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.

Second Marilucia Silva Pertile, co-founder of Start Growth and startup mentor, preparation for raising investment begins long before the first meeting with an investor. "Venture capital funds want startups that know where they want to go and how they'll use the resources. A well-crafted pitch only works when there's solid planning behind it," she explains.

What makes a startup attractive to investors?

To obtain financial contributions, the startups They need to demonstrate traction and growth potential. According to a survey by CB Insights, 351% of startups fail because they're unable to secure investment, often due to a lack of clarity in their business model or execution.

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

• Market and clear problem: It's 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 capability is a decisive factor when investing in a startup.

The power of a well-structured pitch

The pitch is your first big opportunity to capture investors' attention and should be direct and impactful. "A poorly structured pitch can jeopardize even 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 generates money.
4. Competitive advantage: 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. Use of investment: How the money will be applied to generate growth.

Structured financial planning

A lack of financial organization is one of the main reasons startups lose investment. According to data from CB Insights, 381% of startups close due to poor cash flow management.

To prepare for a funding round, 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.
• Maintain organized documentation for due diligence (financial and legal audit carried out by investors before the investment).

“Investors need 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, building strategic connections is crucial for startups seeking investment. Accelerator programs, industry events, and mentoring are valuable opportunities to expand your network and attract investors.

"Investment acquisition begins long before meeting with a fund. Building relationships with investors and being present in the ecosystem increases the chances of securing funding at the right time," Marilucia emphasizes.

Investors seek prepared startups

The venture capital market has become increasingly selective. According to the "Global State of Venture Capital 2023" report, investment has declined globally, making investors more discerning. This means that startups that prepare strategically have a much better 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're ready to grow," concludes Marilucia.

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