The balance sheet has taken a beating over the last three months, affecting the startup community the most. Inflation rates are unprecedented, and a recession is on the horizon, making it more difficult to invest in startups in india. Where does that leave companies that rely on VC money to expand their operations?
Any new business’s launch is a difficult and demanding process. There is often a limited guarantee of success or compensation for your efforts, and the risks are usually severe. An estimated 90% of startups fail.
The finest startups that succeed all have certain similarities. Concentrating on these gives you the investment seed you require to start your growth journey. These investment companies ‘green flags’ and ‘red flags’ will be discussed in detail in this blog.
Red flags for investment in startup
- We’ve encountered startups that have struggled to clearly articulate their value proposition or business model. The concept or the business model itself may have issues if it is too complex or challenging to understand.
- Possibly having seen more projects than the founders, we, as investors for a startup, are not trying to argue our point of view; rather, we are trying to assist the entrepreneurs by sharing our knowledge. Both parties will gain from the conversation and be glad if we can come up with better solutions. However, some entrepreneurs just find it difficult at times to accept advice from others.
- It is simple to determine whether startup founders are being honest and open during talks with investors. There are always some justifications for not being open or honest in responses. This is a major red flag since it makes our conversations less productive and hinders our ability to collaborate.
- Being open after 4 to 6 months might be a major warning sign because it shows that the company is having trouble persuading investors to invest in the project.
- The team only uses the numbers that will support their narrative; thus, occasionally, the numbers in the deck are either too high or too low. It’s not a good idea, as investors are smart and will double-check the figures as part of their due diligence.
- Spending countless hours on the deck shows the team is not paying enough attention to the important issues and has devoted too much of their limited resources to the deck.
Green flags for investment companies
- If the team isn’t asking for a lot of money without a strong reason early on and at a very high value. This can be a sign of the team’s expertise.
- The team can create a visually appealing deck that smoothly conveys a clear story.
- This is a major green flag if a B2B startup has many paying clients or pilots after a year.
- The product has either been extensively modified for each customer or has undergone testing with other customers.
- Since the team wants the company to be re-valued and recognized in the second round, startups typically solicit money for 12 to 18 months while setting up some milestones in between (at a higher valuation). But if there is only a small gap between rounds, this can be a sign that the team can reach its goals.
- When all of the co-investors are reputable firms or VCs, the startup will be more appealing to investors. If renowned VCs invest in this startup, that is a major green flag.
Finding the appetite for a digital startup investment shouldn’t be too difficult if the correct foundations are in place. If you can stand out from the crowd vying for the same seed investment in startup, you have a higher chance of obtaining a VC deal. Visit jcteamcapital.com for more information.