Here are some of the keys to becoming an investable business and unlocking the financial backing needed to fuel your growth and achieve your goals

In today’s business landscape, startups have been gaining ground and capturing the attention of investors for years. However, not all of them manage to become investable companies that attract the necessary funding for their growth and success in the short, medium and long term.

In fact, the first quarter of 2023 accumulated more than 519 million euros invested in Spanish startups, as reported by El Referente in this article. Does this sound like a lot? If we compare it with the first quarter of 2022, we can see that we have experienced a drop of close to 780 million euros, from just over 1,300 million to just under 520 million. Given this situation, how can we build a startup that is attractive to investors?

In this article, we will highlight some general keys to being investable. We will look at the factors that are considered crucial when evaluating a startup and examine the strategies that entrepreneurs can implement to maximise their chances of securing funding. From the initial idea to the development of the business model and the execution of the plan, each stage of the process plays a vital role in creating an attractive startup.

Define a strong and scalable vision

Investors are looking for returns, so the secret is to show them that the startup is not good today, but that it will be good tomorrow. They are betting on you because they believe you have potential and you must sell them the strategy that will respond to their confidence. Consequently, one of the first keys to being investable as a startup is to have a clear and scalable vision. If you want to learn the main principles for scaling, read this brief. “You can lose money in the short term, but you need the long term to make money,” says renowned investor and manager Peter Lynch. A projection that shows the startup has a clear plan to grow and reach a wider market, increasing the likelihood of significant returns, is critical. Being scalable, i.e. being able to increase revenues without increasing costs, is essential to raise funds. To this end, the roadmap needs to be specific and clear, which will help mitigate doubts about the potential revenue stream.

Build a team with industry experience and synergies

The founders and the team is a crucial factor in attracting investors, as they will scrutinise and take into account the passion, background, skill and decision-making of the management group. In addition, they expect it to be flexible, and open to change if ever necessary. There are many factors (including unquantifiable metrics such as intuition) that will determine whether or not they invest in you, but one fact is clear: they must have confidence in who they are giving their money to. “My biggest mistake is probably looking too much at people’s talent and not enough at personality. I think it’s important that people have a good heart,” said business magnate and investor Elon Musk. Investors are looking for a team with complementary skills, relevant experience and a proven track record of execution, but also people who convey humanity and confidence. Showing a strong and committed group will increase the chances of attracting money.

Have a viable and sustainable business model

This involves having a clear understanding of how your startup will generate revenue, maintain profitability and grow over time. So you need to specify the customer segment, understanding their demographics, needs, behaviours and preferences to be most effective; the value proposition, identifying the benefits or solutions you offer, and how they differ from existing alternatives; the distribution channels, setting out how you will reach your customers and how you will distribute your product or service effectively; the revenue streams; the cost structure; the growth strategies, being realistic and always looking to the future; or the competitive advantage, which must be sustainable or adaptable and can be related to price, quality, customer service, technology, innovation, among other factors. The business model can evolve as the startup grows and adapts, so be prepared to adjust it according to the feedback and needs of the market as well as the investors themselves.

Being open to feedback and learning

The final argument in the previous section is related to this quality, which is useful to be attractive to investors. This line of thinking allows you to constantly improve, adapt quickly to market needs and stay competitive. Moreover, getting different perspectives, such as from customers, experts, entrepreneurs or investors, allows you to refine and adjust your proposals. In the same way, you can discover opportunities that you had not previously considered. Also, by receiving open feedback and acting on it, you show investors that you value other opinions and are willing to learn and improve. This contributes to building strong and trusting relationships.

Demonstrating traction and validation

Investors are looking for tangible evidence that your product or service is in demand in the market. Eric Ries, author of The Lean Startup, emphasises the importance of measuring and learning quickly through iterations and experiments. Iteration is the process of repeating over and over again the process of devising, testing and redefining what we want to launch and make it investable. Traction refers to the metric that shows how well (or poorly) you are taking your business model to market and how well it is being accepted by your potential customers. In short, you show whether it is reasonably validated, which is basic because it demonstrates results. These elements help to assess risk and potential return on investment and allow you to make more informed decisions. This is undoubtedly one of the most attractive signals to investors, because it is a sign that there is a real need that you are addressing.

Up to this point we have presented the characteristics that your business should respect in order to increase its investment possibilities. In this link you will find the many ways to raise finance.

If we focus on the specifics, remember that each investor has their own preferences and additional criteria, so it is important to tailor your approach to the needs and expectations of each investor. Therefore, the more you know about the person or group you want to sell the project to, the better. Also, keep in mind that the bond you create with investors is often just as valuable as having a promising business on your hands.

In short, turning your startup into an investable company is not an easy task. Each business is unique and your case may not be applicable for the rest, but it is true that by respecting the strategies mentioned above, you can significantly increase your chances of attracting the capital you need to take the next step.