The question, “What investors are looking for?” is a common one for most startups. In Q2 2023, investors are looking for startups with innovation, scalability, and social responsibility.
They want to invest in companies that can show creativity, have a solid growth capacity, and have a sense of social responsibility.
Understanding what investors are looking for in Q2 2023
Innovation
Innovation is often considered an integral factor in determining long-term viability within any organization. It encourages out-of-the-box thinking to find solutions to challenging problems while helping to create new opportunities. These new opportunities can increase productivity and profits and ensure you remain competitively viable within your marketplace and industry.
In emerging markets, innovation enables you to leapfrog traditional development paths and accelerate economic growth. It also provides opportunities for local businesses to compete globally and create solutions tailored to your community’s specific needs. This is visible in the birth of Tata’s $2,500 Nano car in India.
On the importance of innovation for investors, Cathie Wood, the CEO of Ark Invest, said, “Well, in terms of our companies, we are very involved in the innovation space. We are not afraid as an investor. We’re not afraid of dilution if we think they’re doing it for the right reason.”
Similarly, Bill Gates reveals, “I’m an investor in a number of biotech companies, partly because of my incredible enthusiasm for the great innovations they will bring.”
Scalability
Scalability refers to a business’ ability to increase or decrease its resources depending on market conditions or trends. Through strategic capacity planning as an entrepreneur, you can better control costs while more accurately predicting future cash flow.
To demonstrate scalability to investors, your startup should provide evidence of its ability to grow its business quickly and efficiently in response to increasing demand or market opportunities. You can do this by showcasing a proven business model, a clear and effective growth strategy, a strong team with relevant skills and experience, and the potential for expansion into new markets. You should also show that you have a scalable infrastructure, technology platform, and financial resources to support rapid growth without sacrificing quality or customer satisfaction.
Additionally, you should provide a realistic financial projection that shows how you plan to generate revenue and profits over the short and long term.
Airbnb is an example of business scalability. Airbnb’s founders initially went door-to-door to recruit hosts for their platform. That is clearly not a model that can be scaled well. They needed that initial critical mass to prove their concept. The founders’ unscalable activity of knocking on doors and talking to people was the only way to get to the scalable business they built. Today, Airbnb is global.
Social responsibility
Social responsibility refers to a company’s obligation to act in the best interest of society and the environment beyond its financial and legal obligations. It involves considering the impact of business decisions on stakeholders, including customers, employees, communities, and the environment. Social responsibility is increasingly important for startups in emerging markets seeking funding as investors are increasingly interested in companies that prioritize sustainability, diversity and inclusion, and ethical business practices. Socially responsible companies are more likely to attract and retain customers, build trust and loyalty, and create long-term shareholder value.
An example of a startup in an emerging market that displays social responsibility to scale is Kasha. This Rwanda-based e-commerce platform provides health and personal care products to women in rural areas. Kasha operates a social enterprise model that integrates a social mission with a profitable business model. The company partners with local health clinics and community health workers to reach women in remote areas. It provides education and training to promote reproductive health and gender equality. Kasha has also implemented environmentally sustainable practices, such as using biodegradable packaging and promoting reusable menstrual products. The company has received funding from investors who value its social impact, including impact investors and philanthropic foundations.
Tips to help you secure funding Q2 2023
Do more with less
Consider trimming down by dropping unprofitable projects and focusing on the ones generating the most sales.
Roy Perlot, CFO of Kenya-based insurtech startup Lami Technologies, says:
“We were impacted a bit in our logistics segment because fewer containers needing insurance are moving around in Kenya. To avoid issues, Lami is focusing on non-discretionary insurance products and offering more flexible, short-term payments.”
Make your startup indispensable
When a recession hits, customers often cut discretionary spending first. Founders need to make their product essential to their customers—so crucial that their business would fail without it.
Founders should empathize with their customers and understand their needs. If customers say that the product is good, switching is easy, and customer service is excellent, growth is more likely.
“You have to obsess over those early customers and you do have to listen… If someone tells you there is a particular problem they are facing, we can manufacture the solution. We just have to listen.”
Explore all the options
Although many startups turn to VCs for funding, there are other avenues. Venture debt funds have been increasing, but they need repayment and might not suit long-term needs. Founders should have a good CFO if they want to pursue this financing option.
Leverage consumer intelligence
By leveraging consumer intelligence, your startup can navigate these turbulent times with greater ease. Understanding customer needs and harnessing data-driven insights will better position your business for success, enhancing your resilience amidst the current funding crunch.
Now, more than ever, consumer intelligence is the key to unlocking the potential of your startup and overcoming these challenges. That’s where Survey54 comes in! Our platform allows you to tap into valuable data-driven insights and make informed decisions that will set your business apart from the competition.
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