To be honest, this post ended up with a lot more than four questions. I apologize in advance for that. This is a common question that founders have- “How can I get early stage funding for my startup?” I want to answer it from my point of view and highlight what I look for in startup pitches before investing. Here goes…
- What is the problem? How big is the market, and how are customers solving it currently? Don’t hide information about your competition because it shows that there is a real problem.
- What is YOUR solution to the problem? What is your unique superpower that only you have to help customers solve this problem? Have you tested this, or is it a hypothesis? You can test the solution using surveys, interviews, landing pages, search Ads, concierge MVPs, among many options. Also talk about why now is the right time for your solution to succeed.
- Have you got a co-founder/team, and what have they done in the past that makes them an excellent fit for your startup? If you cannot sell your idea to another person, then it is not likely that will you get customers to adopt your solution. Do you have an MVP that is tested with your customer segment? If you can present data to back up the usage and or feedback, it will be great. If you do not have a tech MVP, you can build a manual concierge MVP- that is often enough at this stage.
- How will you monetize? Are your customers able and willing to pay for your solution? This data point is important- customers will part with their money for a solution that they truly value. It also tells an investor that, eventually, they will be able to recoup their investment. If you have an idea of your CAC (Cost of Customer Acquisition) and LTV (life time value), then share it at this stage. I know these will change as you progress in your startup journey, but I am interested in knowing if you GET this concept and have an idea of how this applies to your business model.
What do I look for?
- SaaS companies that can scale without too much manual intervention. Gross margins >60%
- Platforms and startups that unlock network effects
One example of an investment opportunity that I passed recently: A Femtech company that issued cryptocurrency to “New Moms” if they viewed ads in their app. I thought this was a force-fit in terms of using current buzzwords to raise capital from investors. From what I remember from observing my wife after the birth of our daughter, I recall that “New Moms” do not have spare time to spend away from their babies! I just could not envisage moms watching ads to get rewarded with a crypto coin.
I am happy to look at innovative applications of blockchain, but I am not really into cryptocurrency for now. Did I miss investing in the future crypto/ femtech cross-over blockbuster startup? Only time will tell!
Originally published at https://www.linkedin.com.