Every investor has their own criteria, but across the board, there are certainly trends in evaluating new companies that investors share.
By understanding each of the key areas that investors react to, you can be better prepared to position your deal to be more attractive. You can also begin to understand why they may not be reacting the way you would expect them to.
Location, Industry and Stage
The easiest way to see how you're a fit for a potential investor is to align with the type of investments they typically make.
Are you starting a cookie company? Great, but you don't want to reach out to a private equity company that only invests in technology companies with over $20 million in revenue. It's up to you to do your homework and find the partners that actually make sense for your business.
As you do your research, look for investors that are near you geographically, have a history of investing in deals within your industry, and typically invest at the stage of your company's evolution that you're currently in.
The more aligned you are with these criteria the more likely you will find a warm reception from investors that are looking for your type of deal.
What varies based on the type of investor or size of the fund. A $100 million venture capital fund that needs to generate large returns can't spend time on a $50,000 investment in a restaurant.
The restaurant may be incredibly successful, but in order to move the meter on the $100 million of capital they have to invest, the VC needs a much larger outcome than a single restaurant can provide. This is where market size is a big deal.
All other things being equal, targeting a large market is the best way to get investors excited. The idea is simple - investors passing on an investment that may be worth a million dollars some day is acceptable. But passing on an investment that may be worth a billion dollars some day is a huge loss. When it comes to potential markets to address - size matters.