To ignite a successful company and send it into the stratosphere requires a spark. Passion is that spark. A seemingly crazy product idea can grow into a movement that turns the beverage industry on its head. Drive and determination is especially important as a startup moves through the shaky initial stages when taking the market by the storm still seems like a pipe dream.
That passion can only take a company so far, though. At some point, every startup needs investors.
What does an investor want in a startup? What sort of products and people do they like to work with? What goals should you set to make your company more attractive to potential investors?
To bring in investors, a beverage entrepreneur must take off their CEO hat momentarily and think like an investor. The most important factor that drives investment decisions isn’t the product – it’s the people. Investors invest in people. No matter how wonderful or innovative a product is, someone must like and trust the people involved in running the company.
Also, keep in mind that a potential investor is looking for every reason not to invest. Their radar is tuned to high and they’re scanning the team, the company, and the product for anything that sets off warning bells. Warren Buffet once said that the key to his success wasn’t the deals he chose that were winners; it was the losing deals that he passed over. It’s essential for the head of a startup to analyze the situation, note any potential barriers to an investor choosing their company, and remove those barriers.
Starting with those truths as a foundation, there are 10 specific factors that investors will consider when they look at a startup. Knowing these will provide a leg up to new companies that wish to make the best first impression and secure funding.
If an investor senses a lack of integrity in a CEO or their team, they won’t move forward with a deal. The leader of a startup has to be transparent and honest. This means that if they’re asked a question and are unsure of the answer, making things up is unacceptable. Instead, respond with “That’s a good question and I’m not sure. Can I get back to you?” This not only demonstrates integrity; it also demonstrates a willingness to seek out new information (something that will be covered in more detail later).
It’s highly critical for a CEO to be seen as someone with a huge vision, even if that vision seems insane. This is because there has to be a reason that this new product simply must exist. Perhaps it will be number one in its category, or maybe it will forever change the way the world looks at soda or fruit juice. Numbers also play into this vision – the company needs to have a line of sight to $100 million in revenue.
All forecasts should be based on factual, data-based assumptions. Investors know how long it will take and how much money it will cost, so a startup isn’t going to pull the wool over anyone’s eyes with unrealistic numbers. Unrealistic forecasts signal a real lack of integrity.
It’s not news that starting a company is hard work. For an investor to get on board with that hard work, they need to know that a CEO is in for the long haul. This might mean quitting a well-paying day job to lay it all on the line for the startup. It likely means 100-hour workweeks and sleeping at the office. An investor must know that the leader of a startup is willing to do whatever needs to be done to make the business succeed.
This is also highly critical, and investors have to see the passion. It creates a culture within the company that’s highly contagious – not just to employees, but also to investors. Passion makes other people want to be a part of something exciting.
Of course, investors want a great-tasting product. This means a great formula and high-quality ingredients. A startup won’t be able to be the low-cost offering in its category; it should instead seek to be the best-tasting offering. A new company can make a real impact by being the highest-quality provider of their type of product.
Investing is also a numbers game. Savvy investors want to see a 40% profit margin or higher. If a company isn’t yet there, they should have a vision that includes a clear line of sight to that. As for velocity, it’s best to keep the focus deep and narrow to generate good velocities, rather than wide and shallow.
Any budding beverage entrepreneur would do well to consider category well before they get to the point of looking for investors. This will help them avoid wasting a large amount of time and money on a product that’s too similar to other successful products already on store shelves. Keep in mind that it’s easier to succeed in a category that’s popular and growing than in one that’s flat-to-declining. Also, investors like trends, not flash-in-the-pan fads. Cold-pressed juice and beverages containing kale, for instance, are currently on their way up.
8. Your People
Aside from integrity, the most important consideration in the people category will be your team. If the leaders of a startup are inexperienced in the beverage industry, have they surrounded themselves with experienced, smart people? Are there rockstar salespeople with connections inside the industry? A company’s team is an insurance policy designed to help them succeed.
Investors like companies headed by leaders who have a “learner’s” mindset versus a “knower’s” mindset. While knowers think they have all of the answers, learners are coachable and curious. They seek out new information. They also surround themselves with the best and brightest people – an experienced board of directors, perhaps.
Finally, someone investing in a beverage company wants to see a fantastic presentation. A startup needs to have a solid business plan that’s detailed and well-thought-out. This includes a comprehensive go-to-market strategy. Companies that are clueless as to where to start can look to other companies to get examples of impactful investor presentations.
Keep in mind that starting any company is a journey that will have its ups and downs. This will help keep the passion and enthusiasm up when the road hits dips. It will also help build a company that everyone wants to get behind – including investors.