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It is a very common misconception in the startup world that just by having a revolutionary idea, you will get crores of funding. The reality is that in today’s era, ideas are available for free but the real cost lies in their implementation. Investors invest their money not in some dream but in a business model that is sustainable on the ground and has the potential to generate huge profits. In emerging and established startup hubs like Lucknow, Bengaluru, Mumbai or Delhi, hundreds of pitch decks are rejected every day as founders rush to raise funds without basic preparation. If you really want to take your startup to the point where angel investors and VC funds come to you, you’ll need to approach every aspect of your business professionally.
The first thing any investor looks at is your Product-Market Fit (PMF). This simply means whether your product is solving a real problem in the market and whether people are ready to pay for it from their own pocket. It is no longer possible to raise big funding just by taking surveys or showing the number of free users. When you have repeat customers and your Month-on-Month (MoM) revenue growth chart is climbing upwards, investors are automatically attracted towards your business. Solid traction proves that your idea has been accepted by the market.
Unit economics has become the most important parameter in the funding game. The first question of investors is that what is the cost of adding a customer i.e. Customer Acquisition Cost (CAC) and what is the profit received from that customer in the entire lifetime i.e. Customer Lifetime Value (LTV). If your LTV is not at least 3x your CAC, your business will not survive in the long run. Along with this, the monthly cash burn rate of the startup should be controlled and the founder should know the exact calculation of his runway so that the investor can be confident that his money will not be spent on wasteful expenditure but on growth.
Investors never invest money in a startup which can be copied and destroyed by a big player within a few weeks. You must have a strong ‘defensible moat’, be it your patented technology, exclusive distribution network, network effects or data analytics. Apart from this, the scalability of your business should be clearly visible. If your business is successful in one city like Lucknow or Kanpur, a step-by-step roadmap on how it will expand to 50 other cities in the country or globally doubles the investor confidence.
When investors invest money in a company, they adopt a rigorous process of due diligence. Many great startups miss out on funding simply because their legal structure is weak. Company incorporation, GST filing, compliance with SEBI and FEMA guidelines, tax records, employment agreements and Intellectual Property Rights (IPR) should be completely in order. The most important thing is your cap table (Capitalization Table), which should be absolutely clean. If founders have given too much equity to advisors or non-active partners early on, serious investors may quickly back away.
Get a grasp on these 10 points to attract investors to your table:
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Clear and Strong Problem-Solution Fit: Not just fancy technology, but an effective solution to a real customer problem.
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Solid Traction and Data: Real statistics, active users and ever-growing revenue graph.
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Positive Unit Economics: Healthy LTV to CAC ratio and clear path to profitability.
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Strong and Diverse Founding Team: Balanced team with technical, operations and sales expertise.
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Tidy Cap Table: Founders should have enough equity to maintain motivation in the long run.
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Defensible Business Moat: Any feature that competitors cannot easily copy.
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Clean Legal and Tax Compliance: There should be no scope for any legal hurdles at the time of due diligence.
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Clear Scalability Plan: Practical plan to reach from regional to national and global level.
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Crystal Clear Pitch Deck: Precise description of the problem, solution, market size (TAM/SAM/SOM) and ask in 10 to 12 slides.
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Clarity of Fund Utilization: Where and why will every penny of the requested amount be spent in the next 18-24 months.