India is the third-largest startup ecosystem in the world
Investors will be looking to see that this is a big opportunity, with a large total addressable market size
Indian startups that go on to receive big-time investments all display a few, consistent early-stage metrics that indicate future success
Every Indian entrepreneur dreams of their startup becoming the next Flipkart, Zomato, or Oyo.
And today, in a booming startup market that is the third-largest in the world, there has never been so much opportunity for Indian entrepreneurs.
There has also never been as much competition.
The hard truth is that for every successful startup, there are 9 others that fail due to a lack of funding. And even fewer that become the next Flipkart.
So, how do you ensure that your startup is the one (out of the millions in India) that is funded? You know that your product has what it takes to succeed – but how do you convince investors?
What Criteria Do Investors Pay Attention When Choosing A Startup?
In a market like India, the competition is cut-throat.
Investors will be looking to see that this is a big opportunity, with a large total addressable market size.
They’ll also want to validate that there is enough appetite for your product (and differentiation from competitors) to justify reasonable market capture.
You’ll also be expected to answer questions about forecasts: how much is the market is expected to grow, what is the total addressable market size, and what kind of revenue to grow in the next few years, and what are the growth drivers?
Lastly, you’ll want to firmly establish your credentials. Founders with deep domain expertise tend to be more aware of customer needs, market opportunity, and the competitive landscape, and as a result, are far more credible to investors.
If you’re an entrepreneur looking for funding, you’re already more than familiar with these key factors.
But do you know that, particularly in the Indian context, the difference between a funding ‘yes’ and ‘no’ isn’t the details you present?
It’s the data you back them up with.
Investors are looking for numbers that stand out, hard data, and a solid bottom-line business case for return on investment.
“Investors look for high market awareness from founders – especially in the growth phase. If it’s possible to track market dynamics and metrics of your company, it is important for founders to invest time in tracking them – and also discern which metrics are truly important,” says Ganesh Nayak, LetsVenture.
And today, in the age of cutting edge analytics tools and technologies, there’s no excuse for not presenting up to date, accurate, and real-time insights about your existing data.
Instead, tools like Google Analytics allow you to back up your claims with hard data about the audience, traffic, and growth dynamics that prove your potential to achieve outsized growth and returns over time.
You’ll need to show investors hard data that validates your product, demonstrates traction with your business and supports your growth forecasts.
Particularly in a high-risk enterprise like early-stage funding, investors tend to vet de-risking investments by looking at the momentum a company has gathered.
Momentum signifies product validation, showing the investor that the market has already started engaging with your business, that there is a genuine appetite for your product, and that you have an existing leads database you’ll be able to leverage to drive sales.
This momentum can either be signified by traction by channel partners, the number of users, or portfolio of clients onboard.
Most importantly, demonstrable commercial traction gives you a strong competitive advantage over competitors, who may still be at a prototype stage.
By showcasing engagement metrics such as average visit duration and bounce rate, you can also prove to investors that this type of traffic referrals generates qualified leads: these are visits by users who are organically and genuinely interested in your product.
By leveraging data and insights around conversion, acquisition, and sales, you’ll also be able to make a reasonable case for how many people would actually be willing to pay for your service.
This metric, in particular, is essential to supporting the number of potential customers, the number of potential transactions each year, and bottom-up revenue forecasts.
Interestingly, these analytics tools have demonstrated some (not so… ) surprising trends – and valuable insights for Indian entrepreneurs looking for funding.
And one thing is clear: Indian startups that go on to receive big-time investments all display a few, consistent early-stage metrics that indicate future success – and you can be sure that investors are paying attention.
For example, a study of the top 20 Y combinator graduates – including Indian startup Groww – demonstrated an average of 24% month on month increase in traffic, and year on year traffic growth of 204% – before they went on to receive millions of dollars in their Series A funding.
Groww demonstrated 110.66% year on year growth, reflective of its potential for explosive growth and successful market capture – well before January 2019, when it closed a $6.2 Mn Series A led by Sequoia India.
However, the data about your audience size and potential market capture is meaningless to investors unless you provide context: will you be more or less successful than another, similar startup the investor could choose to invest in?
As an entrepreneur trying to showcase the competitive advantage of your business, you’ll need to be benchmark growth metrics to industry leaders and direct competitors.
Your market capture and traffic metrics are meaningless without context.
This data is far more significant – and exciting to investors – when mapped to the data of the market leaders’ in its field, demonstrating how competitive your market can establish market capture, relative to total market size.
For example, while Groww’s traffic dynamics reflect its meteoric rise, this data is even more impressive when mapped against the data of industry leaders, the firmly established firms HDCFsec and Funds India.
Not only does Groww display significant pre-funding growth, but it also goes on to pace and captures the same traffic as the market leader, proving it’s earlier potential as a high-performance startup.
Lastly, investors will want to know that you are in experts in your industry and that you’re taken seriously by other experts and industry leaders.
With today’s standards and best practices for digital marketing, publishing content on your blog and social media is an integral part of establishing credibility with clients – and investors.
As a startup, your digital channels and content strategy are an avenue you can (and should) optimize.
Which means that if you’re an entrepreneur seeking funding, you want to ensure (and be able to prove) the visibility of your brand through comprehensive insights through backlinks, high trust scores, and thought leadership across publications, blogs and social presence.
Startups: Apply The Growth Hacking Techniques
So, how can you hack your online visibility to signal future success to investors?
No matter your marketing budget, there’s a few tactics you can use to optimize your reach and genuinely engage audiences to build sustained and organic growth.
To achieve industry excellence, the fastest-growing companies are an excellent example to follow. Run a keyword gap analysis or a backlink audit to see what content, terms, and trends you should be ranking for.
Or, consider a backlink audit to find out which publications and influencers you can reach out to for your link building, PR, and social efforts.
Marketing tactics such as PR, SEO, and social media don’t cost a single dollar in advertising, but effectively drive inbound traffic to your website.
Analyse your closest competitors to determine the traffic growth, dynamics, traffic sources, geo-distribution, and desktop / mobile ratio can help you to figure out the promo scenarios that work in your specific field.
By comparing your startup’s web data to competitors and market leaders, you’ll also gain invaluable insights to maximize inbound lead generation, optimize conversion rates, and run effective, highly targeted ad campaigns.
Not only will this robust competitive and historical data help Indian entrepreneurs build a better case for investors, but it may also help them build better businesses as well.
