Early-stage companies jostle in a highly competitive and saturated marketplace, with intermediary platforms and the online blogosphere highlighting this saturation. As such, it can be difficult for investors, whether experienced or native to the industry, to discern which startups are worthy of growth investment attention. It’s important to siphon the cavalcade of information and PR that cloud these companies, and understand the main things to look for in a successful startup. Today, Equitise assesses the common characteristics of startup companies worthy of your time and investment.
One of the primary factors is the market in which it operates, and the corresponding size and need. This has been assessed as the key factor behind startup failure, with 42% of startups failing owing to ‘a lack of market need’. CBS Insights gained this after studying over 100 startups, who clearly failed to consider the feedback and validation necessary before taking ideas to investors. A brilliant solution or product requires a corresponding market need – the most successful pitch is meaningless without significant research and convincing statistics that can assure potential investors.
Likewise, investors should assess the individual team behind the startup, which can be a valuable performance indicator. Interestingly, startups formed by more than one founder have been assessed as 160% more successful than their individual counterparts, further proof investors should conduct background work. People are as worthy and important as ideas. While equity crowdfunding doesn’t demand the same level of personal interaction as some other investment types, it’s nonetheless assuring that your funds will be in the hands of qualified and experienced individuals. The idea and team must be assessed in conjunction. Whether it’s the history of the co-founders working together, their track record of companies or their industry connections, there are many things to look for in a successful startup team.
Similarly, it’s vital your startup has a detailed and ambitious business plan that withholds scrutiny and demonstrates an understanding of the marketplace. This should include the examination of the market need, competitors and the distinct advantages of committing to this startup. Market research and surveys should have been incorporated into this assessment to provide feedback to prospective investors that the business has reached out to its clients and the community. This should be provided in conjunction with a pitch deck, and the business should have an open approach to the provision of information. The business model may already be in action, and this demonstrates a real commitment and enthusiasm for the company that other startups may not be able to equal. If you’re able to assess what seed costs have been apportioned towards, whether it was marketing strategy or product development, this is especially valuable.
The above criteria provide simply an initial list of factors to consider when assessing the startup worthy of your growth investment. Crowdfunding platforms work as intermediaries, and are not able to offer the full gamut of information on the company, this should be assessed and determined by the individual investor. Nonetheless, always keep in mind these factors when determining which hopeful startup could benefit from your investment, and could benefit your investment portfolio.