For many hopeful startups, the time for raising pre-seed money can be both exciting and challenging. The Venture Capital space is getting back to its “good ol’ days” with great Q2 numbers but that doesn’t take away from the fact that it’s an environment that’s constantly changing. To keep up with the constant change, it’s best that founders understand what these investors are really looking for. According to numbers from Carta, founders need to come prepared with specific insights. If you’re a UK or EU founder, expect your local investors to be somewhat behind the numbers from the U.S. market, but the core message here is universal.
Ideation and creation of the MVP (minimum viable product) is just the start. Investors want more than just an idea – they need and want evidence that customers are engaging with your product or service. This means giving insight into the traction you’ve gained. This can be via beta users, early adopters, or even pilot programs. Why does this matter? Well, engagement shows a willingness to adopt and eventually pay for your solution – that’s how they’ll get their money back!
Just having an idea isn’t enough as we said. It’s also not enough that you just have a product that “works.” You need to have a clear vision of what the future is, how the product scales. Investors want to see and understand the friction points in your current offering and the steps to overcome them (bonus points if you get the understanding as well, not your paid consultant). This would include knowing where your product or service faces challenges and how you plan to use the capital to expand. You don’t necessarily have to have it to a T, but you should be able to demonstrate that you’ve mapped out these steps which will indicate you’re pragmatic about your growth trajectory.
Investors are looking for founders who understand their customer base and the market opportunity. There will always be some sort of boom in incremental innovations, however, if you have data-backed insights – not just bold statements – you’ll be the one to capture attention. Try conducting thorough market research, customer interviews, or provide initial revenue as a statement.
Pre-seed continues to gain capital. To get your round closed, focus on pushing customer engagement, a well-thought-out plan for scaling, and a unique market insight backed by data. Investors want to put their money into founders who not only have a great idea, but can also have a strategy in place to turn the idea into a high-growth venture.