by James Ker-Reid - May 13, 2021

What investors are looking for in a tech startup

With 20 percent of businesses failing in their first year, and 60 percent failing to reach three years, it should be of no surprise that securing startup investment is no mean feat. Any prospective startup investor will carry out due diligence to make sure they are backing the remaining 40 percent.

The positive news is that UK tech VC investment hit a record high of $15bn in 2020, VC investment into London tech was more than Paris, Berlin and Stockholm combined at $10.6bn in 2020, and UK cities made up 20% of the top 20 European tech cities. Furthermore, investment in UK nations and regions remained strong through the pandemic with record years for some regions including South East, South West and West Midlands.

So, what is an investor looking for in a B2B technology startup?

A strong value proposition

In the technology industry especially, change is rapid. As such B2B technology startups need to demonstrate their value above competitors. This can be especially relevant for organisational value, so that an investor has the confidence in the business above the product. This way, they have confidence that you can withstand any competitor knocks by giving value above and beyond a product or service. So, what can you promise your customers?

Sales Strategy & Service Unique Selling Proposition

Going a level up from your value proposition, your USP or unique selling proposition, applies directly to sales. A potential investor will need to be convinced that you have a solid sales strategy that highlights the advantage of your product or service against all other options. What special features or unique attributes are there that cannot be rivalled?

Team experience

Let’s be honest, the market for tech startups can get pretty saturated. But if your potential investor is tempted by a comparable product, then it could be your team that stands out. When investors seek startup opportunities, they are investing in people as much as they are investing in products, especially at the Pre-Seed to Series A stage. Startup success takes a lot of hard graft, and you need to give investors the assurance that the business is in good hands by highlighting your expertise and training programmes.

Market size

Competition is not always a negative thing, in fact, to investors it illustrates an active market. The majority of investors will seek opportunities in existing markets to reduce risk. They are looking for a market that will allow them to reach the greatest number of customers, typically the chance to expand into a global market but initially a segment that is niche enough for their capital to have impact.

Sales and budget forecast

Do you have a timeline for achievement? Do you know when you will reach your milestones?

Depending on the agreement, investors will want to see forecasts backed by research to trust that they will see returns.

Lead generation strategy

Finally, with all the other pieces of the puzzle in place, how are you going to find customers? Your lead generation strategy is a crucial part of any pitch and should bring your marketing and sales strategies together. Think about every step of the sales funnel from awareness, through interest and decision to customer service. Remember, your customers are your best ambassadors and it pays to show your investor how you will facilitate that.

So, what is an investor looking for in a B2B technology startup?

Clearly there are many factors that investors look at, and this is not an exhaustive list. One piece of advise we share at Sales for Startups is if you can help give investors 90% certainty on your team, data and strategies then they only need to gamble on the remaining 10% in order to make an investment decision.

 

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