Startups need more than a good idea to attract investment

Startups looking for resources need to demonstrate concrete metrics, a well-structured business model, and a clear growth plan to convince increasingly selective investors.

According to Marilucia Silva Pertile, co-founder of Start Growth and a startup mentor, preparation for fundraising begins long before the first meeting with an investor.“ Venture Capital funds want startups that know where they want to go and how they will use the resources. A well-made pitch only works when there is solid planning behind”, she explains.

What makes a startup attractive to investors?

To win financial contributions, the startups they need to demonstrate traction and growth potential. According to a survey by CB Insights, 35% of startups fail because they fail to capture investments, often due to a lack of clarity in the business model or execution.

Marilucia highlights some aspects that make a difference when it comes to attracting investors:

• Market and clear problem: It is essential to demonstrate a real and relevant problem in the market and how the startup solves this pain better than the competition.
• Sustainable business model: Startups need to prove that their product or service generates predictable revenue and has scalability potential.
• Financial and operational metrics: CAC (Customer Acquisition Cost), LTV (Lifetime Value), MRR (Monthly Recurring Revenue) and churn rate are key indicators to show the performance of the company.
• Prepared and committed team: Investors evaluate not only the product, but also the team behind it. The ability to execute is a decisive factor when betting on a startup.

The power of a well-structured pitch

The pitch is the first great opportunity to get the attention of investors and should be direct and impactful.“A poorly structured pitch can compromise even promising startups”, warns Marilucia.

To increase the chances of success, an effective pitch must contain:

1. Value proposition: What the startup does and what problem it solves.
2. Market size: Growth opportunity and revenue potential.
3. Business model: How the company makes money.
4. Competitive Differential: What makes the startup unique.
5. Metrics and traction: Results already achieved, customers and projections.
6. Team: Who are the founders and why are they the best to run the business.
7. Investment Use: How money will be applied to generate growth.

Structured financial planning

Lack of financial organization is one of the main reasons why startups lose investments. According to data from CB Insights, 38% of startups close for lack of cash control.

To prepare for an investment round, startups must:

• Have a clear projection of income and expenses.
• Control the burn rate (consumption rate of the cashier).
• Demonstrate how investment will be converted into growth.
• Maintain organized documentation for due diligence (financial and legal audit done by investors before the contribution).

“The investor needs to see that the startup knows how to manage resources and has a clear plan for sustainable growth”, explains Marilucia.

Networking and strategic partnerships

In addition to internal preparation, creating strategic connections is critical for startups looking to capture investments. Acceleration programs, industry events and mentoring are valuable opportunities to expand the network of contacts and attract the attention of investors.

“A fundraising begins long before the meeting with a fund. Building a relationship with investors and being present in the ecosystem increases the chances of getting a contribution at the right time”, reinforces Marilucia.

Investors look for startups

The Venture Capital market has become increasingly selective. According to the report “Global State of Venture Capital 2023”, investments have decreased globally, making investors more judicious.This means that startups that prepare strategically are much more likely to stand out.

“It is not enough to have a promising idea. The market rewards entrepreneurs who can prove their value and demonstrate that they are ready to grow”, concludes Marilucia.

With the right preparation, startups not only increase their chances of capturing investments, but also ensure that the resources received will be applied efficiently to drive growth and business consolidation.