What Investors Want to Know From a Micro-Market Perspective

Not every entrepreneur needs investors to get started. For many entrepreneurs, however, raising money is essential, whether from family and friends or from more established sources, such as banks, business angels or venture capital investors. Doing so typically requires the entrepreneur to prepare some kind of business plan, so the would-be investor can ascertain the likelihood of at least getting their money back and hopefully earning an attractive return on the investment.

What do investors – arguably the most important readers of your business plan – want to know from a micro-market perspective?

a) First and foremost, they don’t want to know about your ideas or products – they really couldn’t care less about you and your idea. They want to know about the customer pain that your offering will resolve. No pain, no gain. If you can identify the customer pain, then their attention will be piqued.

b) They want to know who the target customer that has the pain is, and they want evidence that the target customer will buy what’s to be offered.

We ask, ‘Who will be your first ten customers – names and addresses, please – and who will be your largest customer in five years?
JT, London

The biggest shortcoming of the business plans we see is the complete absence of market research. Dreams of demand just won’t do. Hard evidence is what attracts our money.
IC, London

Any entrepreneur pursuing a business-to-business opportunity who cannot answer these questions – for consumer marketers’ names and addresses are not relevant, although the same clarity of purpose is still needed – simply won’t raise the money in today’s demanding venture capital markets. The days when entrepreneurs could scrawl a dot.com business plan on the back of an envelope and raise millions from eager investors are long gone.

The clear lesson here is that the entrepreneur must be painstakingly clear about who makes up the target market that he or she seeks to serve, and they must show tangible evidence that the customers in that market will buy. Why will they buy? To obtain benefits other solutions don’t offer – faster, better, cheaper and so on. Without benefits – without pain relief – there will be no customers. Without customers, there will be no business.