming Personalities- This is basically the first test that your startup is going to face. If the Venture Capital doesn’t feel comfortable with the person that they’re interacting with, they won’t take the deal forward. In most cases, this person is the founder of the startup. As the VC is going to work with the startup for a long period of seven or more years, hence the chemistry and compatibility between a VC and founders of the startup is a very important factor for the VC before sealing the investment deal.
- Clear Knowledge about your product or service – An investor needs to be fully convinced that the money he/she is going to invest in your idea is going to reap him profits in the longer run, only then will he be ready to take the risk and invest the huge sum that he is investing. The startup should be very clear about the USP that their product has to offer over others and what value that USP will be to the end customers.
- Promising traction metrics – The startup needs to be prepared with a working prototype or a Minimum Viable Product of the solution being offered by them. They should also do a market research and present the statistics to the VC to show the need of their product or service in the market.
- The Team – Considering a startup still has to find a foothold in the market and workout its business, a good team with the right skills and attitude is the prime requirement. A VC looking to invest in a startup will always examine if the team has the right skills, knowledge and unity to execute the brilliant idea in place.
- A plan – The startup needs to have a clear long term plan in place. It is important to remember that the seed investment round is the first step towards a string of investment rounds that will hopefully follow. Founders need to be well prepared to project their ambitions for their startup with this round of financing. They should also be able to clearly communicate their exit plan to the VCs.
- Market Plan – The startup needs to have a well-structured and a well thought-out market plan in place before going for the big presentation with the VCs. An action plan complete with the business model, scalability of the product etc. should be devised beforehand.
- The Market Size – The ultimate goal for everyone in the business is to gain profits and build a successful company. If the market available for the product or service you are offering isn’t big enough to achieve that objective, then making an investment in your startup may not feel viable to the Venture Capital.
- Different is the key – The product or service being offered by the startup needs to be substantially different from its counterparts available in the industry. It means, it should have a USP which makes it different from others and makes it stand out in the crowd. Further, these distinctive qualities should be sustainable from the future point of view so that the startup can earn considerable profits off them.