7 Ways Startups Can Attract Investment in 2023
We all know the tech world is upside down. Layoffs at Amazon, Microsoft, Apple, Salesforce, and other big tech companies have captured the attention of investors who seem to be bracing for a pending recession. Also, valuations are down across the board, and investments that look too risky or cash intensive are being shown the door.
What is a founder to do? Pack up and go home or fight for their idea?
If angel and venture capital is drying up, startups can still try to attract investors by taking the following steps:
Focus on the fundamentals: Let’s be brutally honest, your startup needs to have a strong business model, clear value proposition, and a solid go-to-market strategy. Investors want to see a clear path to profitability with significant growth potential. This is as constant as gravity.
Demonstrate a competitive advantage: Investors want to see that your startup has a competitive advantage that will stand out in a crowded market. This could be in the form of intellectual property (IP), a unique technology, or a strong brand (i.e., a trademark). These factors are what will allow your company to stand out and keep growing once it faces real competition. Investors don’t like lawsuits (or fund litigation), so you better know if you can operate within the protections you have, especially should a threat arrive.
Build a strong team: Investors want to see that your team has the right mix of skills and experience to execute on your business plan. Make sure you have a team that is dedicated, passionate, experienced and has the skills and expertise to succeed. Having a team with redundant skills and background is a red flag.
Show traction: Investors want to see evidence that your startup is gaining traction in the market. Show them your growth metrics, user engagement, customer testimonials, and financials (if available). Too many pre-revenue founders are afraid to sell. Sales is like truth serum. They will show if your business has merit or if you should pack it up. Investors in 2023 see no sales as a huge risk and will value your company accordingly. Do yourself a big favor and figure a way to bring in customers before investors.
Be transparent: Be honest and transparent with investors about your startup's strengths and weaknesses. Show them that you have a plan to address any challenges or risks. Nobody is perfect, but if you can’t be trusted or are unconvincing, your pitch is done. Investors want founders who are coachable, willing to listen to experience, honest, and ambitious.
Network: Build relationships with potential investors by attending events, reaching out to investors through LinkedIn or other platforms, and getting introductions from mutual connections. This is important as closing in on investors is going to be tough in 2023. If you are going to rely on multiple rounds of financing, you need to keep more people on your radar.
Consider alternative funding sources: If raising traditional capital is difficult, consider alternative funding sources such as angel investors, crowdfunding, grants or even customers. Customer-funded businesses are always more attractive and given the opportunity cost of raising money or chasing new customers, revenue from customers is the best choice every time.
By following these steps, startups can increase their chances of attracting investors, even in a challenging investment environment.
MVIP can help your company by addressing many of these points right away. Contact us to get advice on how the MVIP approach will help set your startup up for long term success.