This article is written by Brian Malika, a Contributor Author at Startup Istanbul.
Ed Roberto is the Vice president for the Middle East and Africa Techstars. TechStars is a venture capital outfit that invests in cutting edge digital technologies.
To every investor out there, it is evidently clear that the success of a start-up is not entirely dependent on the sharpness of the business proposal. In fact, no matter how innovative the entrepreneurial idea might be, its success is entirely dependent on the execution capability of the start-up founders in place.
That is why sometimes we have mentorship support as part of the investment package to ensure that successful recipients of a business investment program are able to receive the necessary capacity building to ensure that they are able to manage the awarded investment fund appropriately towards actualizing the start-up dream.
In other instances, venture capitalists usually work through an accelerator program that invites upcoming entrepreneurs to come on board and be trained on personal skills that sharpness the execution ability of their innovative ideas.
At the end of an accelerator program, investors are usually more confident that the entrepreneurs whom they will be select will be in a better position to manage the investment fund due to the experience of passion through rigorous training.
But despite the mentorship and accelerator program experiences that an entrepreneur might have, what else makes an entrepreneur stand that an investor should look out for? Here are 4 key determinants on this:
There is no way an entrepreneur can guarantee the success of their start-up on their own. Even if they are working on a digital innovation software application of some sort that only requires them to work on their computer still there will be need for marketers to strategize on selling out the final product or service , financial advisors to accept for every single cent and even sociologists to ideate on the customer journey by informing on the social factors that determine why people prefer to buy things .
Therefore, it will be important for investors to take caution whenever they find start-up founders that have the courage to work on solo grounds. This is because even if a start-up founder is well talented with all-round management skills, still, it all be exhaustive at the end of the day to manage all the functions of a start-up on a daily basis on their own.
2. Product Market fit :
Again, there is no point of investing in a brilliant entrepreneurial idea that does not have a place in the target market. For instance, there is no logic of investing in a start-up that efficiently locates Parking spaces for vehicles in a market segment that does not even have road networks and a sufficient number of vehicles at first place.
Or rather, do not invest to scale in a start-up that offers an innovative solution but there is no market to appreciate the same product or service at the end. For instance, there is no need of investing in a start-up that offers mobile payment service platforms in a region that has well advanced other forms of digital payments.
Make sure that the innovative ideas that you intend to invest in matches with the market-relevant depending on the area the start-up wants to scale up.
3. Progress Test:
Even before you think of investing in a start-up, it’s important that you do a test on how the product or service in question will progress in the market. This means that the start-up idea being executed must have a final product or service that customers can happily use for free. Therefore, make an effort to present the same products or services to the targeted market for a specified period of time for free. If the targeted customers will be willing to use the start-up product or services for free and in good numbers then you can be confident to further invest in such a start-up.
Imagine investing in a start-up that is unable to convince the targeted market to try its new products or services for free? Just imagine.
4. Look out for the under-invested ideas
Since investment is all about taking risks (strategic risks for that matter), every investor should at once have the courage to consider partnering with a start-up that has been isolated by other investors.
We have entrepreneurs out there who have cutting edge ideas that have scared ordinary investors away. Some of these entrepreneurs that people never believe in what they are doing should not be ignored just yet.
Failure Is Part Of The Process To Success
It would be wise to engage that lone ranger entrepreneur that has been segregated due to their unique ideas. You may never know you could be investing in the next Mark Zuckerberg when you consider to positively approach that entrepreneur that has been neglected due to their uniqueness in ideas.
Every investor should be cautious to note that new ideas in the market are bound to fail due to the fact that they are new themselves and as such, it would be wise for investors to be patient and believers in new ideas that are being propelled by start-ups that they support.