What investors look for in startups?

startups and entrepreneurs












Although each type of investor has preferences, generally look for the following features to get in a Startup.

Many types of investors, from typical "family and friends" to large funds Venture Capital. Each of them has their preferences but overall looking for startups with the following characteristics.

1.- Scalability and Capacity Growth: Can you grow your business to get large volumes? This idea of ​​business growth means taking into account the market it addresses: Does target market worldwide is limited geographically or? Having a large and growing market allows some stability produced by the compensation between countries.

2.- Barriers to entry and competitive advantages: Las famosas “moats” de Warren Buffett: Can prevent or hinder competitors from entering our business? Is it easy to replicate the business for any incoming?

3.- Benefits: The way the profit is generated should be clear from the beginning. And this relates to the need for product demand has some "inelasticity": Price should not be the determining factor Cart. Customers must be able to accept a reasonable price for the startup. Investors flee from startups in which "price battles" are foreseen. The business model should clearly explain how the benefits are generated.

And it is important differentiate between a company and a "self-employment". If what you are selling is the working time of employees, probably not a good investment.

4.- Stability: Is it a business that stands on a fashion? Is it a business that will be greatly affected by economic cycles? As an example, the beginning of the housing boom, specialized companies had obtained options on property for resale. While the cycle was bullish, business was round but when the bubble burst, had to close. The same has happened with businesses dedicated to piercings in the United States.

5.- It does not require large capital investments: If investment is very high, be difficult to achieve and usually remain in the orbit of large corporations whose game is different.

6.- It does not require labor intensive: If manual processes, be outsourced. The needs of many people in the workforce are not high.

7.- The cash flow is positive: box is generated or at least, is not required to invest in a large circulating.

8.- It is not subject to legal regulations: Do not run the risk that a government of "illuminati" take the company to enter bankruptcy, as has occurred in Spain in the environment of renewable energy.

Do you know of startups who pass this test?

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