Significance of digital startup models to attract investors
By Dr. Apoorva Ranjan Sharma
There are a million good ideas. What makes a startup truly click is the passion that the innovators inject in order to turn their idea into a sustainable business, and a team that stays focused with an unblinking eye in changing market dynamics. It is even more importantfor a startup to be agile enough to pivot when needed, to overcome challenges and adapt to market changes. Thus, tenacity and the ability to pivot distinguish the innovators from the laggards. Over the years, we have seen this startup trend growing and with technology making its advent, there is a new wave of business model innovation taking place that is the digital startup.
Before we move to the role of technology in startups, let us understand what a digital startup is? A startup is called digital when its main assets are linked to technological investments to create automated business processes. At present, technology is at the core of the most innovative business models. It is driving a change, taking a strong root in almost every major industry. Digital startups are contributing to and feeding off of technological changes. It is creating innovative ways to consume a product or service and scale up the distribution to new levels. And the new-age technologies such as artificial intelligence (AI), cloud, data analytics, blockchain, and Internet of Things (IoT) have facilitated the creation of entirely new business models, giving startups an edge in the competition. If you are a startup, new digital business models are a huge opportunity to identify and address social and environmental challenges.
What do investors look at?
There isn’t an investment thesis for any investor while they think of investing in a new venture. But it does come down to understanding what variables will make a particular project or startup attractive for an investor. However, each startup has its own trajectory, the basic characteristics that investors pay attention to are team, product, market size and valuation. There is no written rule that applies to every single startup. A startup pitching for investment needs a compelling description of the problem, the value of the proposed solution and business model, a clear understanding of the market and most importantly – the qualifications and experience of the team. While these factors are put in place, it is also important to identify a startup’s ability to scale determining its growth potential and long-term sustainability. The startups might not be able to reach their entire addressable market from the start, but what catches an investor’s attention is what problem a startup is trying to solve and its ability to define a large market.
A great pitch is an art. While startups make an investment pitch, it is imperative for them to take note of key red flags that might scare away their potential investors. A poorly articulated plan foruse of funds, unrealistic financial projections and valuation, and a plan that isn’t robust can be deal killers.
It does take some research to identify the right investor who will invest the right amount of money with acceptable terms. The startup ecosystem defines the next wave of digital disruption and risk-takers who want to make a positive impact on the world.
(The author is Co-founder and MD of 9Unicorns)
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