Entrepreneurship, Funding, Management, Organization, Success

8 Things Investors Look for in an Entrepreneur

Entrepreneurs are familiar with the dilemma of financing a startup: their business is little more than an idea, and, as a result, it has not generated any revenue; yet the startup needs capital to come into existence and survive. A handful of business professionals do possess the resources to start a new enterprise, but by and large, startup owners rely on the assistance of investors.

When seeking funding, entrepreneurs have a few options from which to choose. There are angel investors, peer-to-peer lenders, venture capitalists, personal investors, and banks. Agreements with these different types of individuals and institutions will naturally vary, but the one thing they all have in common is that they start with an initial pitch.

Pitching to an investor involves presenting the business plan and fielding any questions they may have. However, these potential financial backers are often less concerned about the product, the marketing strategy, and the elaborate slideshow than they are about the person in whom they may decide to invest. Here are a few examples of what an entrepreneur can do to look attractive to investors.

  1. Demonstrate tenacity


Although nothing is guaranteed in business, investors look for tenacity as a major indicator of potential for success. Founders need to demonstrate the work they’ve already put into the business, as well as their willingness to show up every day and put in however many hours it takes. A fighting spirit helps to persuade in ways that numbers and figures simply cannot.

  1. Fill the room with passion

Entrepreneurs can dramatically improve their chances of obtaining funding if they can effectively convey their passion to others. Their passion helps explain their tenacity, and it helps investors gain a better understanding of what truly motivates the individual: is it fame, fortune, a desire to improve the lives of others?

They want to see the personal connection between the founder and his or her business, and so they will almost always ask you, “Why this business and not another?” Answering this question reveals a lot about the entrepreneur.

  1. Show a balance of humility


Confidence tends to accompany tenacity and passion, but startup owners should strive to show humility as well, lest they come across as arrogant. Part of staying humble in a pitch to investors is being honest and transparent. If there is a weakness in the business model, do not skirt around it. Address it directly and use it as an opportunity to show how you approach adversity.

  1. Open up to feedback

Because no business model is perfect and because no entrepreneur will have thought of every possible angle or perspective of their proposal, there will always be some form of feedback and questioning. Investors will test a founder’s ability to listen to criticism and learn new things. If this individual is not coachable, potential financial backers will readily spot it.

  1. Tackle new problems willingly

Somewhere in the middle of questioning and suggestions, entrepreneurs will have the opportunity to show their ability to think on their feed. How they navigate responses to hypothetical scenarios will exhibit their problem-solving approach and skill in an authentic way. Investors look for people who are creative, flexible, and who will stop and think rather than settle for the first thing that comes to mind.

  1. Aim for clarity and precision

product workup

Whether addressing weaknesses or outlining the strengths of a business model, entrepreneurs should strive to communicate clearly and precisely. Time is valuable for everyone involved, and talking in circles or getting lost on a tangent distracts investors, causing their interest to wane. Find direct lines from point A to point B and help those listening make the same connections.

  1. Match stories with data

Founders can boost their clarity and precision by crafting strong storylines for their presentation. Offering a narrative in place of a data recitation helps investors gain a clearer understanding of the business—as well as more insight into the person behind it.

Storytelling has a way of making the company more “human” and forging a greater relationship of trust between parties. Business leaders do not need stage lights and theatrics to accomplish this; they just need to be genuine in the way they relay their pitch.

  1. Sell the team

Investors are also interested in the people that surround an entrepreneur. Does the business owner attract quality talent? Does he or she work well with colleagues? Business leaders need to convince investors not only of their own character but also that of their employees and partners.

Another important thing to consider on this topic is that some firms will turn startup leaders away if they do not have one or more partners. The adage “strength in numbers” applies well to the mindset that these institutions commonly hold.