To be approved for funding it’s necessary to know what the investors really look for in a worthwhile business proposal.
Most start-ups scour their networks looking for the fund providers who would take a shot in their businesses. Armed with the best business proposals and hot tips from fellow start-ups, it is common for newbies to get rejected time and time again. It is more likely to be approved for funding when those who ask know what the investors really look for in a worthwhile business proposal. The following are the 7 top guidelines which investors generally use when considering providing funding to a start-up.
- Is the project fit for the investors’ profile?
Investors of any kind have what is commonly known as a risk appetite. They have their own funding price ranges wherein they are most comfortable investing in. Depending on the company’s or the individual’s personality, investors are more liable to invest in start-ups who are within their preferred price ranges. Taking to know your investors and the type of businesses they have funded prior would help in the chances of a better proposal.
- What is the timeline of returns and how much to expect?
Just because you have a charming business idea, it does not guarantee a sure funding from the investors. It is important for clear timelines of returns and the viability of exit strategies to be clearly presented and carefully thought-out. Investors also have their own appetites regarding the period of their returns. Some would want a shorter timeline of 3-5 years while others are comfortable up to 15 years, as long as the action plan is stable and reliable. Along with the length of time, investors also look into the amount of returns your business venture would generate for them. It is also best for all parties to be informed of all the critical numbers and values of profits and incomes.
- Does the product or service have a unique selling proposition?
Part of a stable and reliable action plan is the quality of the product or service that the start-up will offer the intended market cluster. Offering a selling proposition which is unique to the product or service creates a significant impact in the chances of successful funding. A company which only offers a product which is already in the market and provided by an established brand is a definite red flag for investors.
- Is the company viable for market expansion?
As early as starting, investors keep an eye on the company’s capability to expand to other markets from the initial target as per the business plan. The company’s ability to expand is a direct function of the CEO and the founding members’ ability to manage and uphold their own action plan to achieve their goals.
- Can the company generate enough revenue to run itself?
If the company must rely on multiple sources of income to keep it afloat, this will also mean that the product that it will offer is not a strong proponent for stability. The product is the centerpiece of the business proposal and it must be competent enough to generate the revenues to run the company.
There are more technical questions that investors can consider during the asking and approval process. The guidelines above involve the essentials of a promising business plan. Formulating your own proposals will greatly help your chances of being approved for funding.