According to Crunchbase, in the first quarter of 2021, global venture investments reached $125 billion, which is an all-time record. This upsurge of interest in investing in new businesses caused millions of startups to spring up like grass in a meadow. The year 2020 witnessed 4.35 million startups, compared to only 2.50 million in 2010. And more to come.
The competition for investors is getting tougher, and startups understand that they have more chances to succeed if they partner up with tech specialists. In this article, we’ll talk about what key things one needs to get investments and what role software development companies play in the whole “finding a perfect investor” process.
Vital Points for a Startup to Get Investments
In a nutshell, startup business investment opportunities grow considerably when your investors see that you are experts passionate about your idea, demonstrate significant growth potential and competitive advantage, as well as have a defined exit strategy. Let’s dig a bit deeper into the matter.
– Passion for your Idea. Believe in the product or service you want to provide. Be confident that it has a competitive edge over existing products or that your idea is a new way to address an old problem.
– Proof of Concept. Companies that invest in startups look for evidence that their money would go to something that actually works. A summary of the project is not enough. Investors need a detailed and well-researched study proving that the idea is viable.
– Business Plan & Unit Economics. Investors are looking for entrepreneurs who deliver a strong business plan and understand unit economics. Even if the economic indicators will straighten out in the next few years, companies that fund startups want to know that you understand where you’re headed and that you measure the right economic indicators that will steer the ship in the right direction.
– Executive Summary. This is the first thing that potential investors will read when they receive your business plan, so your aim is to grab their attention and excite them with the idea. The document is a brief review (a couple of paragraphs) of your business and marketing plan. Make it structural, with a defined problem, solution, market potential, and a unique selling proposition.
– Pitch Deck. Startups frequently prepare a “pitch deck” to present their vision to prospective angel or venture capital investors and convince viewers of why the market opportunity is large. The pitch deck typically consists of 15-20 slides in a presentation and is intended to showcase the company’s technology, products, and team to the investors. You have more chances to find investors for your startup if the pitch deck includes visually appealing graphics and images, as well as your product’s demo.
– Expert Team. Most startups have very limited staffing in an effort to cut costs. Often, there are only one or two founders of the operation. Remember that startup companies looking for investors should have sufficient key employees to cover the most important areas. For instance, if your business is involved in AI and Big Data, do you have someone on staff that is an expert in these areas? You must have at least one expert in the technology or market you are entering.
– Investors’ Benefits. Investors have two primary financial questions about projects: how much they need to invest and how much they will get back. Both of these questions can be answered by a thorough financial projection — a complete description of the model, a set of pro forma financials, a return on investment analysis using sensitivity analysis around key variables, cash sources, and a usage report. All that will help investors to understand how large a return they can expect.
– Discovery Phase. This is one more key point to get investment funding for startups. According to McKinsey, 45% of software development projects exceed their initial estimated budget. A proper discovery phase will help to present a potential investor with a correct picture and prove your business to be reliable in their eyes.
Discovery Phase as One of the Key Stages to Get Investment for Startups
The discovery phase is the first stage of software development involving the project team and top managers working hand in hand to make sure ideas will be transformed into viable solutions in the most efficient and cost-effective way.
What Specialists Are Involved in the Discovery Phase?
The team usually consists of a PM (Project Manager), BA (Business Analyst), UI/UX Specialist, and a Technical Expert.
- PM is the main person responsible for the project, teamwork organization, weekly reporting, booking resources, and delivering artifacts to the customer on time and with due quality.
- BA is primarily responsible for asking detailed questions that will help to translate business goals into a format of functional and non-functional requirements.
- UI/UX Specialist creates a design concept that the future product will provide the best user experience possible.
- Technical Expert analyzes artifacts of the discovery phase and offers the most efficient technical solution on the basis of the client’s requirements, company best practices, and domain expertise.
Why Exactly Do Startups Need a Discovery Phase?
Explore the Subject Area
It’s important to understand who the target users are and what needs they have. The discovery phase team holds opinion polls to validate assumptions about users’ needs and problems.
Identify Possible Bottlenecks
An experienced IT partner will draw attention to any weaknesses in your infrastructure capabilities, all possible incompatibilities, and potential tech constraints. It is crucial to eliminate bottlenecks before the stage of product development begins because the further your project moves on, the more expensive mistakes are.
Reduce Development Costs
Software projects have become more complex, but the practices of requirements gathering and formalization remain underused. The Discovery phase gives the opportunity to define the scope and subsequently mitigate the risks of overruns.
Define the Strategy of the Project
The result of a correctly conducted discovery phase is a strategic plan with strictly defined goals. It helps to answer all the “whys” on the way to achieving targets at each stage of the plan.
How to Find a Software Development Company to Invest in your Startup?
It may not be initially apparent, but you can attract investments with a custom software development company. When you collaborate with experts from a trusted tech partner on a discovery phase, the company may share a network of investors with you. The question is how to identify this trusted partner that will provide you with startup investment opportunities among thousands of software development companies. From our point of view here are the things to look for:
- Network of other software companies that may become potential investors
- Partnership with VC funds
- Experience with your target industry
- References from client startups
- Discovery phase as a service
How Itexus Collaborates with Startups
Our team of Business Analysts, Project Managers, Technical Specialists, UI/UX designers, Web & Mobile Developers, and Industry Experts immerse into your project and make everything possible to make it appealing to prospective investors.
What you get after collaboration with our expert team is:
- A set of detailed documents (vision and scope, and SRS)
- UI/UX design or a clickable prototype of your future product
- Detailed work breakdown structure, workload and cost estimate, and a project plan.
These deliverables provide prospective investors with a clear idea of your product, its competitive capacity, and its feasibility.
We believe that our mission is to broaden startup company investment opportunities by demonstrating:
- Quality and security of business processes
- Workflow and billing transparency
- Trust from customers operating globally
- Extensive startup experience
- Broad investor network
- Expertise in a comprehensive range of industries
- Experience in MVP building and Product Development.
For the Finale
Of course, the viability and innovation of your new product or service are the most important factors to boost startup investment opportunities. However, you shouldn’t dismiss the fact that networking and a thorough discovery phase add to the chance of getting investments. That’s what your tech partner will help you with. Itexus has been involved in custom software development for startups for over ten years. We are sure that our experience will come in handy with your next project.
By Itexus Team