Whether it's a secret recipe, an app the world can't live without or a revolutionary way to plan weddings, when passion and great ideas come together, successful businesses are made.
In the realm of investor backed startups, there are lots of opportunities for businesses to both succeed and to fail. Before you dive head-first into your new business idea, consider the following six factors that can make or break an investor backed startup.
The Successful Launch of Your Investor Backed Business Depends on These Six Startup Essentials
1. A Product or Service Validated by Market Research
Not every good idea makes a business – even if there is a current void in the marketplace. Spaces in the market sometimes exist because previous businesses tried to fill the space and failed or because there simply is not enough demand.
Even if market research suggests consumer acceptance of your product, make sure you will be able to generate enough income through your business model to make money for the business, your investors and you. After all, you cannot build a billion-dollar business, if you operate in a $500-million market. Before seeking investors and launching into your business head-first, do the market research and make sure your goals for business growth reflect the current market.
2. A Killer Business Pitch
If you need investors, then your company's success depends entirely on your ability to craft and deliver a killer pitch. If you cannot effectively explain your product or service and your business model, you will not be able to attract investors to fund your company. Your pitch should take ten minutes or less, and you should be able to explain your product or service using simple, jargon-free terms that any person can understand. Your pitch should include:
- Your product description
- What makes it unique
- Your target market
- Customer acquisition strategy
- How you generate revenue
- How and when the investor will make money
You should also try to craft your pitch in a way that will make it stick in potential investors' minds. One effective way to do this is with a story. While spreadsheets and data are important, they are not as memorable as a riveting tale of inspiration, motivation and hard-work.
3. The Right Team and Partners
Starting and running a business is challenging and time-consuming enough. You do not want to add interpersonal conflicts to your pile of anxieties, when you already have plenty of other, more important matters demanding your time and attention. Ensure you and your partners are aligned on all aspects of your business.
Lots of people have good ideas (I had the idea for Home Depot!) but very few can execute. Successful business partners must have a good relationship with one another, communicate openly, share similar work ethic, drive, commitment and goals.
You should also choose business partners who bring a variety of valuable skills to the table. An exceptional team should be able to work together to resolve conflicting perspectives, discuss options regarding the business and answer questions before they actually are ever asked, so that when the time comes to negotiate in an investor meeting or pivot the business's direction, all partners will be on the same page.
4. Get Business Feedback and Respond to It
Whether you weave socks, wash windows or wield widgets in the tech world, seeking feedback and responding to it is essential to the success of your business.
Absolutely every business depends on satisfying customers, retaining customers and attracting more customers. In order to do this, businesses must be able to innovate and sell. For this reason, it is essential that start up companies seek as many opportunities as they can to generate customer or user feedback.
Growth-minded business leaders then use this feedback to innovate and refine their products or services to provide the absolutely best customer experience possible.
5. A Business Exit Strategy from the Start
In the early phases of a startup company and during your pitch, it is normal to be hyper-focused on your business's beginnings, your product development, your customer acquisition and your revenue model. Even in the early start up phase, however, it is important that you do not forget to set your eyes on an exit strategy: for you and for your investors.
An exit strategy is the point at which your business matures and generates revenue for your investors. Exit strategies sometimes come in the form of an initial public offering (IPO), a merger, an acquisition or a licensing agreement. When your model is proven, an exit strategy will either maintain your existing business's revenue model or accelerate it to the next level.
6. A Solid, Scalable Back Office
Most entrepreneurs are experts in their industry or field, but most are not experts when it comes to managing their business's finances.
When launching an investor backed startup, it is essential that you build a solid financial foundation by beginning your business with a scalable, smart back office. This will ensure you have the tools in place to ensure compliance, accurate bookkeeping, sound accounting practices and the timely and accurate generation of financial management reports. In addition, your back office will help you improve your ability to forecast budgets, helping you determine exactly how much money you need to raise to avoid the costly mistake of under-funding or over-funding your business in its early days.
The tools of a smart back office are essential in your company's early days and as you begin to grow. Establish a smart back office not only to handle the daily grind of bookkeeping and accounting tasks necessary for operations, but also to grow with your business and facilitate management accounting, which empowers you to make data-driven decisions to streamline operations, improve product development, laser focus your marketing efforts, drive business growth and to impress potential investors.
Achieve Excellence in Financial Management without Cutting into Valuable Fundraising Time
Running an investor-backed business is most often more than a full-time job. Entrepreneurs fill their time with investor meetings, travel, market research, product development, business plans, negotiations and customer acquisition. All of these responsibilities – each absolutely essential to the success of an investor backed business – eat up valuable time and energy. As a result, startup owners find themselves with little time left to devote to the actual engine of the business – its finances.
In the early days of a business, it is also essential to minimize unnecessary costs in order to invest as much capital as possible back into the business's product development, marketing and research efforts.
The strain on working capital leaves many unable to hire bookkeepers or accountants to manage their back offices. As a result, investor backed businesses need smart, affordable solutions to their back office's bookkeeping and accounting needs.
Entrepreneurs can solve this dilemma by outsourcing their back offices using a high-quality Client Accounting Service (CAS) provider, like GrowthForce. A strong CAS provider allows you to benefit from the expertise, knowledge and experience of a complete bookkeeping and accounting department at a fraction of the cost. Investor backed businesses can pay for only the CAS services they need exactly when they need them, establish the processes and technological foundation for a scalable back office and expand their bookkeeping and accounting services as the business grows.