Startups need more than a good idea to attract investments

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

According toMarilucia Silva Pertile, co-founder of theStart Growthand startup mentor, preparation for attracting investments 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-crafted pitch only works when there is solid planning behind it, explain

What makes a startup attractive to investors

To secure financial contributions, comostartupsneed to demonstrate traction and growth potential. According to a survey by CB Insights, 35% of startups fail because they cannot attract investments, often due to a lack of clarity in the business model or in execution

Marilucia highlights some aspects that make a difference when attracting investors

• Market and clear problemIt 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 modelStartups need to prove that their product or service generates predictable revenue and has scalability potential
• Financial and operational metricsCAC (Customer Acquisition Cost), LTV (Valor Vitalício), MRR (Monthly Recurring Revenue) and churn rate are fundamental indicators to show the company's performance
• Prepared and committed teamInvestors 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 grab the attention of investors and should be direct and impactful. "A poorly structured pitch can jeopardize even promising startups", alert 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 differential: What makes the startup unique
5. Metrics and traction: Results already achieved, clients and projections
6. Team: Who are the founders and why are they the best to execute the business
7. Use of investment: How the money will be applied to generate growth

Structured financial planning

The 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 control

To prepare for an investment round, startups must

• Having a clear projection of revenues and expenses
• Control the burn rate
• Demonstrate how the investment will be converted into growth
• Keep documentation organized for due diligence (financial and legal audit conducted by investors before the investment)

"The investor needs to see that the startup knows how to manage resources and has a clear plan for sustainable growth", explain Marilucia

Networking and strategic partnerships

In addition to internal preparation, creating strategic connections is essential for startups seeking to raise investments. Acceleration programs, sector events and mentoring are valuable opportunities to expand the network and attract the attention of investors

Investment fundraising starts long before the meeting with a fund. Building a relationship with investors and being present in the ecosystem increases the chances of securing funding at the right time, reinforces Marilucia

Investors seek prepared startups

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

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

With the correct preparation, startups not only increase their chances of attracting investments, but also ensure that the resources received will be used efficiently to drive growth and consolidate the business