Have you ever wondered what qualities investors look for in a startup to consider it fundable?
Benjamin Chong, a partner at Right Click Capital and a Co-Director of the Sydney Founder Institute, has created a three-question test to help determine your answer in the article “Three ways to test if your startup is fundable, on BRW.
Many entrepreneurs feel their problems will be solved with funding, but being fundable is very different from being in need of funding. Being fundable is all about your startup’s potential to attract financing so you can grow your business. All startups need some kind of funding to survive but not all are considered fundable.
Is your startup fundable? Read on to see what Benjamin Chong has to say on the matter.
1. Are you solving a real problem?
When launching a startup, keep in mind that your company has to offer a real value to the world, or at least a part of it, before you seek funding. Here are some questions for you to consider:
What is the problem your startup is trying to solve?
Is it a real problem or a perceived one?
Have potential customers confirmed you’re solving a real problem?
What’s the market size of the problem?
" Last week, I was presented with an idea for a personal electronic device that could help when paying for items at the cash register. While it was an interesting idea, I couldn’t see a real problem that the device was solving. "
2. Do you have a killer team?
Great minds think alike, so building your startup team is extremely important. Investors look for teams of individuals with a combination of technical background, business skills, and industry experience that are driven to succeed.
" A great way to gain experience is by joining a startup and contributing to the success of a fledgling business. I’ve previously employed-future entrepreneurs, who’ve added immense value to our businesses. At the same time, they’ve gained an understanding of the frenetic pace of an early-stage business and developed skills from financial modelling to phone sales to graphic design. "
3. Are you gaining traction?
A startup with little to no traction will not pique the interest of investors. Make sure you are establishing a solid customer base and gaining traction over time. This will help investors determine if your startup is viable. Below are several questions that must be addressed before pushing your startup to the next level:
Do you have users or customers?
Is the rate of user growth increasing?
Have you been able to charge customers for your product or service?
" Investors will need to see traction to determine if your startup is viable. Traction is the proof that there is a demand for your product or service."