Investors/Venture Funding is as much part of the startups as is the idea and entrepreneur himself. Before internet, or software boom hardly you could find people opening up their pockets to fund an idea. The whole scenario changed with globalization and new whiz kids entering the business sector which was held within the families from generations.
There is hardly any company in recent times which has come up without any investor backing it, Amazon, Apple, Microsoft, and the list goes on. Venture Capitalists keep looking for new ideas and people through whom they can make a profit. They are constantly on the lookout for these self-motivated set of people who are working out of the box. So what is it that they look for before investing in the startup?
People behind the Startup
Investors spend time and money to look at the startups that are creeping up. What catches their eye is the team behind the Startup, how charged up they are to make their idea a reality. This team of people does not have anything sell to the investor apart from their idea, passion, integrity, and willingness to an extra mile to get things done. Any investor is interested in your startup only to make a profit. Once they get the reassurance from the team, they are with you.
Knowledge of the product and current Industry
A decade back, if anybody would have claimed they can do shopping without card there certainly would have posed quite a few eyebrows. But today it is a reality with digital wallets sweeping the market with every transaction done.
But there were investors who saw it coming and there came Paytm and Mobikwik. Apart from the team’s abilities and experience, the need arises to know the difference a product can make to the current industry. You certainly are looking at a future which is not envisioned by anyone.
The Startups are thoroughly examined
There will be quite an effort from Venture Capitalists tend to know about the startups. They spend quite a lot of time and effort to gather the information of the startups, their selection and also have brain storming sessions to come to the conclusion of how can they be a profitable investment for them in future. Once they are short listed, they will be examined thoroughly and also the entrepreneurs have to give detailed answers to all their concerns. Entrepreneurs need to have all the answers ready for the idea, to completion of the project and the future forecast of the company.
In this age of various communication venues, age old networking is the one which works the best when it comes to funding. Most Venture Capitalists rely on professional and personal networks to find out investment worthy start-ups. In the studies conducted it has been found that 30% of the total funding done was through private network followed by the references by this network and from recommendations from the existing portfolio of the companies.
Criterion of funding
Funding varies by industry, location, stage of investment and the current trends. For example, in the case of IT, industry entrepreneur and his team get more score compared to the health sector where in products score high. In Silicon Valley ecosystem in California investors have always funded the less experienced entrepreneurs.
In the startups, it is either the technology or people behind it who are looked at. Well, so far people behind the startups have always scored higher compared to technology when investors are looking for investment.