What Do Investors Look For Before Investing In A Startup

Entrepreneurs struggle with different things at different stages of their entrepreneurial journey. You might be struggling with validating your idea, or it might be finding the right team or even scaling up your operations. One challenge that all entrepreneurs face is securing funding. Without capital, it is difficult for you to go to the next level. 

We got a chance to interview Mohamed Geraldez, also known as Mohamed Yahya, who is a very successful Muslim entrepreneur, business coach, motivational speaker. Muhamad Geraldez who is business Nomad and an investor mostly in Muslim businesses that have a social impact. 

Currently, he is busy going around the world and sharing his experience as an investor and entrepreneur. He also has written a book called To God Through Money which is available on Amazon. We interviewed him a while back and ask him about what investors like him look for in a business before they feel comfortable to give their money. 

Product or Service That Is Already Working

Mohamed is where he is now primarily because of his attitude towards money. he did not have a rich uncle or family member that can lend him the capital he needed. He made it the hard way, he saved all his money to grow his business. 

As an investor, he advises that entrepreneurs have a validated business model before they pitch investors. 

“Show me a product or service that is already working, ideas everyone has ideas your mom has them, everyone has a scheme everyone has tactics everyone has a strategy,” he said. 

When you can show that to you have a product or service that is generating income then you will get investors’ attention. 

However, that only gets their attention you still have to convince them that you have what it takes to grow it into something bigger. Ultimately, investors are looking for a return on their investment.

Entrepreneurs are obsessed about getting people to buy their products. In other words, they worry about what if there is no demand for their product, so much that they sometimes forget about the supply part which is just as important. 

Many ventures fail because they can’t make sure the supply is adequate to meet the demand. He said when you can produce something you have to make sure that you can keep producing it if demand increase.

“Try producing sometimes 5 times a day for the next 365 days, there are many things that can come into play that you may not anticipate, one of it could even be the barakah in your business.”

There is this misconception that investors are looking for something new. Meaning an innovative idea that will be the next big thing that is going to change the world. Investors are practical people. 

“It does not have to be a new idea. Google was not the first search engine and Facebook was not the first social media. The rest just did not happened”

The secret in wooing investors to the point that they will take out their checkbook is only one thing. This is GROWTH. You have to be able to convince them that your product or services are doing good, i.e. there is a market for it and it is going to be better tomorrow. 

Show them that you are already generating income and you need capital in order to expand your consumer base. 

Less Freedom With Investors

A lot of people want to be an entrepreneur because they want to be their own boss. But as soon as you have an investor you can kiss that freedom away.

When you take money from an investor you now have a boss. You are now accountable to your investor. They are going to be on your back making sure that you doing the right things and heading in the right direction so they would have the return on their investment.

The best thing is for you to generate income first and save your earnings and invest it in your own business.

How To Make Your Start-Up Irresistible To Investors

Your start-up will become irresistible to investors if you met the requirement above and on top of that you already have a team ready to grow your business.   

“If you can show that you are generating revenue and you have like 3 co-founder one is in-change of marketing, one is in charge of finance and you are the operating CEO and you need capital to expand you will not have a problem getting funding from investors. Investors will come looking for you.” 

In other words, you already have a system in place and the right team to handle important functions and the only thing that is stopping you is the lack of funds.

You probably need to buy new equipment so you can increase production, or perhaps you need an office in another country to serve a new market segment.   

When you have are in one of those situations you change yourself from somebody that needs money into an attractive opportunity.