Welcome to a series of articles on the Investor Expectations (IE) from Startups who are potential Investees.
Let me begin by making some ground definitions on the scope of this series of articles.
By Investors, I am referring to those who help fuel the growth of a startup with money at any stage in return for equity.
The money could be in the form of seed funding, early stage funding, Series A etc. The reason for treating all of them as one block is that they are all seeking multiples of returns for the risk they are taking in the startup’s unknown journey.
Exceptions: I am aware that there are some investors who make investment decisions for reasons other than seeking returns such as a) They are personally excited about the technology b) The founders are personally known to them c) For vanity reasons such as wanting to be seen as an Investor in their circles or by media d) Do not want to be left out in the race. The last description may even apply to very seasoned investors.
In this series, we are NOT addressing the concerns or expectations of these types of Investors.
I also do not intend to portray Investors as perfectly rational beings and I am aware of their own quirks, gut feelings and prejudices. But given that those are individual-specific and may be triggered by many factors, these too would be out of the purview of this discussion.
Having decided to address those Investors who are driven to generate much higher rates of returns compared to other investment avenues, it would be worthwhile to take a sneak peek into their expectations from startups to avoid a mismatch.
I am not going to deluge you with figures and statistics nor am I attempting to dissect the finer aspects of investment such as valuation, quantum of investment etc.
Much of what I am going to write are about the elements in the pre-decision space and the factors that favourably or adversely influence the investment decisions of these investors.
It is my fond hope that the Founders of Startups may find significant value in this series to become better prepared to pitch to Investors and in the process make the funding process largely free from frustrations for both the parties.
Before proceeding any further, I felt it would be appropriate to put in place a few disclaimers and so here they are.
Disclaimer 1: The content for this series of articles on Investor Expectations (IE) is from my own observations based on my conversations with Investors, Intermediaries and personal interactions while pitching to Investors for my earlier ventures.
Disclaimer 2: I draw upon real-life instances sans the identifiers to support my observations . So if you notice, either as a startup or an Investor, something familiar, perhaps you may have mentioned it to me during one of our conversations. Rest assured that my intention is only to capture the lesson in the event and not to cause any discomfiture to any of the parties involved. I also take efforts to mask the event so that they cannot be traced back to any single party. I do not name any person in my blogs for the simple reason that what he/she went through is far more important than the person himself/herself.
Disclaimer 3: I recall the words of my maternal grandfather, a self-taught astrologer who said “Astrology is not just a mathematical analysis of the positions of planets but is largely driven by the psychology of the planets”. He would base his predictions on what he called as the planetary behaviour. Likewise, in an investment decision, the Investor psychology will play a major role and hence we will be focussing on that in this series.
A shameless plug: At Idea To IPO Growth Consultants, we offer a packaged consulting service GRIP (Get Ready your Investor Pitch) to assess the Investor Readiness of Startups (based on 22 Vital Parameters) and help them become one if they aren’t already.
A couple of requests:
- If you find this series of articles interesting and valuable, please share it liberally with Investors, Intermediaries and Founders of Startups and on the social media.
- If you chanced upon this article and would like to receive them in your own whatsapp timeline or email inbox as soon as they are published, please write to me with subject line ‘Interested’ with your name and mobile number (for those interested in receiving it via whatsapp)
Just to reiterate, the objective of this series is to help Founders understand the expectations and concerns of the Investors and prepare accordingly for mutual benefit.
If you think that this preamble is unduly long, I fully agree. Let’s start on this journey.