5 Strategies Investors use to Pick Companies

It's hard raising money. How do you do it while understanding the terms, what funders need, researching funders, etc. Here are 5 Strategies Investors use to Pick Companies.

Strategy #1: A Strong Team

People invest in people. The company needs a strong team to grow, thrive and realize an exit someday. Our company work with founders to prepare them to speak with investors. There is one thing that successful teams have in common: communication. They know how to listen, take feedback and give constructive feedback to people. This is important for a funder to see, as the #1 startup failure is the shattering of the team.

Strategy #2: Customers (aka Traction)

When a company has paying customers, it shows the investor that they have been able to validate their business and revenue model. Getting the first set of customers (between 1 - 5 in B2B case, 1 - 1000 in B2C case) is one of the key metrics that are used to evaluate how a company is executing on their idea. This is the true definition of product market fit. As the company grows, they can create automation to help them have a consistent repeatable stream of revenue.

Strategy #3: Competition

There are always other companies within your landscape. If a company says "I have no competition", then they are saying, "I have no market for this product". No market, no money. Competition is good. Why? They can become your next acquirer, partnership or collaborator. They can also, potentially provide comps for future exists. So go ahead and deeply analyze the competition.

Strategy #4: Conviction

We speak with many founders and funders. Many funders may tell you, "If you change X, I'll fund you.". This might be to see if you have conviction for your business. If your company is going to blow with the wind, you will chase funding and not have a viable product. Its fine to justify your product, thesis and idea. Be flexible without being so pliable that the company stagnates chasing after the next dollars.

Strategy #5: Funding Language

Know the language of funding and fundraising. There are many terms to learn in the funding journey. There are many things to learn about how fundraising works. This final resource talks about 16 questions that a founder can think about prior raising money. They are very enlightening and help you determine when to start rising money. They help you get in the right mindset for fundraising.

16 Common Questions About Fundraising - Andreessen Horowitz

For most companies, fundraising isn’t about $100-million rounds and “unicorns”. It’s often an anxiety-ridden, lonely, frustrating process filled with uncertainty and self doubt. Despite the stories out there, raising venture capital isn’t easy for most startups. Entrepreneurs are always evaluating…