AI-generated summary
Investing in startups in our country has become an increasingly secure opportunity, as evidenced by the substantial growth in investment volume during the first half of the year. According to the Bankinter Innovation Foundation’s Startup Observatory, investments nearly doubled compared to the entirety of 2020, reaching 2,170 million euros. This surge is largely driven by more mature funding rounds and the growing prominence of venture capital (VC). When deciding where and how much to invest, VCs prioritize two fundamental factors: a large market and a strong team. They favor sectors growing faster than the global GDP, such as video games, and use tools like “TAM SAM SOM” to evaluate market potential. The team’s experience, ambition, and global mindset are crucial, especially in early stages where financial metrics are less reliable.
Entrepreneurs seeking VC funding should succinctly articulate their startup’s mission and demonstrate early traction with clear data. Understanding the specific focus of each VC—whether B2B or B2C, software or hardware—is vital, as investment needs vary accordingly. VCs generally prefer scalable product startups, particularly those with subscription-based SaaS models that offer recurring revenue and measurable performance metrics. A solid go-to-market strategy and customer acquisition and retention plans further enhance credibility. Finally, successful fundraising requires clear goals aligned with market and product development, realistic timelines, and effectively leveraging competitive insights to create investor interest.
Investment funds look for some particular characteristics before betting on a startup, some related to figures and others to people.
Investing in startups in our country is an increasingly safe bet. This is what all the indicators indicate, based on the volume of investment attracted in this first half of the year. In fact, according to the
Market and team, the key factors for investing in startups
Although the expectations and requirements are different for each operation, the funds follow a general line when investing in startups. If we wanted to summarize, a venture capital, in addition to a product, looks for two fundamental factors: a large market and a team.
As for the market, the funds know that it is very difficult to gain a foothold in small ones; on the other hand, if you get a percentage of a large market, the company can be worth a lot. In general, the rule is that if the sector grows more than global GDP, it is a good market: a clear example is video games.
It is necessary to analyse what barriers to entry into the sector exist and what the competition is. The “TAM SAM SOM” is a tool used to measure the size of a market and identify how profitable the business can become.
The team’s analysis, on the other hand, responds to more human criteria. In fact, its influence is greater, especially in the initial phases, when more reliable metrics cannot yet be taught. At that stage, the fund is aware that it is not investing in a company but in people. VCs value the team having some experience in the industry, being ambitious but realistic, and thinking globally.
Know yourself and the bottom
A good piece of advice that an entrepreneur can follow so that a venture capital fund looks favorably on him is to learn how to summarize his startup in a single sentence: short and understandable. In fact, if the entrepreneur is not able to tell an investor the problem he wants to solve, it is most likely that he is either not solving it, or does not know what problem he is facing.
It is good to demonstrate with the help of video, facts and figures. And even if funds start investing more and more at earlier stages, it’s important that they can see a viable product with early traction metrics.
A startup has to inform itself beforehand, to know what the VC it wants to go to is focused on . In fact, there are funds that only deal with B2B companies, and others that only B2C, because depending on the model, more or less capital may be needed. B2C models typically require more investment because the target audience is wider. For the same reason, there are many more funds that invest in software than in hardware, since the latter requires greater logistics that inevitably increases costs.
What models do Venture Capital prefer to invest in startups?
In general, venture capitalists prefer to invest in product startups rather than service startups. They do not usually like consultancies, because they are looking for a standardized and scalable product, which can be sold with agility to a wide audience. Recurrence is one of the most appreciated characteristics; that is, that not a single piece is sold, but that loyalty can be generated through a subscription, for example, or that they are products that can be sold more than once to the same customer.
They prefer the SaaS model, which allows them to build a mass of customers. In addition, it has the advantage of acquiring many metrics on the operation of the product and its acceptance, recurring revenues and others, which are data that then allow you to finance much better.
The funds also look at the Go to Market strategy, in which the startup must be clear about how it intends to face the market. For example, if you market software, you need to know whether and how to go to large companies or SMEs first. This is another of the parameters that venture capitalists use to assess the credibility of a project before deciding whether to invest in it.
The other is marketing and sales. The startup should have a plan for how to attract customers and how to retain them, as well as know the costs. In the more mature phases, when there are already valuable metrics, it can be said that if a startup captures more customers than it loses, it is on the right track.
Know how to sell yourself without neglecting the product
Funds do not always know exactly the reality of a market, so a good trick is to give them a perspective. Knowing how much money competitors have raised and if there have been any major sell-offs can lead to FOMO (the fear of missing out). Similarly, it is interesting for funds to be able to see if there are already investors with amounts committed during a round, to find out who is interested and for how much.
The size of the funding rounds should be sufficient to achieve the objectives over the next 18 months. A round takes on average between 3 and 6 months to rise. You always have to have a scheduled date for the closing of the round and, in the meantime, dedicate yourself to meeting the company’s objectives.
Finally, it is important that the startup is clear about what goals it wants to achieve with the funding. They are usually of two types: market and product. It is very normal that in the early stages the financial plans of a startup are not fulfilled, but the funds are useful to see how the entrepreneur thinks: his ambition and his realism.
