Scaling a business is a significant milestone in any entrepreneur’s journey. It’s the point at which a venture has successfully passed through the startup phase and is now poised for growth. But how do you attract investors who can help take your business to the next level? What do investors look for when deciding whether to invest in your scaleup?
Understanding what investors look for can help you build a more compelling case for investment and ensure your business is well prepared for the process.
Let’s dive into the top 5 things investors focus on when evaluating potential scaleups, featuring some of our experts’ insights:
1. Team: A Solid, Complementary Team
The importance of having a strong team cannot be emphasized enough.
“It’s always the team,” says Corrine Kiame, president of the Lebanese League for Women in Business. “Because that’s what’s going to give you, other than your product, a competitive edge to be able to achieve more.”
Investors know that the success of a scaleup depends not only on the product or idea but also on the ability of the team to execute. A complementary team that combines technical expertise, business acumen, and leadership is highly desirable to investors.
A great team is one that “can be flexible and is able to pivot in case of changes or unfavorable factors,” explains Samar Hawa, Berytech Fund 2’s‘s Senior Advisor and Project Development Manager of Rebirth Beirut. “We’re living in a very changing and dynamic world, so being flexible and able to pivot the business is crucial,” she notes.
2. Partnerships: Strategic, Creative Collaborations
Strategic partnerships can accelerate growth and offer valuable resources, market access, and credibility. Investors are keen on scaleups that have established or are in the process of forming partnerships with other businesses, organizations, or industry leaders.
This is especially important in a country like Lebanon, shares Kiame. “No startup can grow without funding, but in a country like Lebanon, where the funding is relatively limited, you can leverage through partnerships.” She especially recommends exploring opportunities for service agreements, when it makes sense.
3. Profit: A Clear Path to Profitability
Entrepreneurs should know that “investors are financial investors at the end of the day,” says Hawa. “Unless they’re giving grants, then that’s another story,” she continues. “But if they’re financial investors and want a return, they want to know that there will be an exit at some point.”
While many scaleups start by focusing on growth, investors want to see a clear path to profitability. They’re looking for businesses that can eventually generate positive cash flow, and they want evidence that your company can turn a profit once it has scaled.
This doesn’t mean that your scaleup needs to be profitable right now, but investors need to know that you have a plan to achieve profitability.
4. Preparation and Confidence: Doing Your Homework
Being well-prepared and confident during investor meetings is essential. Investors want to see that you have done your homework and are thoroughly knowledgeable about every aspect of your business.
Investors value entrepreneurs who are well-informed and up to date with the latest industry trends and innovations. This shows that you are not only aware of current developments but also have the foresight to anticipate future changes in your market.
This includes presenting clear, data-backed arguments about why your scaleup will succeed. The confidence that comes with being well prepared shows investors that you are capable of making tough decisions, leading your team, and navigating the challenges of scaling. It goes without saying that entrepreneurs must have a great elevator pitch, where they can describe their startup in a minute max.
Ultimately, understanding the financials of your business, and “why you are asking for the money” is essential, stresses Kiame. “Investors invest today hoping to exit in 5 or 6 years and you need to know that an exit in year 5 or 6 is like a divorce. And the divorce is always painful,” she says.
5. Compatibility: Alignment with Investors’ Interests and Aims
Finally, investors tend to prefer scaleups that align with their own interests, values, and goals. Before meeting, ensure that your company’s mission and values align with theirs. This compatibility helps build a strong, trusting relationship and ensures a more seamless partnership. “Don’t go just for the money. Really understand the background of the investor,” advises Kiame. Ideally, she says, entrepreneurs are better off seeking investors that have a heart for the startup itself.
Tweaking your pitch to suit investors is recommended, “but it’s important to remain transparent,” notes Hawa. Don’t hesitate to say things the way investors want to hear them but be sure not to deviate from reality, she suggests. Hawa likens investment meetings to job interviews. “You don’t go to a job interview without researching the company you’re interviewing with,” she says.
By focusing on these 5 key areas, you can build a business that attracts investors and positions itself for sustainable growth.
Whether you’re preparing for a pitch or simply looking to strengthen your business for future investment, keeping these factors in mind will help you create a compelling case for why your scaleup is worth investing in.
About ScaleSmart
ScaleSmart is a program under the ACT Smart Innovation Hub Initiative, co-funded by the Embassy of the Kingdom of the Netherlands in Lebanon. Its primary objective is to support the growth and sustainability of startups, creating more employment opportunities for young people and revitalizing the local economy.
