What are investors looking for? When you seek out investment of any kind, you know you need to put your best foot forward, and if you can get in the mind of the investor now, you’ll be better prepared to answer any questions that arise.
Does it solve an actual problem?
In the rush to market in the past couple of years, a lot of people have been throwing “AI” around. That’s great, but is it actually solving a problem? Does the problem actually need AI? And is it a better solution to what’s already on the market right now? AI is an extremely competitive scene. You need to be able to differentiate. At Sentiero, we focus on this question heavily because we know, and we’ve seen, that infusing AI into the conversation doesn’t necessarily mean a winning investment. The company has to solve a problem first and foremost in order to make a splash!
How resilient is it to market change?
Can you adapt to the trends? Think about the problem you’re solving: are you just trying to solve the flavor of the moment, or are you building something that has staying power? There are generational challenges we all face and if you meet these root needs you’re not just going to be a flash in a pan. If the solution you’re solving is too trendy and doesn’t hit on those core, generational challenges in life, you run a great risk of becoming irrelevant.
Is this a feature or a product?
One of the things that has happened in the rush to get to market is that people build AI solutions for the sake of AI solutions. Instead, think about how it’s a broad scale solution. If you have a fully-featured product, you get ahead of the competition, but it takes time. But you can also go build a solution that sits on top of the foundational software. In that case, you’re just a “feature” and nothing stops the initial software to build out a similar solution. Understand where you are at in the process so that you know what kind of capital you need at which point in the process.
Do you have any proprietary data or IP?
Investors want to know what kind of proprietary data and/or intellectual property you are leveraging in your solution. That can be a key differentiator for you and allow you to be set apart. This is extremely intriguing for an investor. Understanding the data you have and if/how it is AI-ready is something you need to be ready to share with potential investors.
How do you manage training and inference costs?
What is your plan to manage your cost of goods in the long run? How much does each incremental user cost? Understand what your costs will be now, as well as when you scale. It can be a hard shift to switch from monthly billing to usage-based billing, or other models. You need to have an answer to how you plan to manage these costs over time.
Is the product sticky?
A big challenge for businesses; you want to make it easy for people to onboard but also to STAY. What does the process look like to keep users in the long run? How quickly, or difficult, can people offboard? Investors will want to understand what your potential churn rate will be and how long you can retain users. All of this feeds into the business model in the long run.
How do you deal with AI risks?
How are you handling data privacy, data bias, and other underlying challenges that surround AI today? Don’t lose the forest for the trees and focus too far out in the future that you ignore key foundational tactics to manage AI risks in today’s ecosystem.
Is the revenue model sustainable?
Investors will want to understand the business behind your product/offer. They’ll want to see how you’re working with experimental budgets. Can you sustain the cost of goods in the long term? As you go through time, why do customers stay with you? Do you have the long-term sustainability to turn your amazing idea into a great business that generates revenue? Shocking we know, but investors will want to see that you have thought through the business of what you’ve built!
Can you source enough talent to scale?
Investors will want to see that you have the bandwidth with staffing and talent. The talent pool can be very small at the moment, so depending on what you’re building, you need to have a plan for how you will hire into these roles to scale and grow. Talent pools are expected to grow, but they aren’t on pace yet, therefore founders need to have a reasonable plan for growth.
Are you solving yesterday’s problem?
Are you solving the way things have been in the past, or are you looking to the future? Investors will be looking to see if you are thinking toward the future, or thinking in a different, new way that represents where we’re moving now and tomorrow, and how we’ve operated in the past.
Bonus: Should I raise venture capital?
Venture capital funding is not the right solution for everyone. It’s a great fit for some startups, but not for all. It’s important for founders to do their research to know what type of funding is going to position their company for success both now and in the future.