Sustainable competitive advantage.
This is the single most important factor in investment decision-making, encompassing all the elements of your proposed venture. ‘Sustainable’ means over the longer term; ‘competitive’ should include all the alternative ways other people may solve the problem you’re addressing; and ‘advantage’ needs to be measurable and significant.
A management team with a proven track record.
Your management team must be solid, balanced, and experienced, with a demonstrable ‘ability to execute’. They need to be able to work together in harmony and learn from each other’s strengths and weaknesses.
A defensible, dynamic product line.
It’s easier to predict the success of a tangible product than it is a service, making service industries generally of less interest to investors. The best position is some innovative technology, with a great initial product, and list of proposed follow-on products that’ll keep you ahead of your competitors.
Market potential.
Not only do you need to show how your product is unique, you need to prove that there is a real demonstrated need for it and a large-enough market potential. You must show that you know your demographics and will be able to reach your target market in an ongoing manner. Your pricing and sales strategy have to be clearly defined and in line with industry norms. If you already have a brand with a large customer base that’s relevant to this new business, that’s a tremendous advantage.
Strong focus and differentiation.
Investors want to know that you’ve acknowledged and researched your competition thoroughly, and they want to see your strategy for contending with competitors and distinguishing your products or services. What gives you the competitive edge?
Clear statement of investment offering.
How much money do you need, and how much ownership do you expect to give in return? Have you a realistic valuation of your business? How will you use the money? Who else is involved, and to what extent? Will you offer additional rounds of investment, and how will you handle equity dilution?
Return on investment.
You need to provide realistic financial projections that show how long it will take for the business to show a profit and for your investors to recoup their initial investment. They will also want to see a clear exit strategy – a way for them to make a profit and move on to the next deal.
Assuming you’ve done all this and you’ve gained an interested investor, remember that it’s important to have legaladvice before you take any type of investment for your business, to ensure that any deal you make is structured properly.
