Seed investing is generally the first money that is put into a company and can be the start of an exciting journey for a company. Even though we are in a funding crunch, or a period of time where funding may be scarce, entrepreneurs are still pitching away and spending their time and energy on convincing seed stage investors to put in their dollars into what could be a billion-dollar opportunity.
There are multiple funding opportunities that you could resort to and be successful as an entrepreneur, but one of the most common ways is through an Incubator like 500 startups, TechStars, or YCombinator.
I sat down withArjun Dev Arora, Serial Entrepreneur and Entrepreneur in Residence at 500 startups, a seed stage accelerator in San Francisco and Mountain View, California to discuss the top 5 things that investors looks for.
1) A fantastic team
As most Angels proclaim, the team makes the difference between success and failure. Some of the most successful ideas have already been tried before, but it comes down to the real grit and talent of the team that can take an idea and execute on it.
Having invested in multiple technology startups, Arjun mentions that being driven, adaptable, smart, and driving value are major importance when it comes to the success of the venture.
2) Strong indications of product/market fit
Most entrepreneurs think the moment that they have come up with a billion-dollar idea that investors will be flocking to them, but fail to realize how much work should be done to make the fundraising process easier.
Product/Market fit is when startups have high engagement with their product paired with people that are willing to pay for it. This becomes extremely important because it's a high indication of success and shows investors that there is proper demand for what you are building.
Although there are some investors that will invest because they love the team and believe you will be successful, a majority could be hesitant. By proving your numbers, you have a higher likelihood for peaking their interest.
3) Systems thinking
One of the hardest aspects of starting a business is understanding how to build and refine systems for all processes with an eye for design. Systems thinking is what Arjun describes as an ability for creating systems in your marketing, sales, product development, or anything that can be systemized while also paying attention to what the customers wants.
Far too often investors see products that have built refined systems but lack the aesthetic appeal which forces customers to limit the use of the product, or inhibiting the business.
4) Massive market
Whether or not you like it, the business of investing is to show a return that is higher than the amount that the investors have put in. Steve Blank, successful entrepreneur, author, and lecturer at Haas School of Business, University of California-Berkeley, Columbia University and the California Institute of Technology (Caltech) mentions that investors fund companies and are expecting a liquidity event.
For those reasons, having a large enough market gives your startup opportunity to grow and tackle huge problems. One of the biggest misconceptions Arjun says is that the market has to be huge today.
5) Strong creativity and design
It's not all about heavy technology, hustling, and sales. Right brain creativity and an aesthetic eye is just as important as a process driven optimization focused approach.
A great rule of thumb is to have at least a designer, hacker, and hustler on the team.
If you think your startup has what Arjun is looking for, apply to the next batch of 500 startups!