"Startup founder, it's you not your idea that impresses investors"

What do investors really want? This question often echoes in the minds of aspiring entrepreneurs, and at its core lies a fascinating truth: investors are not merely hunting for innovative ideas; they are searching for potential. They want to see if your business can grow, scale, and ultimately deliver a return on their investment.

Imagine this: A solid network of investors isn’t just a luxury; it’s your lifeline to success. These connections can unlock doors and provide the crucial funding you need at pivotal moments. Nail it, and those investors might stick around long after your initial venture. But let's be real—navigating investor relations is anything but straightforward.

While the internet is awash with advice on making a stellar first impression and perfecting your pitch, there are insider insights that can truly set you apart. What do investors genuinely look for? How can you build trust and rapport?

Sahil Chopra of Inflection Point Ventures spills the beans on a top-secret factor that many overlook: “It’s not just about the idea; it’s about the founders.” That's right! Investors are hunting for strong businesses led by exceptional individuals who possess a clear vision and the tenacity to overcome hurdles.

Sahil Chopra is an accomplished professional specializing in growth, marketing, and management consulting. Currently, he serves as Associate Vice President of Growth & Marketing at Inflection Point Ventures. IPV is an investment platform with a network of over 12,000 CXOs, high-net-worth individuals, and professionals, that navigates the intricate landscape of early-stage investments.

Prior to this role, he co-founded Happy Nature, where he successfully drove substantial annual revenues. Sahil began his career as a Management Consultant at Accenture Strategy, where he focused on enhancing passenger experiences in the aviation industry and led sales transformation initiatives in automotive and retail sectors. Earlier, at Mahindra & Mahindra, he played a key role in driving revenue growth within retail operations and managing a significant regional business. 

Size matters

The market potential is another critical area of focus. Investors assess the size and growth trends of the industry, seeking evidence of genuine customer demand. “If you’re solving a problem, make sure it’s a problem worth solving,” Mr Chopra says. Understanding the customer segment and the compelling nature of the solution can be the difference between a funded startup and a forgotten pitch. Scalability also plays a significant role; a startup should ideally grow without incurring exponential costs. After all, no one wants to invest in a business that’s destined to become a financial black hole. 

Know the rivals

Competition is fierce in the world of business. Mr Chopra explains that investors consider both direct competitors and substitutes that might address similar needs. A clear competitive advantage—be it proprietary technology, brand loyalty, or operational efficiencies—can set a startup apart. “In a crowded market, differentiation is your best friend,” he quips. Effective strategies that highlight unique features or exclusive partnerships are essential for survival in this cutthroat environment.

Red flags to avoid

While many factors can impress investors, certain red flags can quickly extinguish interest. A vaguely defined problem? That’s a warning sign. “If you can’t explain your problem clearly, you might want to rethink your pitch,” the investor suggests. Overly optimistic financial projections also raise eyebrows. Teams lacking industry experience or weak customer acquisition strategies are concerning. Furthermore, neglecting challenges or having no plan for customer retention might indicate that a startup is not quite ready for the market. It’s like showing up to a race without laces tied—potentially disastrous.

The digits speak

Financial health is paramount when evaluating startups. Key indicators include the revenue growth rate, which reveals market traction, and gross margin, a signal of potential profitability as the company scales. The ratio of customer acquisition cost (CAC) to customer lifetime value (LTV) is crucial too, providing insights into the sustainability of the business model. And let’s not forget about the cash burn rate—nobody wants to be left in the dark about when their funding might run dry!

Citing some examples of successful startups, Mr Sahil said, “Certain sectors are currently grabbing investors' attention. In the electric vehicle (EV) realm, startups addressing critical infrastructure gaps—like accessible charging and efficient battery technology—are paving the way for a sustainable future. Meanwhile, mental healthcare startups are revolutionising support by making it more accessible through on-demand therapy and telehealth services.”

What’s hot!

Currently, Mr Chopra is keeping an eye on sectors such as sustainable technology and renewable energy, which align with the global shift towards eco-friendly solutions. Health tech, particularly in mental wellness and telemedicine, shows promise due to its potential for social impact and scalability. Web3 and blockchain technologies are also generating buzz, with their capacity to enhance transparency and security across industries. These areas not only offer significant growth potential but also the chance to contribute meaningfully to societal transformation.

Entrepreneurs, keep it real

For those seeking angel investment, the investor offers some straightforward advice: clarity, transparency, and passion are key. “Investors love founders who show commitment and know their market inside out,” he notes. A detailed, realistic business plan and a readiness to adapt based on feedback are essential. Transparency about risks is appreciated—after all, a well-prepared founder is a reassuring sign for potential investors. Additionally, choosing investors who can provide strategic guidance and connections, rather than just cash, can make all the difference.

After all, the journey of building a successful startup is much like dating—sometimes it’s about finding the right match, rather than just the best pitch!