Often one hears early stage startups talking about how difficult it is to get funded. While the startups work extensively on their business plan, powerpoint presentations and executive summaries, question that is often asked and remains unanswered – What makes some startups more favorable to investors while other similar startups are overlooked? Well it seems Startup Genome Project has the answers!
Recently a study conducted by the Startup Genome Project attempts to answer some of these questions on startup funding. If you haven’t read the report already, you can grab from the link mentioned at the end of the article.
Here is the summary of what the report talks about in detail.
- Solo founders or founding teams without a technical co-founder have a lower chance of getting funded. It means that investors generally look for a founding team rather than a solo founder. Ideally two co-founders with one having business insight while other who gets the technical know-how to the table.
- Such balanced teams of one business co-founder and technical co-founder are able to raise more capital and are more successful in achieving their growth targets.
- Business driven founding teams are more successful with scale centric business models than product centric one. On the other hand, technical heavy founding teams are more successful with product centric business models.
- Startups that haven’t raised money overestimate their market size and often misinterpret their market as new.
- Startups need 2-3 times longer time to validate their market than what the founding team feels. This creates pressure to scale prematurely.
- Most successful entrepreneurs are driven by impact rather than experience or money.
The above points throw more light into why some startups get funded while other don’t. Angel investment is a very subjective decision and generally its more to do with the relationship between the founding team and the investor. This is also true for many venture capital investments. More often it is the team (execution capability) that is funded rather than just the idea.
You can download the complete report here.