WHAT DO INVESTORS WANT TO SEE?
With a strongly rising number of startups in SouthEast Asia, especially Vietnam, in recent years, grabbing a chance to meet an investor individually is gold. However, there are entrepreneurs who fail to nail those first interviews. This is due to several causes which sound very reasonable: lack of investor meeting experiences, mismatching in expectations from both sides, language barrier, etc.
Having been working with a good amount of international and domestic investors, VIISA took an opportunity to quickly survey some of the investors hoping to figure out the true scenario from the other side. Before we dig any deeper into this topic, please remember that we do not talk for all investors. Especially, the “investors” we are mentioning in this topic are mostly early-stage investors (angels to pre-series).
Below are some of the critical aspects of your company that you can definitely get better prepared for those valuable meetings.
1. YOUR PRODUCT FIT
➛ In a world when ideas are born by seconds, it’s easy and very common that your problem statements are based solely on assumptions. At the beginning, you might not see it as a big deal. However, as your customer base grows, at some point in time you will see a slow-down in the chart. And you absolutely do not want to risk landing in a situation where nobody wants your solution, which is rather sad given the amount of time and finance put in. Remember, if there is no need from the market/ no problem to be solved, there is no business.
➛ So, do your homework. Verifying the problem, designing the solution and having it clearly defined to your investors are crucial. Remember, they are not the people in your industry. Therefore, make it on-point and easy to understand.
2. MARKET SIZE
➛ Investors expose themselves to more risk investing in your company since you are something new and innovative (of course, with the belief of a higher expected return). Thus, make sure that you are targeting a big enough market for them to consider. This market opportunity is also a signal for investors on the long-term potential of your early stage business.
➛ Some founders may find it hard to measure this. Our advice is to start from an established fact (can be statistics from researches, report,etc.). Then you can narrow down your market size to any angles that you are standing at or targeting to. This approach will make yourself straightforward enough for investors to quickly get a grip on how big you are supposed to make.
3. MONEY TALKS!
➛ A lot of entrepreneur articles have already mentioned this in several ways. And we found out that it mostly comes down to two things: the business model and unit economy model.
➛ In terms of business model, you can definitely start by defining how you are going to make money out of this business. Having said that, being able to clearly show who is going to pay you the money? And, how are they going to pay (subscription base, transaction base,etc.)? And what seems to be quite important is how big your revenue is going to be in the next couple of years? Therefore, the investor may somehow get the idea of their ROI on your startup.
➛ On the other hand, we saw some founders really struggled with the unit economy model. And most of them ended up with a pretty complicated yet hard to understand figures. For early stage startups, we suggest you take some baby steps at this point.
➛ First, work on the lifetime value of a customer to your company. On “Medium”, Snapship shared “The CLV metric is valuable as a health-check of your customer base or as a tool to look historically on your acquisition strategy and iterate your approach towards unprofitable customers while repeating the process used on the profitable segment.”
➛ Second, take into account the customer acquisition cost. Customer Acquisition Cost (or CAC) is the expense required to obtain a new customer. CAC is typically used in conjunction with LTV (lifetime value) to gauge how much a new customer costs compared to the total revenue they’re expected to generate.
4. MANAGEMENT TEAM
➛ It is not very surprising to us that most of the investors we surveyed pay special attention to the quality of a startup’s management team. Founders with big dreams usually caught the eyes of investors. Even so, the team behind the scenes, who help them realize those dreams, is the golden key.
➛ The right team helps break down founders’ big dreams/ visions into milestones, objectives and targets and ensure everything is on the right track. Moreover, as Johann Wolfgang von Goethe, a German writer, once said “A great person attracts great people and knows how to hold them together”, your ability to onboard great people is also a hint for investors about your potential of becoming a great founder.
➛ Therefore, during an investor meeting, if you believe there are valuable core members in your team, always save enough time to share about them. A few questions that you can use as food for thoughts when preparing this part such as what relevant domain experience does your team have? Why must it be this team to execute this business plan? What brought your co-founding team together? How do you keep the team work in harmony?
👋👋👋 ALL IN ALL
➛ Being an entrepreneur has never been an easy game and it absolutely does not comfort any weak minds. We hope those sharings above can equip you with some ideas to have a better preparation for those furious yet interesting investor meetings.
➛ Over the course of 4 years, VIISA has conducted 7 batches of acceleration program where over 65 founders of 36 startups were supported to level up their capabilities and also successfully raised their next round fundings.
➛ At VIISA, we believe in empowering founders for a better Vietnam.