What do investors look for in a startup? - The Hexaa

What do investors look for in a startup?

Investment in a business is a serious vocation: it requires careful planning and investigation of the trajectory of the business in which one plans to invest, in order to maximize profits and minimize the probability of any loss. This changes the paradigm of the investment sector completely; one ought to avoid rash and unplanned decision and in return, startups must also design their working in a certain way to attract the attention of as many investors as possible.

As a pet rule, there are a few characteristics that must be searched for in a startup before making an investment. Also, a good entrepreneur ought to pay attention to

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their money.

1. Idea:

A startup is only as good as the idea it is standing on. Every great company that has ever existed has grasped a certain niche in the market that was overlooked by its competitors before. The first step of making a startup a success in financing rounds is having a great idea and a plan for executing it. This is especially important if the idea is the product of an unconventional train of thought.

Even in cases where the entrepreneur does not know the investors and isn’t very popular, a startup hat is based on a good idea can gain him all the attraction from financial investors. It is suffice to say that an executable plan gives a startup the biggest leverage on its contenders no matter how competitive the business

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environment is.

2. Reliance on technology and innovation:

In seeding rounds, there are hundreds of entrepreneurs pitching their ideas for their startups, yet only a few are able to gain worthwhile traction in terms of their business. This is because with the changing milieu of the world, every investor looks for an enterprise that spearheads innovation and makes use of novel technology for making itself stand among its competitors. For this premise, hundreds of examples can be sought out from the market, espcially the tech industry.

The success of Microsoft, Tesla and Apple is based on this very fact: introduction of unprecedented technology and innovation that the public has been unaware of previously.

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3. Testing the waters – spending on customer research:

Startups that put themselves in the market and show diligence in inquiring the needs of the consumer become wildly successful in the long run. Such startups are able to know the environment they are dealing with and as a result are able to formulate and present plans that ought to work in the competitie environment.

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Working on researching the needs of consumer also gives a startup the advantage of being able to share the insights of the business with investors and gaining their trust with the fact that the startup actually has a plan to deliver the promises it makes with its investors. Thus, it wont be wrong to consider that development of a plan from an adequate study of the market is helpful in gaining attention from potential investors.


4. Adaptability

The circumstances in a business can change any day: pandemics, recessions, wars and all testing times put the fate of nascent startups at risks. Therefore, a good startup must possess the ability to move ahead with the market demands and induce adequate changes in the business as the circumstances require. Such adaptability allows a company to stay afloat no matter how hard the conditions become.

This allows one to keep up in all times and maintain business in one niche or another without having to stick to one paradigm. The example of Kodak is clear as daylight for startups that intend to learn from the failures of others: Kodak did not manage to adopt with the circumstances of evolving technology, and as a result was pushed out of the race of digital photography. Any good startup must possess the ability to rethink and revisit the originally intended plan of business, if need be.

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5. Competent Leadership:

A startup is bound to work only when it has a leadership that knows what it takes to run a startup in the cut-throat competition of the market. If we look at this situation from the perspective of an investor, he is actually entrusting someone with his hard-earned money that he saved in a great portion of his life. Therefore, the most important point of satisfaction that he requires is that his resources be put in capabe hands who are able to deal with the fine operations of making a startup successful.

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More than anything, an investor looks for a competent management personnel in a startup that ensures the birth of a strategy and plan for making the startup successful. Veteran entrepreneurs working for managing the company gain more attraction than anything else: they develop a bond of trust with the investors, making them feel safe while pouring their investment in a startup.