6 Attributes of a financeable idea

For an idea to be considered fundable, it must possess certain attributes that attract the interest of investors and financial institutions. Here we present 6 essential attributes. We use these 6 Attributes as a framework to evaluate and improve the fundability of ideas, and to make investment decisions.

1. How CONVINCING is the idea?
How good is the idea for solving a problem or introducing a better way of doing something? How unique and how much better is the solution than other ways of doing the same thing?

The persuasiveness of an idea to be financeable depends on several key factors, and there is no single formula. However, crucial aspects can be identified that determine how persuasive a proposal should be.

A fundable idea must be compelling enough to generate confidence in investors. This involves presenting a clear proposition, backed by solid evidence, demonstrating high market potential, and supporting a capable and passionate entrepreneurial team.

2. How EXPANSIVE is the idea?
How big is the market for the idea? Will awareness of the idea spread quickly on its own, or will it require a large investment in marketing?

The expansiveness of an idea to be financeable is not measured solely by its size or geographic reach, but rather by its growth potential and scalability.

The expansiveness of an idea to become financeable is related to its growth and scalability potential, its ability to innovate and differentiate, and the strength of the entrepreneurial team and financial projections.

3. How ADOPTABLE is the idea?
How easy is it to understand? How easy will it be to find, try and buy? Are there switching costs, such as sunk costs or a high learning curve?

The adoptability of an idea to be financeable refers to the ease with which the target market or users can accept and use the innovation. It is not just about having a brilliant idea, but about it being practical, useful, and attractive to those who will consume it.

A fundable idea must be adoptable enough to be seamlessly integrated into users’ lives.

This involves considering compatibility, ease of use, relative advantage, observability, and testability.

4. How ACHIEVABLE is the idea?
Are there any “if only” scenarios for implementing the idea? How viable is the seed and angel plan to build it and prove it appeals to the potential market? How much seed capital is needed to achieve these two major milestones from the angel investor? How driven and smart is the founder?

The achievability of an idea to be fundable is a crucial factor that investors carefully evaluate. It’s not just about having a grand vision, but about showing that that vision can realistically and feasibly be turned into reality.

A fundable idea must be achievable enough to generate confidence in investors. This involves demonstrating technical feasibility, financial realism, the capacity of the entrepreneurial team and solid strategic planning.

5. How PROFITABLE is the idea?
How strong is the business model? Does the business model increase or decrease the compelling and adoptable nature of the idea?

The profitability of an idea to be financeable is a determining factor in attracting investors. There is no magic number, but there is a set of indicators and considerations that influence the perception of profitability.

The profitability of an idea to be financeable depends on a combination of financial, market and operational factors. Investors look for ideas with a high ROI potential, solid profit margins, a scalable business model and a capable entrepreneurial team.

6. How DEFENDABLE is the idea?
How difficult or easy is it for competitors to copy the idea? Is it patentable? Does it create switching costs?

The defensibility of an idea to be fundable refers to its ability to withstand competition and maintain a sustainable advantage in the market. It is not just about having an original idea, but about protecting it and keeping it relevant in the long term.

A fundable idea must be sufficiently defensible to protect its competitive advantage and ensure its long-term sustainability. This involves considering intellectual property, continued innovation, barriers to entry, and the capacity of the entrepreneurial team.

What angel investors are looking for

Angel investors are wealthy individuals who invest their own capital in early-stage startups. They look for a combination of factors before committing their funds. Here’s an overview of what they typically look for:

1. A solid team:
• Experience and skills: Angel investors invest in the team as much as in the idea. They look for founders with industry experience, business acumen, and the ability to overcome the inevitable challenges of founding and growing a startup.
• Passion and commitment: Angels want to see founders who are fully committed to their vision and have the determination to make it a reality.
• Ability to execute: A team with a track record of executing plans and meeting goals is very attractive.

2. An innovative idea and a market with growth potential:
• Unique value proposition: Angels look for companies that offer an innovative solution to a real market problem.
• Market opportunity and size: Startups that address a substantial market opportunity are more attractive to angel investors. They often look for companies that serve large or fast-growing markets, as they have more potential for a high return on their investment.
• Scalable business model: The company should have a business model that can grow quickly and generate a high return on investment.

3. A solid business plan:
• Clarity and conciseness: The business plan should be clear, concise and easy to understand. It should outline the company’s vision, market strategy, business model and financial projections.
• Realistic financial projections: Angels want to see realistic financial projections that demonstrate the company’s profitability potential.
• Exit strategy: Angels want to know how and when they will be able to recoup their investment. A clear exit strategy is critical.

4. Alignment of interests:
• Fair investment terms: Angels look for fair investment terms that align their interests with those of founders.
• Transparency and communication: Angels value transparency and open communication with founders.

In summary:
Angel investors look for companies with strong teams, innovative ideas, markets with growth potential, solid business plans and fair investment terms. At the same time, they seek to support promising entrepreneurs and contribute to the growth of innovative companies.

Finding venture capital

Finding venture capital (VC) is a crucial step for many startups looking to scale quickly. Here is a complete guide on how to navigate this process:

1. Basic Preparation:
Solid business plan:
• A detailed plan that describes your business model, target market, competitive advantage, and financial projections.
• It should be clear, concise, and compelling.

Impressive Pitch Deck:
• A visually appealing presentation that summarizes your business plan and highlights key points.
• Focus on the problem you solve, your solution, market size, and growth potential.

Strong Entrepreneurial Team:
• VCs invest in people. Demonstrate that your team has the necessary experience, skills and passion.
• Highlight relevant experience and previous achievements.

Market Validation:
• Evidence that your product or service is in demand.
• This may include pilot testing, initial customers, or market research.

2. Research and Contact with VCs:
Identify Relevant VCs:
• Research VC firms that invest in your industry and stage of development.
• Use online platforms like Crunchbase or LinkedIn to find VCs.

Networking:
• Attend industry events, startup conferences, and networking events.
• Connect with other entrepreneurs, mentors, and influencers.

Direct Contacts:
• If you have industry contacts, ask them to introduce you to VCs.
• You can also contact VCs directly through their websites or social media.

3. The Due Diligence Process:
Initial Meetings:
• If a VC is interested, they will invite you to meetings to get to know you better and dig deeper into your idea.

Due Diligence:
• If the meetings go well, the VC will conduct a thorough investigation of your company.
• This may include reviewing your finances, technology, team, and market.

Terms of Investment:
• If the VC decides to invest, the terms of the investment will be negotiated.
• This includes the investment amount, equity stake, and investor rights.

4. Additional Tips:
Be Patient:
• Finding VCs can take time. Don’t be discouraged if you receive rejections.

Be Transparent:
• Be honest and transparent with VCs about your company and your challenges.

Busca VCs que Aporten Valor:
• No solo busques dinero, sino también VCs que puedan aportar experiencia, contactos y orientación estratégica.

Prepare your Data Room:
• Have all your company’s important documentation organized and ready to be presented.