India has been one of the fastest growing markets in the world, and as it continues to expand, Indian investors are looking to invest in other growing markets around the globe. Among them, Canada has become an increasingly popular target for investment due to several factors. Not only because of its thriving business culture, easy access to the North American marketplace through trade deals like NAFTA and most recently the Canada-India trade agreement is also a key factor that makes Canada a fruitful land for Indian angel investors. When making investments in Canadian startups, Indian investors tend to favour certain factors and attributes when deciding which Canadian startups to target – here are some of what Indian investors look for before funding a startup.
A large market share and competitive advantages
Since 2017, Canada has been among the top five countries that received venture capital investment from Indians. This trend will likely continue as Canada is deemed as an increasingly attractive destination for foreign angel investors. Those from India are primarily interested in startups that have shown substantial growth potential or have a big market opportunity. Specifically, they look at companies with great products, strong managing teams, and clear vision.
How can founders showcase their market share or competitive advantage? Some of our suggestions would be:
- Outline the current competitors (both direct and indirect)
- Direct competitors are businesses that are offering the same products/services as you do
- Indirect competitors are businesses that sell a related product/service and share the same target audience
- List your product/service’s strengths and weaknesses
- A strength could be a competitive advantage over the competition
- A weakness could be a logistical issue with supply chains
- Detail on what makes your product/service unique
- Explain the growth potential and lucrative opportunities your startup possesses
Proven management team
Angel investors want to see that founders have a proven management team with experience scaling an organization. A strong team is essential for building the necessary operational, financial and marketing capabilities to scale your company. You will also need to show that you have a product or service that has growth potential, through customer validation and market research for example. Lastly, you will need to articulate your company’s competitive advantages and provide evidence of how this will drive sustainable growth over time.
How to showcase your team’s readiness to a potential investor:
- Explain your startup’s culture and how you plan to grow the team internationally
- Outline specific duties of certain departments in your company (sales, operations, logistics, etc.) and how they will accomplish their expansion goals
- Break down key statistics of goals your startup has already met and where the team is heading next
- Connect a vision to your efforts and why your product/service will be successful
- Ask the investors if they have what you need as well (suppliers, a strong network, and experience in your space)
A defensible market position
The market position of the company will determine how it is perceived by investors. A company with a defensible market position has a good chance of being funded because the investor believes that their investment will not be at risk. Other factors, such as growth potential and industry expertise, must also be considered when pitching to an investor.
How to establish a defensible market position:
- Provide profit margins and sales to investors to show scalability and growth potential
- Provide information, statistics, and research that proves the demand and need of your product/service in a specific market
- Acknowledge other competitors in your market and what your startup will do different
- Share sales numbers and projections that will entice investors that your offerings are a good investment for them
You have passion and have invested your own money
While Indian investors most likely look for innovation and growth potential, they also want to know the background stories of the founders and how much they believe in their offerings. One way to tell how serious and passionate the entrepreneurs are, is by seeing how much of their own savings they have invested time and money into the startup. An investor is meant to take you to the next level, not fund your entire business model.
Ways to get your startup off the ground before approaching an investor:
- Crowdfunding: There are hundreds of platforms that let you upload your project and people can invest and contribute to the startup’s growth
- Corporate seed funds: Support from corporate companies can elevate your success as they have strong networks, capital, and an interest to grow their wealth as well.
- Incubators: Typically don’t ask for equity and are there to provide office space, training courses, and offer some capital to help you grow.
- Accelerators: Help the startups scale by providing access to their network, mentoring, workspaces, and usually specialize in a certain business type or market. Canada-India Acceleration Program helps Canadian women entrepreneurs expand their startups to the emerging market of India!
- Angel networks: Provide small investment amounts to help startups grow in the early stages of development. By joining Canada-India Acceleration Program, startups will be connected with Lead Angels, providing them with the best access to vetted investors in India for their international expansion.
Angel Investors are inclined to invest in an industry or space they know best
Remember, not all investors will be interested in your company and it is not because you don’t have a viable and scalable product/service. It could be because they are not knowledgeable about your industry or space. As much as they vet your startup, you need to vet their fit for your brand as well. You want an investor that understands your needs and has built up other companies similar to yours.
When to know if an investor is a good fit:
- Do they have the expertise and connections you need?
- How involved are they with each investment?
- How much equity are you willing to part with?
- Are they supportive and confident in their ability to help you grow?
Summary
A track record of success is most likely what angel investors look for before investing in a startup. They want to see that the company consistently meets its goals and can show growth potential. They also want to know that the business is able to adapt quickly to challenges and changes and are preparing for future plans. To accomplish this, it’s important for entrepreneurs to constantly monitor their business and make necessary changes when needed. The goal is to show the investor that their investment will help you grow your business so they can profit as well.
By Taylor Desjardin
