Many people have great ideas, but only few can execute well. Hence, the first and foremost important factor for investors is the quality of the team. If an investor doesn’t believe that you can make the dream come true, there’s no chance he’ll move forward. Notice that I’m using the term ‘team’ rather than ‘founder’. The reason is that most investors prefer avoiding investments in startups that have a single founder.
100% Commitment – Investors want to know that you’re spending 100% of your time working for the startup. This means no side-projects and definitely not working for someone else at the same time. Usually, by the time you’re ready for fundraising, you’ve already been working full time on your project for a few months. Thus, in most cases this isn’t a real problem.
Personal Skills – Investors prefer investing in entrepreneurs whom demonstrate unique personal skills. So if you excelled in the academia, won any prestigious prizes, or launched a successful open source project, don’t be shy and mention it.
A well rounded team – It’s not only about the personal skills of each team member, but also the diversity of skills between the members. Thus, you should have at least one techie co-founder, one business/marketing co-founder, and if you’re developing a mobile of web app, a UI/UX co-founder. Most investors would also want to see that the company’s equity is fairly distributed between all co-founders. If it’s a very early stage startup, then fair means equal percentage to all co-founders (remember that it’s execution that matters, not the idea).
Real-life experience in your startup’s domain – Having prior experience in your startup’s domain decreases the risk that you’ll make rookies’ mistakes. If you don’t have such experience, then you should at least have profound knowledge in this domain. This means the following:
Understanding the ecosystem – You must be familiar with all the different players in your ecosystem (i.e. customers, suppliers, distributors and competitors). You should have a deep understanding of how the product, the information and the money flow between all these players.
Understanding the customers – You should have a clear understanding of how the market is segmented, how big is each segment, what’s the segment’s demographics and how the customers behave. For each segment, you should know where are the customers (online and offline), what are their most important needs, how much they are willing to pay, what’s the ‘customer acquisition cost’, what’s the ‘customer life-time value’, etc. (I’ll elaborate on this topic in one of my next posts).
Understanding the problem – Once you have a profound understanding of the ecosystem and the customers, you should be able to explain in one sentence the most important pain point that customers have.