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Apoorv Ranjan Sharma

A doyenne in the field of early stage investment and start-up incubation, Dr. Apoorv Ranjan Sharma is the Co-Founder of Venture Catalysts, India’s first Seed Investment & Innovation platform. In his role, he is responsible for driving the strategic planning and overseeing the overall functioning of the organisation.

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6 Things Angel Investors Look at Before Funding a Startup

If you know people in the right places, then you’re already ahead of a lot of people. If you don’t, then leveraging your existing network and hunting for opportunities ceaselessly to make connections with influential people is a part of your job description.

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After working hard for months developing your product or service, you are finally done. You’ve mapped out your business model and are all set to take your business venture to newer heights — but how do you raise enough capital to get started?

Angels and early-stage investors are an attractive option for entrepreneurs and start-ups unable to secure funding from banks or financial institutions, but not every start-up is lucky enough to get funded by one. It is not enough to have just an idea or a product that you want to sell. A business venture must consider a whole range of factors that angels look at before they write you a check. All businesses are unique and face their own challenges from the very beginning, but if you tick all these checkpoints before going for your investor meeting, you will give your chances of securing an investment a big boost:

• Team

The most important factor that swings the investor vote in your favor is the team. A good team is the foundation of a potentially successful start-up and must include people who are not only good at ideation, but also know how to execute their ideas in a manner that fits the market requirements. It is rare for start-ups to have the perfect product that fits the market right away, and they will most likely need to pivot depending on what customers need, the competition in the market, and the transformation within the industry. Taking into consideration the high degree of uncertainty accompanying early-stage investing, angels almost always bet on the jockey over the horse based on their conviction in the team’s skills, domain expertise, and adaptability to evolve just as quickly as the industry does.

• Product

The product or concept is another important factor considered by investors when looking to fund a start-up. The product must be unique, must fulfill a need, or create some form of disruption within the market. Angel investors need to justify the large risk they are taking with a company, which is why entrepreneurs must offer them a fresh idea that promises to fill a void in the marketplace. Angels are knowledgeable in the start-up domain, so it’s very important for entrepreneurs to show them how and why their business is different and better than their competitors. Demonstrating to the investors that you have a compelling value proposition is extremely important, and is something that is often overlooked by most first-time entrepreneurs.

• Market traction

In a highly competitive market, where only a small percentage of companies get access to funds, it is imperative for a start-up to demonstrate a grasp of the market and its relevance in it. Early-stage investors need to see a sizeable market opportunity before committing their money, and start-ups can establish this through pilot or beta customers. Start-ups should also possess the ability to convert their pilot users into potentially paying customers.

• Scalability

Angels almost always take into consideration the scalability of the business idea, considering the need of the market and customers. For a start-up in its early stage, new factors can arise that require parts of your operations – like branding or strategy – to be tweaked and altered to fit the market requirements. A good entrepreneur must invest energy and emotion into a business plan, but not be tied to it, and must constantly be on the lookout for ways to improve what s/he is doing to achieve greater success.

• Networking

If you know people in the right places, then you’re already ahead of a lot of people. If you don’t, then leveraging your existing network and hunting for opportunities ceaselessly to make connections with influential people is a part of your job description. Either way, the ability to build relationships and maintain existing ones is very important for the growth and life of your business, and is a vital parameter that angels judge your investment pitch on.

• Converting users to customers

A pilot phase helps in testing the viability of a new product with a certain focus group, and has an added benefit of raising awareness about the product and getting conversations started through word-of-mouth referrals. What is important, however, is converting those early users into dedicated customers. This requires creating a positive user experience that translates into the adoption of the product by the end-consumer. Addressing vital issues pertinent to the market and customer needs becomes paramount in such a situation. Identifying the problems that the product solves and exploring how it can be made better than the alternatives in the market helps entrepreneurs refine the product and draw more customers. Entrepreneurs must also look to create products that drive engagement, compelling users to tell others about their experience.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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