Making Your Early-Stage Start-Up “Investible”
What do investors look for in a start-up? It’s the question many early-stage innovators want answered when it comes to securing private funding.
There are four key factors to a start-up being considered “investible”, says business consultant Laura Beckan in this article from University Lab Partners:
- Unique value proposition
- Attractive market size
- An outcomes-driven team
- Profitability of your product
When putting together financial pitch decks for potential investors, Beckan’s advice is to ensure modelling include revenues (the driver of all projections), expenses, and earnings before interest, taxes, deprecation and amortisation.
Regarding revenue, consider factors such as the unit price of your product or service (which, if estimated, needs to be supported by market research), manufacturability, customer retention and geographic markets.
“Since revenue often comes from multiple sources, the more a start-up can dissect its revenue streams, the better they look to investors,” says Beckan.
“Clearly explaining your company’s revenue streams allows investors to come up with a precise valuation of your company.”
When it comes to expenses, the cost of goods sold (COGS); operating expenses including R&D, sales, marketing and administration; and long-term assets such as property, equipment and intellectual property are all important considerations for a financial pitch deck.
“Oftentimes, you may not know exactly what the COGS will be, but you can make a reasonable estimate by looking at the competition and evaluating what price point your customers will be willing to pay,” says Beckan.
“Putting any number that doesn’t make sense for COGS will show investors that the team didn’t do their preliminary research, making the start-up more risky to invest in.”
For more details, check out the full article via University Lab Partners.