Choosing a startup for investment: an investor’s perspective

In this article, we will examine the main reasons why investors find it challenging to identify worthy projects and how Finetic Consulting can assist both investors and founders in turning obstacles into opportunities for growth and success.

Contents

• Opportunity for founders:
  Viewing startups through the investor’s lens

• Many ideas, few ready projects:
  Why a simple idea does not always lead to a successful project and how a lack of a clear business model complicates funding searches.

• Founders’ willingness to take risks:
  How founders’ readiness to invest their own money impacts investors’ perceptions of their projects and why this is critically important for investors.

• Mistakes in preparing for investment:
  There are common mistakes made by founders that hinder successful fundraising, including insufficient transparency and lack of a clear development plan.

• Legal unpreparedness and the value proposition:
  The importance of legal preparation for startups and how a well-formulated value proposition can enhance investor trust.

• Overvaluation of intangible assets:
  Why evaluating the team is more important than assessing ideas and initial developments, and how founders can enhance their teams to improve their chances of success.

• Fraud risks:
  How instances of fraud in startups create distrust among investors and how startups can enhance their reliability.

• The role of Finetic Consulting:
  A description of how Finetic Consulting helps founders and investors overcome barriers, increasing the likelihood of successful collaboration.

• Conclusion:
  A summary of the discussion.
  

Many ideas, few ready projects

The world of startups is filled with ideas. Many founders approach investors with concepts they believe to be promising. However, an idea is not a project. Investors need projects that have already passed the development stage, have a clear business model, and are ready for market entry. Investors strive to minimize risks and prefer to fund businesses that are operational with minimal risk and proven revenue potential.

According to research by Startup Genome, around 90% of startups fail, with only 10% reaching the scaling or profitability stage. This indicates that most projects are not ready for serious investment—often lacking both a finished product and a clear market entry strategy.

Finetic Consulting assists founders in transforming ideas into ready-to-evaluate projects, significantly increasing their chances of securing funding and accelerating the journey from concept to real product.

Founders’ reluctance to risk their own capital

One of the key signals investors pay attention to is a founder’s willingness to invest personal funds in the project or assume risks. If founders are unwilling to invest their own money, it raises doubts among investors. They may interpret this as a lack of confidence in the project’s success or an unwillingness to share risks with investors.
Moreover, it is not uncommon for founders to shift the responsibility for project development onto investors. They often refuse to act as guarantors for the raised funds or to provide collateral for assets acquired through investments. However, investors are looking for partners, not those who simply expect a gift.
Finetic Consulting teaches founders how to prepare for negotiations with investors, present their projects as reliable investments, and demonstrate their readiness to share risks. This builds trust and enhances the likelihood of successful financing.

Weak investment preparation

Another common mistake among startups is a lack of transparency and inadequate preparation for investment. Founders often approach meetings with investors without a clear development plan or the necessary documentation. Here are some typical errors:

• Lack of a clear concept:
  Founders cannot articulate what the final product or service will be, making the project highly uncertain for investors.

• Market and demand research:
  Many startups do not conduct market analysis. Founders are confident that their product is needed but cannot prove it. Investors want to see concrete research—who will buy the product and what the market scale is.

• Unclear roadmap:
  Without a clear development plan, investors lack understanding of how the startup will achieve its goals. Founders cannot simply hope that “everything will work out.” Specific steps are required.

• Errors in the financial model:
  Financial forecasts are the foundation of trust. If they contain significant errors or unjustified assumptions, investors understand that they are dealing with an underdeveloped project rather than a viable opportunity.

Some founders offer investors high commissions for attracting funds, hoping to bypass the development and expertise stage. However, for serious investors, this signals that the project is unprepared, and such proposals only heighten doubts about its success.

Finetic Consulting helps founders develop a financial model, roadmap, and conduct market analysis. This not only increases the chances of successful negotiations but also strengthens investor trust, who see professional preparation and transparent prospects.

Legal unpreparedness and lack of a value proposition

Another significant shortcoming from founders is the attempt to find financing when their projects are not legally ready for investment. Many startups do not adequately address intellectual property rights, fail to establish contracts with key employees, and sometimes do not even have a clear company structure. For investors, this is a serious cause for concern.

Moreover, many startups enter the market without a clear value proposition. Investors need to understand how much funding the project requires, how it will be used, and under what conditions the deal will be made. Without this information, startups lose credibility, as investors do not see a clear working framework.

Finetic Consulting helps founders prepare their startups legally, secure intellectual property rights, develop company structure, and create a competent value proposition, thereby reducing risks for investors and enhancing their trust. This comprehensive approach helps establish a solid foundation for successful collaboration and funding acquisition.

Overvaluation of intangible assets and weak teams

Founders often overvalue their contribution to the startup, such as an idea or initial developments, while neglecting the quality of the team. However, investors look not only at the product but also at the people who will develop it. A weak or inexperienced team is one of the primary reasons for funding rejection.

Research by CB Insights shows that 23% of startups fail due to a weak team. Investors seek confidence that the team can implement the idea and bring the project to success.

Finetic Consulting helps founders build strong teams with the necessary competencies, significantly increasing their chances of attracting investment.

Fraud risks and lack of trust

Fraud in the startup space remains a pressing issue. According to Kaspersky, about 20% of startups attempting to raise funds through ICOs turn out to be fraudulent. This creates distrust among investors even towards legitimate projects. They must exercise caution, complicating the process of selecting worthy startups.

Despite the fact that most startups operate with integrity, investors still fear that their funds may fall into the hands of fraudsters. This distrust extends even to reliable projects, forcing them to overcome heightened skepticism and caution from investors.

Finetic Consulting conducts due diligence and thorough assessments of startups, from legal compliance to business model analysis. This helps investors avoid fraudulent schemes and make informed decisions.

How Finetic Consulting assists both sides

Now that you understand the main challenges faced by both founders and investors, it is essential to note that Finetic Consulting is your reliable partner in overcoming these barriers. We do not just provide services; we strive for your success, enhancing the chances of startups securing investments while reducing risks for investors.

For founders:
We prepare projects for fundraising, starting with business model development and financial planning, and extending to team building and legal structuring. Our goal is to help you create a strong and attractive project.

For investors:
We offer comprehensive due diligence services, startup assessments, project expertise, and startup selection based on specified parameters. This allows you to mitigate risks and find genuinely promising projects for investment.

The process of finding worthy startups can be complex, but with Finetic Consulting, you can minimize risks and increase the chances of success. We provide investors with a full range of services, from due diligence to startup selection, while assisting founders in preparing projects for financing and establishing trust with investors.

We look forward to helping you on the path to success!