What are some of the criteria and expectations that investors have when evaluating start-ups for funding?

Investors need to see the connection between a good team, the team's motivation to develop the technology and the team's motivation to bring the technology to the market. All this needs to be finely tuned.

It needs to be a painful problem. Problem that lots of people face (big market size) You’ll need a lot of metrics to back up this problem. Think multi dimensional. The solution has to be novel, or novel to how you solve for the problem. The solution has to be proprietary. The solution needs to be explained simply.

Investors are like treasure hunters, searching for promising startups. They have a map, but it's not made of X's and pirates - it is criteria and expectations. Top of the list? Startups that tackle a real, burning problem. These startups offer a clear solution, distinct from the crowd, like a shiny gem amidst pebbles. Investors also seek a skilled crew, a product poised for takeoff, and a clear path to a profitable exit. Demonstrated traction, strong financials, know-how are like sturdy tools, guiding the startup towards success. Understanding these expectations is like deciphering the treasure map. Startups armed with this knowledge can navigate the investment landscape and find funds for their entrepreneurial journey.

Investors scrutinize start-ups based on several criteria. Firstly, a robust business model demonstrating clear revenue streams and growth potential is pivotal. Sound financials, including realistic projections, instill confidence. A strong and adaptable leadership team is crucial, with a track record of execution. Investors seek a unique value proposition and competitive advantage in the market. Scalability and a sizable addressable market are attractive. Due diligence on legal matters, such as IP protection and compliance, is standard. Transparent communication and a well-defined exit strategy enhance investor confidence. Overall, investors look for a combination of financial viability, strong leadership, and a competitive edge.

Investors look at the founders' experience, skills, and their ability to execute the business plan. Traction, which is evidence of growing user or customer numbers, is also crucial.

The presence of a diligent team and product traction, makes a startup attractive to potential investors. A product is only as good as the people building it. The team has to be passionate and diligent about building out the product and pooling in the much needed time and skills to ensure it succeeds. Also, there needs to be proof that a market exists for that product. Traction validates that needs. It shows that you’re building something the market wants and that there is therefore, a chance of making profit.

When investors evaluate startups for funding, two critical criteria are the team and traction. A strong, skilled team with a track record of execution and industry expertise instills confidence. Investors look for a balanced team with complementary skills. Traction is equally vital; it demonstrates market validation. This includes customer growth, revenue, and engagement metrics. Showing tangible progress in these areas signals a product-market fit and potential for scalability, key factors in securing investment.

Investors seek startups with exceptional teams and demonstrable traction. They value experienced, diverse teams with complementary skills and a track record of success. A strong founding team instills confidence in the startup's ability to execute its vision. Additionally, investors prioritize traction, tangible evidence of market validation and growth. This can include user acquisition, revenue growth, strategic partnerships or any other factor showing momentum. Traction indicates that the startup's product or service resonates with its target market, reducing investment risk. Combined, a stellar team and solid traction signal a startup's potential for substantial returns.

Investors want the full package: a killer team and proof you're going places. Imagine them as casting directors scouting for a blockbuster. Your team is your cast; it needs to be talented but also diverse, covering all the bases from tech to business acumen. And your traction? That's your early box office numbers or reviews—essential to pique interest. In something as competitive as fintech, a team that understands not just tech but also regulations and customer behavior can be your ace. Your metrics should align with your story. If you say you're about user engagement but flash numbers about partnerships, that's like a rom-com trailer with only explosion scenes. Investors want a coherent, compelling narrative.

You need to understand that money is not really given to businesses, it is given to people who we think have the capacity to deliver the business solution. A great vision can be destroyed by an inefficient team with ill-equipped managers. Knowing who are the vehicles for solving the problem you want to invest in is as important as the investment in itself. If you are not convinced that the team is competent, protect your resources and find another opportunity.

Providing context and explaining how you plan to improve your unit economics is important. This can involve discussing strategies for reducing customer acquisition costs, increasing customer lifetime value through upselling and cross-selling, optimizing operational efficiencies, and exploring new revenue streams.

Investors focus on understanding the startup's revenue generation and spending dynamics. A clear and scalable business model, producing recurring and predictable revenue, is crucial. Positive and improving unit economics, reflecting profitability and sustainability, are key indicators. Unit economics metrics like Customer Acquisition Cost (CAC) and Lifetime Value (LTV) provide insights into the cost and revenue associated with each unit of the product or service. Demonstrating a sound financial model with strong unit economics assures investors of the startup's ability to create value and maintain long-term viability.

Think of the business model as the recipe for your money-making pie, while unit economics are the quality of your ingredients. Investors love a good, replicable recipe with top-notch ingredients. A clear business model says, “Here’s how the pie is baked,” while strong unit economics ensure it’s a pie worth every penny. In my view, while the business model entices investors with a tasty prospect, it's the unit economics that reassure them it’s not just a pie in the sky, but a bakery with a bright future.

Investors want to understand the startup's revenue model and its scalability. Positive unit economics, where the cost to acquire and serve a customer is lower than the revenue generated, is often sought.

Investors always scrutinize the viability of your business model and the economics behind it. So your job as a founder is to clearly articulate how your startup generates revenue, sustains profitability, and achieves efficiency in its operations. If you can demonstrate a sound understanding of unit economics, you can instill confidence in the sustainability of your financial model.

VCs want to see your ability to identify and address the market's unmet needs or pain points. By highlighting the specific demand for your solution, you can showcase how your product or service stands out and has the potential to capture a significant market share. This perspective goes beyond just stating the market size and shows a deeper understanding of your unique value proposition.

If you’re not going to be generating $100M revenue and be worth $1B, most VCs won’t fund your startup. They want you to build a rocket-ship. They want you to hit a home run. If not, bootstrap.

Investors seek assurance regarding the market opportunity and the startup's distinctiveness. A sizable and expanding market, coupled with substantial demand for the solution, is crucial. Demonstrating a realistic grasp of the competitive landscape, including direct and indirect competitors, and articulating a compelling Unique Selling Proposition (USP), is essential. Investors look for startups that not only identify competitors' strengths and weaknesses but also showcase a clear strategy for differentiation, ensuring they can capture a significant share of the market and stand out in a competitive landscape.

Investors eyeing your venture are essentially window-shopping for a good market and a stand-out player in it. A booming market is like a bustling mall, and they want to ensure your store has the zing to pull in the crowd. Knowing your competition is like having the mall's directory; it helps to know who’s selling what. But what really catches the investor’s eye is that unique window display, your USP, showcasing why passing foot traffic should stop at your shop. In my opinion, it’s not just about having a cool store in a busy mall, but also knowing what makes folks prefer your goods over the shop next door.

A thorough analysis of the market size, potential for growth, and competitive landscape is vital. Investors want to see that the startup has a unique value proposition and can capture market share.

Investors want to believe in your story, not just your spreadsheet. Share the emotional spark behind your vision - what drives you, what problem ignited your passion? Then, tie it to impactful metrics - lives improved, environments healed, communities empowered. Remember, values matter! Align yours with theirs to make a match made in impact heaven.

Investors prioritize a startup's long-term vision and impact. A compelling and ambitious vision, aligned with investors' values, is essential. Demonstrating a quantifiable positive impact, whether social or environmental, enhances appeal. Startups should articulate their mission, vision, and values coherently. Investors seek clarity on Key Performance Indicators (KPIs) and milestones, providing tangible metrics for assessing success. This holistic understanding ensures investors align with the startup's purpose and have confidence in its ability to achieve meaningful, sustainable, and measurable outcomes.

Sharing the story behind your vision and explaining how it connects to your own journey can help investors understand your product and vision behind it, and also the sincerity of your goals.

Investors often seek startups with a clear vision and a mission that aligns with their values. They want to know how the startup can create a significant and positive impact.

Investors typically align with visionary leaders who see beyond the immediate horizon. So you'll need to convey a compelling narrative of your startup's long-term vision, which shows the impact it aims to achieve. And also articulate how your mission resonates with societal or industry needs while showing a roadmap for significant, positive change.

The funding ask should echo the startup’s growth stage and necessities, painting a realistic picture for investors. Valuation, on the other hand, should be a credible testament to the venture's achievements and future potential. It's like a seesaw; a balanced approach in both funding and valuation showcases a startup’s strategic foresight and market realism. Being adept at narrating your funding journey, current runway, and future projections, alongside a transparent valuation method, forms a compelling storyline that can resonate well with potential investors.

While being in the current funding round, keep the next one already in mind. Often, start-ups are raising funds in regular intervals, which means 12-18 months after closing a round, the next one has to be completed. It is very helpful to already now think about the future capital needs, as well as the valuation needed to make the raise sustainable. The more clarity a start-up has on milestones and KPIs needed to reach the targeted valuation for the next round, the easier the process will be. By looking at this "backwards" calculation, sometimes it might make even sense to raise less capital in the current round (and/or at a lower valuation), to keep a consistent valuation increase story going and to de-risk the journey.

Investors assess how much capital the startup needs and how it plans to use the funds. The valuation should be reasonable and justifiable based on the startup's current stage and potential.

Clarity in funding requirements and a realistic valuation are super important. So you need to be able to clearly articulate how the investment will fuel your growth trajectory, and also be transparent about the valuation methodology that is employed. Investors typically appreciate founders who strike a balance between ambitious valuation goals and a pragmatic understanding of market norms.

Funding & valuation: the ultimate investor test! Be transparent & data-driven - explain your ask based on stage & needs, current runway, and future plans. Valuation should be a credible map to your potential, not a fantasy island. Use a trusted method and highlight measurable achievements. Remember, honesty & foresight pave the road to securing the right investment.

An extremely successful Venture Capitalist that I know looks for this: humility, modesty and frugality. He says, "When a bird flies too high, it's song is lost." That made a lot of sense to me. A founder who truly knows the value of the product has nothing to prove. Hence, may operate from a position of sincerity, with no pretense or posturing.

As an investor, I also look for scalability and adaptability in startups. It's crucial to assess how well a business can grow and adapt to changing market conditions or unforeseen challenges. This demonstrates resilience and potential for long-term success, beyond initial market entry and short-term gains.

Investors may have additional criteria specific to their investment thesis or industry focus. These can include regulatory compliance, intellectual property, technology innovation, and more. Remember that different investors prioritize these criteria differently, and startups should tailor their pitches to align with the specific preferences of potential investors.

Nobody wants to step on a 'landmine'. 'New' innovations are often not new and are protected via patents. Infringing a patent claim is the equivalent to stepping on a 'landmine'. Make sure you have conducted an initial 'freedom to operate' and have a strategy for not stepping on any 'patent landmines' and for protecting your innovation(s). It strengthens your moat and gives the investor confidence that their investment won't be 'blown up' by a patent infringement. Fundamentally this is a foundational due diligence activity for startups.