Investable companies don’t occur by accident. In fact, the opposite may be true; many companies may accidentally become un-investable. This article is part #2 of a two part series that shares tips as to why startups may be investable enabling them to obtain funding from angel groups and VCs.
Your company might be investable if…
- It is open to providing information and observer rights or a board seat for appropriate levels of investment.
- You focus on listening to and understanding your customer and their needs.
- Your startup has no significant debt, (beyond Convertible Notes), unpaid accrued or contingent liabilities.
- You have a clean “Cap Table” and are without unaccredited investors or complex shareholder issues.
- The startup has no shareholders with non-dilution clauses.
- The valuation of the previous round of financing was reasonable and this round’s valuation is balanced.
Potential Due Diligence Showstoppers: Do Any Apply to Your Startup?
- Founders and inventors have embedded the IP in the startup.
- There are no significant lawsuits pending against your startup.
- Neither you nor your startup co-founder possesses a history of litigation against third parties.
- The addressable, attainable market for the startup’s products or services is reasonably significant, approaching $100M as a minimum.
- Your startup focuses on listening to and understanding your customer and their needs.
- The startup has a reasonable operating runway, is not running on fumes.
- The filing of tax returns and adherence to state and federal regulatory issues can be validated.
- There are no pre-existing agreements that might cloud an exit.
- New investors can become comfortable they won’t be subject to significant dilution because excess capital will be required in the future.
- The existing investors possess cash flow and are willing to provide a follow-on investment in the upcoming round.
- You and your co-founders view this opportunity as the first of many startup opportunities.
