Raising investment for a new business can be challenging. Founders need to convince investors that their business is worth backing financially. There are several key facts and reasons founders should highlight to show investors why they should invest. Firstly, the problem the business solves and its target customers are crucial. Outlining a big problem that genuinely needs solving makes the business case stronger. Analyzing the target customers and market potential also proves business viability. Secondly, founders need to explain their unfair competitive advantages. Proprietary technology, exclusive partnerships, patents and team expertise can help beat competitors. Thirdly, demonstrating some initial traction and metrics proves market validation. Revenue growth, active users and engagement metrics back up market demand.
Proving solving a real market problem attracts investors
One of the most important things founders need to show potential investors is that their startup is solving a genuine problem in the market that consumers or businesses are facing. Identifying a big problem that needs fixing is crucial to convince investors to invest. For example, Airbnb solved the problem of making travel accommodation booking easier and cheaper. Investors want to see evidence that a large target market will use and pay for the startup’s solution to that problem. Founders should thoroughly analyze their target users and the size of the addressable market. They need to convince investors there are enough customers who will buy the product or service at a price that enables sustainable profitability. Using consumer surveys, focus groups and beta tester feedback will help prove target customers need and want the solution.
Communicating the startup’s unfair advantages attracts investors
Founders need to explain their startup’s unfair competitive advantages to potential investors. Every business has competition, so investors want to hear why the startup can beat rivals sustainably. The startup’s proprietary technology is often a key advantage. For example, biotech startups with patented compounds have an edge. Exclusive partnerships can also help lock out competitors. If the startup has a world-class machine learning team, this talent advantage is compelling to investors. Customer acquisition strategies, distribution channels and supply chain optimizations can also establish barriers competitors will struggle to match.
Demonstrating market traction and metrics proves viability
Investors will be keen to see evidence of early customer traction and usage metrics. This helps validate that the market needs the product and that the business can acquire and retain high-value users cost-effectively. For example, rapidly growing monthly active users, renewal rates and low churn are positive signals. If the startup already has impressive revenue growth and is approaching profitability, that proves the business model is sound. Benchmarks showing the startup is outperforming competitors on key metrics like customer acquisition cost and lifetime value also highlight market validation and competitive strengths.
In summary, founders seeking investment need to convince investors they are solving a major consumer or business problem, have unfair advantages against competitors, and have already demonstrated strong early traction. This establishes market viability, sustainable competitive differentiation and execution ability to investors.