How investment-ready are you?
While clearly an important caveat if and when a startup needs money, assuming there is a compelling case for investment, when is a startup “ready” for an investment. What are the parameters that investors look for, and that startups should prepare for?
The most significant readiness factor is if the infusion can accelerate the startup’s journey. Accelerate the process of building and taking the product to market. Accelerate the adoption of the product in the markets. Enable a significant amplification of value to customer. Eventually, increase revenue opportunities. And this value varies as startup moves across stages of evolution of startup.
In seed stage, the primary readiness factor is if the product is built and some basic validation is in place. Technical feasibility is established with atleast a market prototype built that can be tried out by customers. At least few customers have used the product and communicated useful utility and potential commercial interest. Actual sales need not have transacted. The investment is to take this to next level and demonstrate actual market traction and revenue.
In angel stage, investment readiness is when the product has been successfully taken to the initial market. Customers have bought and used the product. In a small segment, the customer adoption has been scaled. The investment in this stage is primarily to now show that the sales can be scaled. The first stage of serious scaling. To tweak and pivot the organization, product, and market readiness to a much higher level of capability to address much larger scale of business. In this process, the startup will get ready for subsequent rounds of investment in the growth stage, when startups look for VC fund infusion.
Most fundamental tenet of readiness is that at each stage, the previous stage has been successfully crossed. Along with readiness, time is key. Should be clear that the infusion of money at that stage, will significantly amplify the pace of growth compared to continuing without the funds infusion. Growth coming in an economically viable way. Sustainable growth is key at all stages!