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 #1 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. By being conscious of these factors the entrepreneur should be able to avoid potential pitfalls, significantly increasing the probability that their startup is investable.
You might be an investable company if …
- You have tested your hypothesis and validated the need for your startup’s product or service in the marketplace.
- You and your startup co-founders can get comfortable working with angel and venture capital groups without requesting them to execute an NDA.
- You and the co-founders of your startup are open to new ideas and truly coachable.
- You and the co-founders of your startup make up a diverse and multi-functional leadership team.
- Key members of your startup board and leadership team are open to references and 3rd party background checks.
- You and the co-founders of your startup are open to new ideas and truly coachable.
Potential Due Diligence Showstoppers: Do Any Apply to You?
- You and your co-founders are investing your personal funds into the opportunity.
- Operations are not a family affair.
- You and your co-founders have a strong work ethic and are committed to doing what it takes for the startup to be successful.
- You and your co-founders operate utilizing “Lean Startup” philosophies.
- You and your co-founders have established reasonable, appropriate, cost-efficient process controls which permit and support the scaling of the startup.
- Level of trust and confidence in the startup management team increases with each successive interaction or meeting with investors.
- Startup’s executive management has “skin in the game” in terms of an equity stake and is not expecting immediate market-based salaries.
- Executive management is passionate about the startup’s opportunities and is expected to present well to future investors.
- You have created a startup with a simple, straightforward legal structure.
- Your startup is structured as an LLC and you intend to convert it to a C-Corporation upon the closing of an upcoming equity financing round.
- You are or intend to incorporate your startup in Delaware, Nevada or Wyoming.
Investable Companies #2: Is Your Startup Investable?
