Being Prepared For Raising Funds For A New Venture Means Doing The Research to Understand The Market
As a company that has created business plans and investment packages to attract investors and get debt financing, we can't stress enough the critical role that market research plays in convincing investors or lenders to back a new venture.
We’ve seen many early stage companies and startups struggle to gain traction, not because their product or service was lacking, but because they failed to do their homework on the market. Investors are bombarded with pitches every day, with founders and managers claiming their idea to be the next big thing. To truly get the attention and respect of investors, you need to demonstrate a realistic understanding of the market you're entering. This is where market research comes into play – it's the foundation upon which you build your entire investment case.
Think about it from an investor's perspective: they're putting their capital on the line and they want assurance that they're not throwing their money into a black hole rather than investing in something that will multiply that capital. Market research provides greater perspective and a stronger chance by validating the market opportunity, quantifying the potential customer base, and identifying the unique selling propositions that will set your company apart from the competition.
Market research isn't just about crunching numbers and spitting out fancy charts and graphs (although those are certainly important). It's about telling a compelling story – one that paints a vivid picture of the unmet needs in the market, the pain points your customers are experiencing, and how a company’s offering will resolve those challenges and mollify that pain.
Investors want to see that you've done your due diligence in understanding the competitive landscape. They want to know that you've identified the key players, analyzed their strengths and weaknesses, and developed a clear strategy for differentiating your product or service. Market research is the tool that allows you to do just that. Further, market research is essential for developing an effective pricing and revenue model. The price should be linked to the problem it solves. By understanding the target customer's willingness to pay and estimating the potential market size, you can craft a financial model that demonstrates the path to profitability - and making sure the investors get a return on their investment.
Most significantly, market research helps mitigate risk, something investors and banks both wish to do. Companies need to identify barriers to entry, regulatory hurdles, and other challenges to instill confidence in the team’s ability to execute on their vision.
We've seen too many promising startups experience delays or fail before they got off the ground because they didn't take market research seriously enough. They relied on assumptions and gut feelings rather than hard data and rigorous analysis. Not only did investors see right through this bluster, but the people involved realized too late that they didn’t know what they were getting into or talking about.
If you're thinking about starting a new venture and raising money to do so, do yourself a favor – invest the time and resources into comprehensive market research. It's the foundation upon which your entire investment case rests and could very well be the deciding factor in whether you secure the funding you need to turn your vision into reality. If you need help with this work and don’t know where to start, reach out to us at Brightleaf. We’ve not only helped startups and early stage companies put together business plans and pitch decks to get the money to fund their ventures, but we’ve also helped investors do due diligence to see where a company holds promise or where their plans have holes.
This is what we do. And we’re good at it.
