{"id":42009,"date":"2023-10-20T15:18:04","date_gmt":"2023-10-20T15:18:04","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/what-investors-really-want-its-not-primarily-a-great-idea-startupsmart\/"},"modified":"2023-10-20T15:18:04","modified_gmt":"2023-10-20T15:18:04","slug":"what-investors-really-want-its-not-primarily-a-great-idea-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/what-investors-really-want-its-not-primarily-a-great-idea-startupsmart\/","title":{"rendered":"What investors really want: It\u2019s not primarily a great idea – StartupSmart"},"content":{"rendered":"
Investors are looking for an impressive and reliable founding team above all else in an early-stage startup, a new study has found.<\/p>\n
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These early startups are notoriously risky investments, and with a lack of history, sales or a track record, investors have to rely on other aspects of the business to make a decision.<\/p>\n
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Stanford Graduate School of Business professor Shai Bernstein, along with Arthur Korteweg and Kevin Laws, conducted a study with the aim of finding out which of three main categories of information about a startup that investors actually value the most.<\/p>\n
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The study finds that human capital is most crucial for a startup\u2019s chance of landing an investment, with especially more experienced and successful investors basing their choices on these aspects.<\/p>\n
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The study worked with AngelList, a platform connecting founders with investors, to send nearly 17,000 emails to almost 4500 active investors.<\/p>\n
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AngelList regularly sends emails to these investors about featured startups, and includes information about the founding team, its traction in the market and other current investors.<\/p>\n
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The study randomised which pieces of information would be divulged to the investors in the emails and measured the click rate to see the investors\u2019 interest.<\/p>\n
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Investors were sent different emails about the same startup, with some including information about the funding team but not traction, and vice versa.<\/p>\n
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It found a 13% increase in investor follow-through when the information about the founding team was included, and no change when other information was added instead.<\/p>\n
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\u201cThe average investor responds strongly to information about the founding team, but not to firm traction or existing lead investors,\u201d the study reads.<\/p>\n
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\u201cOur results suggest that information about human assets is causally important for the funding of early stage firms, and hence, for entrepreneurial success.<\/p>\n
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\u201cThe operational or technical capabilities of the founding team raise the chance of success, especially in the earlier stages of a firm\u2019s lifecycle, when experimentation is important.<\/p>\n
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\u201cAn alternative explanation is that high quality teams have attractive outside options, and can therefore credibly signal the quality of the idea.\u201d<\/p>\n
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