Before an investor can pass any judgment on a “Startup” they have to first categorize the company. There are two categories a startup can fall into”
Both categories require the same but also different analysis. I am going to assume that the reader of this article is in a pre-revenue startup (meaning you have not made any sales yet). Let’s discuss the criteria, shall we=)
INDICATORS OF SUCCESS
Everything in the realm of entrepreneurship and startups begins and ends with MARKET RESEARCH. Both pre and post revenue startups must present very thorough market research in order to obtain funding. The difference is Pre-revenue companies are making conjectures that are not based on real data because they have no sales. Often I talk with startup owners seeking funding for XXXX amount of dollars. They tell me they are predicting to make X amount of sales and money over however long of a period. I ask them how they came to those numbers and I very frequently hear the same answer. “Well if we sell our product at XX price and sell XX units then we will make X money and have X percent of the market”. My response is always the same. “How do you know you are going to make those sales? How do you know if anyone cares about what you are offering? Without sales history, it is hard to make cash flow projections that are legitimate. Therefore, market research is very important. Whether you are a pre-revenue startup seeking funding or a post-revenue company who needs a cash injection, your market research and business plan will 100% be the deciding factor and the number one indicator of potential success!
BUT HOW DO I KNOW MY CHANCES OF SUCCESS IF I HAVEN’T MADE ANY SALES?
This is a very good question and I appreciate you asking it =) Yes a majority of your research as a pre-revenue startup will be based on conjecture. However, there are ways you can build in some semi-hard facts and proof of potential growth. Your customer analysis will work wonders for you by helping you and investors determine your startup’s potential life cycle. In order to make this determination, you must be able to demonstrate an established and functioning ecosystem. You must be able to show, via research, that there is a market need or a market interest in what you are planning to offer. Additionally, you must be able to show that your market and niche have responded to you, your company and your product/service.
BUILDING YOUR ECOSYSTEM
A great way to build this ecosystem is by gathering feedback from potential customers and various interested parties. This can be done via surveys on multiple social media platforms or in person. Always be sure to interact with interested people at trade shows, networking events, charities, and even competitor events. The raw data you gather from these surveys will tell you a lot about your potential customers. From this information, you can begin to build an MVP (minimally viable product) while creating a buzz about it online thus showing that there is interest in your startup. Combine this customer analysis with online interest and 1 or two rounds of MVP development based upon customer feedback and you suddenly have a much more credible venture that shows much more promise than something based on conjecture and minimal research =)
I hope this article gives you some clarity and direction in your startup journey. Please follow me on Facebook and subscribe to my Youtube channel =)
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