What investors look for in tech start-ups

In the digital age, ideas can be shared by anyone. The brilliant thing about ideas is that when you share them with like-minded individuals, not only does everyone walk away with something new but the idea can get refined and give birth to even more ideas. The sad thing about an idea is that if no action is taken, it remains just an idea.

Entrepreneurs are the ones who are not afraid to get their hands dirty. They have the guts and drive to do the million things needed to bring an idea to life. There are certain other characteristics that an entrepreneur needs to define and shape the company’s future.

Competency is a definite requirement whether it is being able to handle a multitude of items on a to-do list, getting the right people to do the right job, or even just knowing how to copy a successful business for implementation in a different market.

It does not hurt to have a bit of charm as well. It is important to keep your relevant people such as your customers, your business partners, your investors, or even your staff, happy.

Asia is going through a period of incredible growth right now and it is hard to see any other time in history where it has been easier to set up a business that has the potential for global success. This is particularly so for Internet and technology businesses which typically require a lower initial investment than businesses in other industries.

When entrepreneurs begin on the journey to build up a business from scratch, one of the biggest challenges they will face is to get their plan in order. This means studying the competitors in and out of their market, learning what works for them and what does not, and more importantly, whether or not it works for your new business.

It is important to talk to potential customers to get a sense of their needs and what can be done to get them to use your products or services. Often, this preparatory work is what investors look for when finding out more about the business.

When meeting with entrepreneurs, investors need to know that the entrepreneurs know what they are talking about and not giving out fluff. They need to know that the entrepreneur has a solid plan for at least the next six months and that the investment they are seeking is not just some high end number but a well-calculated and thought out figure that is reasonable.

In particular, investors look for entrepreneurs with that twinkle in their eyes – the twinkle that shows a belief, passion, and desire to make their venture a success.

It helps the investors to know that the start-up has a complete team that is able to cover a variety of aspects of the business. In particular, the team has to have good business development skills, an understanding of how to market to their customers at a low cost as well as the tech knowledge that is required in the industry.

While many entrepreneurs are extremely focused on their idea, few have their focus on cash flow. Cash flow management is among the many real world issues that is taught in business schools, at the MBA level, that helps entrepreneurs in particular, to talk with investors. There are also other skills to be learnt such as business operations.

However, while not everyone is able to pursue an MBA, there are books such as Steven Silbiger’s The Ten Day MBA, which extract the essence of what is taught, for practical application in day-to-day business.

Investors need to know that they are investing in something worthwhile. They need to know that the money they are putting in is being put to good use and not squandered. Keep studying the competition, the market, and ways to improve the business model.

Above all, do it one step at a time and have fun doing it. It is the passion for what is being done that drives the entrepreneur and this reassures investors that the entrepreneur is in it for the long haul.