What Do Investors Look For In Your Software App?

In our blog “Navigating Startup Funding for Your App Development” we explained funding stages and relinquishing equity in your company in exchange for funding. Now we’ll address other parts of the funding and pitching process to prospective investors.

Know How to Scale Out and Evaluate Your App Idea

A good product is one thing, but will it make a viable business? This simple but extremely important question is one of the things that prompted Flint Hills Group Founder, Dave Cunningham, to start The Campfire Program for entrepreneurs. Campfire participants learn how to ask and answer the necessary questions to objectively evaluate whether their idea can scale into a business that appeals to investors, such as:

• Are we the experts? What stops the competition from doing what we’re doing?
• Do we have the right skills to build it?
• Do we have customers who would buy this today? Would they use it frequently?
• Does our idea have staying power? What if an event like COVID happened?
• Is our market growing 20% or more?

If your evaluation determines you have a product and not a company, all is not lost. Are there competitors who would be interested in your product? If it meets many of the other criteria then your answer should be yes, so funding can be used to quietly build it and then let the competition know you have it available to acquire.

Don’t Hide the Obstacles

Great ideas and smart teams still have hurdles to climb, and investors know this. Address these with transparency, then demonstrate how you’ve created a plan to overcome them.

No road is without bumps, and prospective investors will see you as being unrealistic if you don’t show that you’ve considered them and have a game plan.

The Dream Team

The right team is as important as the commercial viability of your idea. Investors look for experience. If team members can point to previous product development and business successes, it increases an investor’s comfort level. You may be a team of one for now. If so, you need to find others to join you as a team. Investors are not likely to invest in a single person.

As we mentioned in the earlier funding blog, investors will look for staff who are strong in areas where you are weak. It’s not unusual for software developers to lack business leadership experience and skills, so don’t be shy about admitting being a CEO is not your strength but you’ve brought someone in for that role. And remember, your team doesn’t need to be filled with permanent employees – a team of management, legal, marketing, and financial consultants can add both breadth and depth to your proposed commercial execution and allow you to bring on permanent hires at viable stages of your company’s growth.

Investors will also want to see a collective passion from your team. If it’s not evident that everyone believes in what you’re doing, why would the investor believe in you?

What to Expect During the Pitch

A few key things to keep in mind as you prepare for your presentation:

Keep it brief but meaty.

Try to stay around 20 slides but have a smaller presentation of essential slides ready if needed. You only need to make 3-4 points on each slide; use speaker notes to elaborate.

Prepare in advance for questions.

Prepare two sets of questions and answers in advance to practice: The first is a set of obvious questions, and the second is a list of questions you hope they don’t ask – but you’d better be prepared with answers if they do.

Prepare questions for you to ask them!

You’re looking for a good fit, not just money. In most cases your investors will be there to advise you as you run your company and you want to try to glean, as much as possible, if you can see obvious personal or strategic conflicts down the road. It’s also permissible to ask if you can talk to other founders of companies they’ve funded and advised; in fact, it shows that you care about investors being a part of your team and not just a wallet.

Prepare to Exit

Finally, it’s important to have an exit strategy. It may seem counter-intuitive, because you’re there to build your idea into a company and to have that company be successful. However, savvy business owners think about the end and what that looks like, whether it’s a succession plan, or being acquired. According to Cunningham, every Founder’s measure of success is, for the most part, selling the business.

“Your investors aren’t investing with you to stay with you for 50 years,” Cunningham said. “They want their money back with a profit, and a well-devised exit strategy can give them that.”

You may choose to incorporate the exit strategy as part of your presentation or be prepared to share it when asked.

A Partner Who’s “Been There, Done That”

Flint Hills Group knows how to help take an app from ideation to execution. We’ve also been on the entrepreneurial side of things and applied our expertise “around the campfire” in The Campfire Program. Whether you need us to be a part of your team to put our expertise on display for prospective investors, or need guidance with the process, we’re here to help. Don’t hesitate to give us a call or drop us a note.