Startups need more than a good idea to attract investment

Attracting capital goes far beyond having an innovative idea. Startups seeking funding need to demonstrate concrete metrics, a well-structured business model, and a clear growth plan to convince increasingly selective investors.

SecondMarilucia Silva Pertile, co-founder ofStart Growthand 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 it," he explains.

What makes a startup attractive to investors?

To obtain financial contributions,startupsThey need to demonstrate traction and growth potential. According to a survey by CB Insights, 35% of startups fail due to an inability to secure investments, often because of 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 the potential to scale.
• Financial and operational metrics:CAC (Customer Acquisition Cost), LTV (Lifetime Value), MRR (Monthly Recurring Revenue) and churn rate are fundamental indicators to show the company's performance.
• Prepared and committed team:Investors evaluate not only the product but also the team behind it. Execution capacity is a decisive factor when betting on a startup.

The power of a well-structured pitch

The pitch is the first major opportunity to grab investors' attention and should be direct and impactful. "A poorly structured pitch can even jeopardize promising startups," warns Marilucia.

To increase the chances of success, an effective pitch should 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 advantage: What makes the startup unique.
5. Metrics and traction: Results already achieved, customers and projections.
6. Equipe: Quem são os fundadores e por que são os melhores para executar o negócio.
7. Use of investment: How the 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 due to lack of cash flow management.

To prepare for a round of investment, startups should:

• Have a clear projection of income and expenses.
• Control the burn rate (cash consumption rate).
• Demonstrate how the investment will be converted into growth.
• Keep documentation organized for due diligence (financial and legal audit carried out 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 essential for startups seeking to attract investments. Acceleration programs, industry events, and mentoring are valuable opportunities to expand your network and attract the attention of investors.

“Raising investments starts long before the meeting with a fund. Building a relationship with investors and being present in the ecosystem increases the chances of getting an investment at the right time,” reinforces Marilucia.

Investors seek prepared startups

The Venture Capital market has become increasingly selective. According to the "Global State of Venture Capital 2023" report, investments decreased globally, making investors more cautious. This means that startups that prepare strategically have a much higher chance of standing out.

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

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