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Startup Success Criteria for Investors
Today, startups are a very popular topic in Ukraine’s business environment. Experts and entrepreneurs compete to talk about their necessity and their important role in the development of our country. But, unfortunately, it is quite hard to recognize their profitability and success amid the flood of startup ideas and innovative projects…
That is why venture investments are considered the riskiest in the world, but at the same time the most profitable. Is it possible to forecast the future of a startup project? It is! EXIP experts share a method for determining the profitability and success of startups based on an analysis of investors’ funding decisions.
A startup’s life can be divided into several stages: startup idea, startup project, and project foundation. The criteria for judging a startup’s success and for obtaining funding differ for each of these stages.
Criteria for assessing the “startup idea” stage
At this stage, the investor’s attention is focused on the person who proposes the idea. As a rule, most people with a business idea are just dreamers. This is easy to test: all dreamers drop out when asked to fill in a brief about their idea. The investor respects those who have a permanent job, and attracts freelancers to work on their startup idea.
The main criterion for deciding whether to fund a project at this stage is the uniqueness and novelty of the idea. At present, investment can only be obtained for further work on the startup idea. With this money, the developer can, for example, test the idea on the target audience, prepare a business plan and business model, and also register a legal entity and form a project team.
Criteria for assessing the “startup project” stage
At this stage there is already a working team led by a project manager and several confirmed sales. There is also an improved business model for the startup project and a well-prepared business plan. Investment at this stage is needed for a full market entry and for testing and searching for sales channels. Such projects attract investors’ attention more. The main criterion for an investor’s decision to fund the project is a cohesive and motivated team of professionals.
Criteria for assessing the “project foundation” stage
This stage is considered the least risky for investors. The project already shows that the proposed product is needed by the market, sales channels have been found, and sales stability has been confirmed and is evident. The business model as a whole has been confirmed and is successful.
At this stage, the main criterion of project success is stable sales for 3 months. High sales figures do not matter much for the funding decision. Investment is needed for scaling and expanding the business.
But this stage is the least attractive for investors, since, as a rule, the project already has partners who are funding it. Also, according to investors, most project foundations have not shown the growth dynamics that were planned.
Conclusions
Startup projects are considered the most attractive stage for investors. Each of the stages above takes on average 6 to 12 months. If these timelines are extended for reasons other than a lack of funding, founders should think about the profitability and success of the project and look for new ideas.
As a rule, funding at the startup idea stage is 2000–5000 USD, at the startup project stage 10000 USD or more, and at the project foundation stage 1000000 USD or more. The most important criterion for investors at all startup stages is the knowledge and leadership qualities of project managers (founders).
At present, the market demands more and more new ideas and projects. The task of an founder is to make themselves known as quickly as possible and find support. Such an opportunity can be found on the platform EXIP — the first exchange of intellectual products, where investors are already waiting for innovative projects and are ready to invest in the most promising ones.
