What Early Stage Investors Look For In Startups

This article is written by Jeremiah Uke, a Contributor Author at Startup Istanbul.

Sohail has a proven track record of delivering shareholder value for principal investors through active management of a portfolio of companies. Over the course of his professional career, Sohail has built new businesses as a founder and early stage Director, delivered operational and bottom line improvements to companies in Family Office portfolios in interim positions, restructured or turned around businesses as a CEO and served Boards and CEOs of large corporations as a strategic advisor.

Sohail’s experience as an entrepreneur saw him take a startup from the start to exit stage. He also spent reasonable time with a family business in the UAE as the COO of their ventures division. Sohail has garnered a lot of experience throughout his career, and therefore during his session at Startup Istanbul, he shared some of the factors investors look out for in early-stage startups. The list includes:

1.Strategic Foresight: This point asks the question “Are you seeing things other entrepreneurs/investors are not seeing?”. Usually, when you see an opportunity in the first place, everyone else thinks you are crazy and write it off. Only later, do they get to see its relevance. This has been the case for some of the world’s biggest ideas and businesses today.

2.Executional Agility: This deals with the ability of your team to execute plans when all factors come to play. It’s not just enough to be able to conceive that amazing idea. Investors need to be convinced that your team has the capacity to carry that idea and execute it according to plan from start to finish. This brings us to the last point.

3.Innovative Resilience: Sohail refer’s to this point as the startup’s X-factor. It is the ability of your team to continually find ways to pivot and move ahead even when you are in a bad spot. It is a balance between you having the perseverance to continue the original plan and knowing when it’s time to shift things a bit to be able to survive.

Having put these three factors together, the question is, how does it translate to something tangible, and this is answered by these 5 questions. These questions will show some insight as to why investors look out for these things in particular. Starting from the first one;

  1. Why are the factors that drove the incumbents’ past success not going to be the foundation for future success? This question asks directly about your knowledge of the environment you are about to delve into
  2. How does your proposition create enough customer value to offset switching costs?This one says, how does your startup create a proposition capable of helping youtake charge of that opportunity you have found.
  3. 3.What competitive advantage do you have? How will you sustain this advantage?This question builds on the first two. Having identified that there is an opportunity in the market, and having found the right proposition for this opportunity, why should it be who takes it?

This article is written by Jeremiah Uke, a Contributor Author at Startup Istanbul.

─ May 3, 2020