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What does an investor look for in a good startup?

Here’s a secret: The first thing they want to know is how you solve a problem.

Problems are what it all comes down to. There are two types of problems that investors want to know about.

There are problems you solve, and problems you need solved.

 

Problems you solve

A strong pitch deck always starts with the problem that needs solving. It does not matter what your startup has to offer, whether it be a great gig economy, an innovative product, or software as a service, you are always solving a problem.

Investors are sceptical people, and no matter how well made your product is, they will want to see why it is useful before being interested. 

You need to get out ahead of scepticism.

If the investor thinks: “This is nice but who needs this?” It’s too late.

This is why you start with the problem up front.

Perhaps you have experienced the problem yourself, and can use an anecdote to illustrate it. Or maybe you have another story to show the problem exists.

You need to establish the problem first.

Once you have done so, you can demonstrate exactly how you are uniquely positioned to solve this problem throughout the rest of the pitch.

When you are explaining features, relate them to the problem. When you are talking about the market, you can relate it to the problem. This is all important.

Don’t solve a problem? No solution needed.

Problems you need solved 

These are problems you cannot solve yourself. 

Rather, these are problems that your solution doesn’t fix, but may hold you back in some way. This breaks down into two categories: 

1. Problems you still need solved
2. Problems you have already solved

Problems you still need solved 

The most obvious example of this is funding. 

You need capital to take the next step, hence why you are raising, right?
But there are other problems too. Perhaps suppliers are hard to come by, or you are having difficulty growing your team at the required pace.

Whatever it is, honesty is key here. You cannot hide flaws from investors, they will spot them no matter what, but getting out ahead of it means you can keep control of the narrative, and explain how you are working on solving it.

Problems you have already solved.

These are a really valuable assets.

Problems you already solved are tempting to gloss over so that you give the impression of smooth sailing, but quite the opposite is true.

If you can demonstrate how you solved a problem, it can give insight into what you’ve already tackled, how you went about this, and what you’ve learned from the experience.

 

So where do you use these problems?

Simply at the most relevant moment. Don’t make a slide where you divulge all your problems, that lays it on a little thick. Rather, address them when they are relevant to the slide. It’s better to do so in an off-the-cuff manner than to bake them into your pitch.

Talking about past and future challenges is not a ‘warts and all’ kind of situation. You’re still selling a startup after all. But demonstrating how you solve a problem can be a great way to be honest and show how you deal with adversity.

If you want to learn more about how to get ready for investment, and find investors to pitch to, you can join our FREE Inner Tribe Masterclass: at https://innertribe.eu/how-to-get-your-pitch-deck-investment-ready