Startup funding
On several previous occasions we have spoken on this blog about what investors are looking for in order to place their trust in an entrepreneurial project. In this article we would like to delve into the 8 requirements for obtaining funding, a list drawn up by Patrick Hunt, one of the managing partners of Intelectium. In practice, startups must show a series of ideal conditions to convince professional investors (Professional Business Angel or Venture Capital Firm), and which mix such important concepts as the market, the product, the business model, its team and the chances of success in a reasonable time. Not that it is an inflexible list or all the factors mentioned must be met in all cases, but they are a good reference for most cases. Let's review these points or requirements: 1. A real problem that already exists. Although it seems obvious, it is not always fulfilled when the entrepreneur reaches the investor, since this problem must be real, current and pressing, and for which there are no adequate tools to solve it. The first point involves a dose of realism and practicality.2. A very large market. Linked to the above, if the problem is not generalized we will be able to do little to turn our business into something scalable and therefore attractive to an investor looking for significant business figures.3. At least two full-time dedicated entrepreneurs. Perhaps with the crisis it is somewhat complicated, but a single entrepreneur, even if he is dedicated full-time, is still considered a risk for the investor. But even if there is a second entrepreneur, if he does not consider his project attractive or important enough to dedicate himself full-time, he will not be considered relevant by those who do not know him and have to put money into it. Maximum conviction is sought in the challenges that lie ahead on the part of entrepreneurs.4. A prototype in the market. The napkin as an idyllic element of entrepreneurship is not sustainable when it comes to seeking funding. It requires the exercise of having worked on a prototype, on a tangible product or service, which in turn allows us to verify if we are dealing with a “minimum viable product” (MVP). This in turn will be the basis for verifying if we are really faced with something necessary and that meets an end.5. Great Traction. This MVP allows us to accelerate the launch of products and to have evolution metrics, which is what we call “traction”. Products that fail to generate “traction” in a reasonable amount of time do not give good feelings, as they reveal that we are facing a minor problem or that the market is very niche. It's no use trying to alleviate this lack of “traction” with marketing campaigns, because in the end it's still a patch for something that should work Per se.6. High level of customer retention (churn rate). Because if investors are looking for something, it is for there to be a product that has a high level of “retention”, that is, that the customers that the startup achieves return, are loyal and can even prescribe it.7. High customer interest in the product or service. And here we come to the point related to the”Engagement“, which refers to the time of use of the product, the conversion it generates if it is an ecommerce, etc.8. Signs of a successful business model. All of this ultimately leads to a key point: the existence of a viable business model, which assumes that customers are willing to pay for the service or product. In this regard, Spanish investors are interested, perhaps even more than their colleagues in the United States, that there is a viable monetization model from the beginning of the project, since it gives greater strength to the company in less time. From here on, it is possible to deepen and search for the existence of barriers to entry, degree of differentiation with the competition, exit barriers once users with customers, etc.More: How to seduce investors?
