What Do Investors Look For in Startups?

1. Strength and Structure of the Founding Team

Investors don’t just invest in ideas—they invest in people. The founding team is often the most important factor in early-stage investment decisions.

What they look for:

• Complementary skill sets: Do the founders bring a mix of business, technical, and industry knowledge?
• Leadership and vision: Can the team inspire and lead others?
• Commitment: Are the founders fully dedicated, or is this a side project?
• Coachability: Are they open to feedback and mentorship?

Tip: If you’re a solo founder, consider partnering with someone who complements your skills. Teams with balanced expertise and shared passion stand out.

Example: A SaaS startup with a technical co-founder (CTO) and a business-minded CEO is often more attractive than a one-person team trying to do both.

2. Scalability and Sustainability of the Business Model

A scalable startup is one that can grow rapidly without a proportional increase in costs. Investors are interested in startups that can expand efficiently.

What to demonstrate:

• Growth potential: Can the business grow regionally or globally?
• Revenue model: How does the company make money, and is it repeatable?
• Unit economics: Are you profitable per customer? (e.g., CAC vs. LTV)
• Barriers to entry: What protects your business from competitors?

Key Concept: CAC & LTV

• CAC (Customer Acquisition Cost): How much it costs you to acquire a customer.
• LTV (Lifetime Value): How much revenue you expect from that customer over time.

Ideally, LTV should be at least 3x CAC.

Example: A subscription-based app with low churn and high user engagement is more scalable than a service-based business with high overhead.

3. Financial Projections and Market Potential

Even though early-stage startups don’t have decades of financial data, investors want to see that you’ve thought through your numbers and understand your market.

What to include:

• 3-5 year projections: Revenue, expenses, and expected profit margins.
• Break-even point: When will your startup become profitable?
• Total Addressable Market (TAM): How big is the market you’re targeting?
• Go-to-market strategy: How will you enter and capture that market?

Key Concept: TAM, SAM, SOM

• TAM (Total Addressable Market): Total demand for your product/service.
• SAM (Serviceable Available Market): Portion of TAM you can realistically serve.
• SOM (Serviceable Obtainable Market): Share you aim to capture in the short term.

Example: “Our target market is the $5B online education industry. We aim to capture 1% in the next 3 years by focusing on language learning apps.”

4. Risk Analysis and Competitive Edge

Investors are trained to assess risk, and they want to know that you’ve done the same. A good founder acknowledges risks—and has a plan to reduce them.

Types of risks investors consider:

• Market risk: Will anyone actually buy this?
• Execution risk: Can the team deliver?
• Financial risk: Will the startup run out of money?
• Technology risk: Is the product reliable and secure?
• Regulatory risk: Are there legal concerns?

Tip: Don’t pretend your startup has no risks. Instead, show that you’re aware of them and are proactively managing them.

Competitive advantage:

• What sets you apart from others?
• Is it your technology, brand, community, network effects, or speed to market?

Example: “We have a patent-pending AI algorithm that reduces data processing time by 70%—a clear competitive edge in the healthcare analytics space.”

📌 Final Thoughts

Startups that get funded are rarely perfect. What matters is clarity, preparation, and the ability to convince investors that you’ve built something meaningful, with the potential to grow and scale.

If you’re preparing for your first investor meeting, remember:

• Know your numbers
• Know your customers
• Know your value

…and most importantly, know how to tell your story.