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Beyond the Pitch

The Top 6 Things Early Stage Investors Want to See

Getting investors to begin due diligence on a startup company can be a daunting task.

The competition is tough.

Early stage investors see many deals and are looking for reasons not to invest. Entrepreneurs are working to create business models so compelling that an investor just has to say yes.

As a venture accelerator, TechColumbus invests, mentors, and helps entrepreneurs accelerate their growth. Our services are designed to help entrepreneurs and startups reduce risk and become investment ready.

As an investor with multi-million dollar funds under management—usually in syndication with others, we know what we and other investors want to see:

  1. Customer Validation: Customer validation is data-driven and evidence-based. Investors listen to entrepreneurs who know what their customer’s problems are—entrepreneurs who have talked directly with and listened to all levels of potential customers, from general managers who own P&Ls, to technical implementers, to the actual end-user—whether that is the nurse who will be relying on a new medical device or the warehouse foreman who needs a faster way to fill orders, to a security guard who needs to see in the dark.
  2.  Market Validation: You’ve built a great product or service.  However, what evidence is there of a large, well-defined population of buyers for that product or service? What distribution channels (physical and sales) exist to serve this population? What sorts of strategic partnerships will be required to tap in? What are competitors doing or not doing that you can do better? Beta customers, sales and other direct contact with the market are the best forms of validation.
  3. Investor Validation: Who else (besides friends and family) has put money into the deal? Has prior due diligence been completed? What were the findings? Are there other investors who have expressed an interest in syndication?
  4. Entrepreneur’s Skin in the Game: Is the entrepreneur full-time? How has the entrepreneur invested in the business? Sweat equity is good. Cash is better.
  5. Intellectual Property Protection: Is the technology patented? Does the startup own the rights to the technology or does it hold licensing agreements that preserve exclusivity? How great are the reverse engineering risks?
  6. Coachable Entrepreneurs: Most of all we want to see business founders who are passionate and have had some experience in a startup environment before—even if they failed. We are looking for individuals who know their industry, customers, and technology, yet have the confidence and balance to acknowledge that they don’t know it all and ask for advice. We want founding teams who can listen and lead.

TechColumbus is a great place for startups to become investable.

As both advisors and investors, we are uniquely qualified to help create the kinds of companies we (and our co-investors) want to add to our investment portfolios.

  • Direct, and experienced, education of budding entrepreneurs is great for the future of our community. Thanks, Tom, for this extensive list!

  • David S. Jackson

    Thanks Tom for this concise and useful list. IP ownership and licensing exclusivity is where we see a lot of trouble in the M&A space. I try to counsel start-up clients to document those rights early and often.

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