What’s more important to investors: the idea or the team?
What’s more important to investors: the idea or the team?
4th August 2022
If you don’t have a solid idea and the pitch, financials, and proof of concept to back it up, you won’t find an investor willing to support you.
But, in our experience, the team behind the idea is just as important as the idea itself.
That’s because, setting the idea aside, there are several essential elements you need to demonstrate before you can successfully raise investment. This is the case whether you’ve already got a team behind you or you’re a sole founder seeking investment on your own.
How to Make Investors Trust Your Team
Demonstrate You’re Highly Resourceful
To begin with, any prospective investor will expect you to show how highly resourceful you are.
They’ll want to see that you can pitch your idea to them in a clear, concise, compelling way and that you have the passion and salespersonship to get people to buy into your vision. Not just a few people, many people; the vast numbers of people it’s going to take to dazzle the marketplace and eventually reward your investor with a healthy return.
When an investor sees you’ve got that ability to make other people excited about what you’re working to achieve, they’ll recognise how highly resourceful you are. They’ll be confident you’ll be able to attract talent when you need to and that you have the skills to forge commercial partnerships that will open up new networks and unlock new opportunities.
They won’t doubt that you’re the calibre of entrepreneur they have to work with because you’ll always be able to find new customers, create new products, and attract fresh capital when needed.
That’s another reason honing your pitch to perfection is vital. It’s not just your idea you’re pitching; you’re pitching yourself and your team and firing the investor up with how much more they can gain from supporting this single proposal you’ve brought to them today.
You’re not just giving them the Fear of Missing Out on this product; you’re giving them the FOMO on you and all the future opportunities they could miss out on if they don’t snap you up right away.
Accomplish that, and investors will have no doubts about how highly resourceful you are and how you’ll be able to access everything you need to make your company a force to be reckoned with.
Demonstrate you understand the financial risks
All investors want to see that you understand the financial risks as well as the financial rewards, especially the considerable risks they’ll be undertaking if they decide to back you.
Entrepreneurs who concentrate solely on pitching to investors the fortune they stand to gain are scuttling their chances of investment before their startup ship has even left the harbour.
Investors are canny people. The chances are they’ve been around this block many, many times before, so they’ll be under no illusions that backing even the most ‘can’t lose’ idea also comes with the potential they could lose everything if there’s just one small glitch in the plan.
How do you put them at ease? By showing them you understand the financial progress your company will make – not just the revenue you’ll have accrued in five years’ time and how many millions that will be – but also that you’ve got a realistic, clear-headed grasp of the obstacles you’ll inevitably meet along the way such as:
How many rounds of investment you’re going to need;
How long that investment is going to last you, and;
How much cash will still be in your bank account at the end of it (i.e., will you have enough for a two- or three-month buffer, or will you have run your account down so low that if you don’t raise additional investment extremely quickly, your business will go bust)?
Make it clear to the potential investor that you know things can change, spanners can get thrown in the works of even the best-laid plans, and you understand not only the potential risks of that happening but also the substantial risk you’re asking them to take by investing in you and your team (if you have one.)
How are you going to mitigate those risks?
How are you going to protect their investment, as far as it will be possible to do?
Demonstrate a Plan for Commercial Success
Finally, your investor will want to see you’ve got a realistically thought-through implementation plan and an understanding of how you will create commercial success.
How will you build from where you are now to where you intend to be in the next three, four, and five years?
How are you going to deliver a return on their investment which will make funding your proposal much more than just worthwhile? What about the exit strategy – yours as well as theirs?
What will your implementation strategy be in both the short and the long term? i.e., what are you going to do over the next year to eighteen months with the money they’ll give you today, and what will you do over the next five years to ensure you deliver a return on their investment?
Your Team is Just as Important as Your Idea
Every investor you pitch to will want to feel confident you can generate a healthy commercial return, and that means convincing them you have the strategy, implementation skills, and entrepreneurial abilities to make that hypothetical return a reality.
It doesn’t matter how good your idea is. There are thousands of wannabe founders out there with incredible ideas, but they’ll never raise the investment they need because they don’t have the personal qualities required to make it happen.
They’re not highly resourceful, don’t understand the financial risks, don’t know how to create financial success, and don’t have an implementation strategy.
When an investor sees that (and it usually becomes clear very early into the pitch), they won’t believe in you. They’ll thank you for your time and keep looking for a founder they can believe in.
That’s why your idea will never be more important when raising investment than the calibre and promise of you and your team.
If you still have any doubts about that, think about this. I recently held a Q&A with an investor who told me that 20% of his investment decision is based on the idea, and the remaining 80% is based on the founder’s ability to execute it.
Those are figures it would be unwise for any investable entrepreneur to ignore.
Want to know more about becoming an Investable Entrepreneur? You can download a free copy of Robot Mascot COO James Church’s bestselling book here.
Get a FREE assessment of your current investment readiness. Our PitchReadyTM Scorecard assesses your current ability to attract investment across three fundamental areas. You’ll even receive a bespoke 12-page report, completely free.
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