While graduating from a startup accelerator boosts your exposure, experience, and resources as a startup, there is a great deal more to consider than simply the prestige of the accelerator you participated in. From the pedigree of the accelerator, to the trajectory of growth, to the team you’ve built, investors take a careful look at how a startup performed in their batch. Here are five indicators you can focus on hitting to maximize how far your accelerator journey can bring you after your startup graduates.
Build a solid team
One of the first things an investor looks at when considering investing in a startup is you. You, as in the founders and the startup’s team, are an important factor when someone decides whether or not to invest. Investors want to see a team of passionate, knowledgeable, and experienced, and adaptable professionals who can utilize those skills in the ever-changing market their startup serves. According to investor Kevin Hale, a partner at Y Combinator, there are a few things investors look for in the founders of a startup in order to decide whether or not to invest.
First, proving that you are savvy and knowledgeable about the market is vital. Do you understand your costs, how to attain customers profitably, and what exactly your industry is? Investors are also seeking founders who are communicative, display good social skills, and who have done their research and possess a sense of direction regarding where their startup is going in the market. This is where networking, reaching out to mentors, and building relationships is absolutely tantamount, and if you have been through a startup accelerator, it is vital that you do not allow the relationships formed within the batch to stagnate. Through presenting all of the aforementioned qualities to investors, they can get a clearer picture of what it will be like to work with you down the road and how you will respond to various situations in the future.
Know the market
According to Chloe Daniel from Medium, who authored this post on surviving the post-acceleration cliff, freshly graduated startups are “mere fledglings”, and in order to build rapport with investors, it is important that you eliminate as much fear of risk as possible in their minds. While the founders are a vital piece of the puzzle when deciding whether or not to invest, investors also look at other traits of your startup, as well. One of these traits is the market your startup occupies.
Targeting investors who are in your domain is pivotal in this process. Many investors seek out startups that are in a field they have expertise in so that they can make smart decisions about their investment, gauge their risks, and determine if the startup is a strong contender in the field. In order to alleviate investors’ fears about the risks of putting their funds into your company, there are a few things that are important to do when catering to their niche market.
First, according to Forbes, it is important to display that you have a broad market for selling your product and that your product can function and adapt in an ever-changing market. Are you knowledgeable about the ins and outs of your market?
According to Valuer, it’s important to know if your startup’s market is in decline or at maturity, what barriers exist for companies in this market, what the cost of entering the market is, and who your competitors are in the market. Additionally, it is important to cater to the age of the market. Investors who occupy long-standing markets will want to see how you differ from the competition and what newness you bring to the table. According to Valuer, newer markets require a different approach. In these markets, you must show investors that your startup can steadily grow in a sustainable manner.
Have a detailed plan
The next important aspect of winning investors is having a solid business plan. According to Valuer, “A masterful business plan that exhibits your knowledge and competency of the market, scalability, financial strategy, and experience and foresight into business operations is a concrete tactic to prove your value as a founder and partner to investors.”
In order to display your knowledge to investors, it is important that you share details. According to Craig Guillot from Bankrate, wise investors often request detailed business reports “complete with a business description, marketing plan, financial plan, market analysis and a SWOT (strengths, weaknesses, opportunities and threats) analysis.” It is vital that, when presenting investors with your startup’s metrics, you share the good, bad, and setbacks that your startup has experienced. It’s important to highlight your growth as a business, but only showcasing your high points can be a major red flag to investors.
The top three things the business plan that you present to investors should include are your business concept, market insights, and financial information. If these topics and the information above are included in your startup’s business plan, you’ll be well on your way to gaining investments in no time.
Find your special concept
Circling back to the advice of Y Combinator partner Kevin Hale’s advice, another tantamount aspect of winning investors is finding your startup’s concept. Perhaps you have come up with a solid business plan, know your market, and have a great team; can any of that be effective if your concept is not developed?
Whether you are in the tech market or market specific products to a niche audience, developing your concept involves the skill of storytelling. This is another skill that Hale’s decision to invest hinges upon heavily. Can you convey to investors and consumers why you have the “special sauce”, or a unique solution to a big problem? Can you offer insight into why the problem exists, why it hasn’t been solved before, and why your product is equipped to fix it?
Show how you’ve grown
Remember how we said to share the good, bad, and setbacks of your startup’s metrics with investors? That is important, and perhaps the most important part of that advice is sharing your growth. This can include the good, bad, and plateaus, but investors want to see your startup’s trajectory and what they can expect now that you have graduated from an intense accelerator program. Valuer reminds readers that a great concept alone cannot convince an investor to put their faith in your startup; your vision must be accompanied by metrics that eliminate fears of risk that often come along with investing.
While you may have a head start due to your experience with an accelerator, it is important to show that your startup has not stagnated since graduation. According to Valuer, the best way to do this is to show progress through providing investors metrics on “Month-over-month organic growth, continuous revenue growth, increased user numbers, staffing expansion, technology development, etc.”
While there is no singular way to attract investors or showcase the strengths of your startup, these five indicators can help you discern whether or not your strategy for attracting investors is on the right track. Through showcasing various aspects of your startup, such as the social skills of your team and the “special sauce” you bring to the market, you can set your team and your startup up for success, maintaining and building upon the upward trajectory you experienced during your time in a startup accelerator program.
