- Team: experience , domain expertise , passion, staying power, etc.
- Market: potential size should be very large , your products/service / business model should clearly indicate what problem you are solving and why will you get a significant share of the market.
Return on investment (only thing that matters in the end to an investor): An investor needs to see strong possibility of a 10x plus exit. Which is a function of:
- A large market
- Capability of the team with its products / services to take the business to a scale , within 5-7 years. So that the investor can sell his shares @ 10 times the investment price
Once the investor sees the right signals, the process of attraction starts. He will come closer to you and your business. That’s when he will look for further details about products , domain, detailed financials etc. He will also spend efforts to learn more about the domain and may involve some domain experts.
He further validates the same thing:
- Whats are the odds of getting 10-20 X Return on Investment in 5-7 years
- Whats are the odds of getting 5-10 X Return on Investment in 5-7 years
Once he is reasonably convinced about the RoI. Next stage for him is to look for all reasons to say NO. He looks for things about the team / market / product / competition / legal issues – which may put the odds of RoI at a big risk.
- And if he finds anything which can seriously risk the RoI – he will back out
- If not, things move forward