Starting a new business can be a humbling experience. Often startup founders have to begin at zero, relinquish control and admit that despite their title or industry experience, they are not the expert when it comes to scaling up.
However, emerging markets are so attractive to investors due to their potential return on investment. A strong influx of talent is flocking to emerging tech sectors such as Alberta and Saskatchewan, creating what can be seen as ‘the perfect storm’ for tech-focused startups.
A recent technology report published by Startup Genome named Calgary among the world’s top 60 emerging startup ecosystems – largely credited to sub-sector strengths including cleantech, fintech and ag-tech – while last year 2022 YYC’s tech market comprised more than 50,000 tech jobs, 6.9 per cent of total employment across the city, according to GeekWire.
With this boom in a tech-focused workforce also comes a boom of innovation and VC capital. Combine all this together, and Alberta has created a powerful cocktail for outsized investment returns.
Alberta is a great example of why investing in entrepreneurs within emerging markets is so attractive, with factors such as a growing technology-focused workforce and robust funding from the government contributing to the growth the province is seeing in the VC space.
In August the federal government announced plans to funnell $6.1-million into Calgary’s tech sector – with plans to create an estimated 1,000 jobs across the city – and technology investors and VCs looking to the next unicorn understand it is much more likely to happen in an emerging market like that of the Canadian Prairies.
We’ve compiled a handy list of talking points for any potential investor to sink their teeth into:
Total Addressable Market (also known as TAM) defines how much the market is worth that your business is targeting.
Investors are looking for investments with outsized returns, and businesses operating in large total addressable markets offer this opportunity. Potential investors will want to see what market you’re targeting and understand how this market will facilitate exponential growth of your company.
However if there’s a large market, how is your business going to pull the desired customers away from products and services they may already be using?
An innovative product with a growing moat
What makes your product different from what is currently offered by competitors? Who is your audience, and what pain points does your business address? These are some of the first questions you can expect to hear from venture capitalists assessing your business.
Innovation can, at times, be a loosely defined buzzword that is thrown around in business presentations to ‘wow’ the audience; but putting into words exactly how your product is a unique innovator is much harder.
Specifically, potential investors are looking for early-stage startups which clearly define what separates their business from others – how they are building a moat or competitive advantage that competitors won’t be able to easily replicate.
Especially in the early stages (where you might not have a functioning prototype let alone actual revenue), investors are putting their money into your idea; namely, planning around execution and business strategy.
They are investing in you, the founder. Your business savvy, your drive, your experience, your due diligence. Have you demonstrated that you are willing to put your time and heart as well as potentially your own money (bootstrapped) into your business?
This is why it’s important to show investors you have the vision to bring a business idea to the final product.
Being a founder of a company is definitely not easy, and you will be regularly required to make difficult decisions and lead your staff through challenging times. Being a strong leader is a necessity for building a company from the ground up and investors will want to see you have the passion, coachability, and commitment that is needed to build a company.
However, as you begin to initiate talks with a potential investor – whether it’s a VC firm or single early-stage seed round investor – they will want to see more detailed plans on how you plan to execute your vision.
Having the technical and STEM talent on board (regardless of whether it’s the founder or team) is important, we’re talking tech startups here! So a scientist, engineer, and a coder or two could be imperative in executing and running your business vision.
B2B or B2C?
Most companies can be separated into two different groups, with each group having their own nuances and things to consider when understanding what potential investors in Alberta are looking for when deciding where they will invest their money. Check out our blog post on the differences between these two different groups here.
Financial statements are one of the most important things you will bring when presenting your business to potential investors. Your numbers will be highly scrutinized, as they will provide a metaphorical looking glass into the future of your business. Find out more about pro-forma statements, financial essentials and what investors will expect from your financial statement here.
As a founder of a company, you’re expected to have a high level of understanding surrounding the market your business will operate in.
Undoubtedly your company will have competition or alternatives to your new product, and investors will want to see you have performed in-depth market research to understand where your competitors fall short, why there is a need for your business, and how your company will stand apart from the rest.
Make sure to do your due diligence in analyzing the companies offering services similar to your own, and just as importantly, make sure you have researched your target customer. Investors will also want to see you understand what your ideal customer is looking for and how you intend on making them aware of the value of your product or technology.
When venture capitalists consider investing in a startup, they typically want a leader who has experience. This experience usually comes from one of three different places:
The first is industry experience. If your startup is focused on building logistics software for the trucking industry, investors will appreciate it if you’ve spent at least part of your career directly involved with the trucking industry. This shows you understand the problem your company is working to solve and have an inside view as to why your company’s solution is worth an investment.
The second type is entrepreneurial experience. Building a company from the ground-up is a skill most don’t possess. Investors will want to see your leadership style, as well as any direct experience you bring in taking a business idea and turning it into a fully functioning company.
Investors will also be judging you on your drive, work ethic, charisma, and personality. When presenting your business to potential investors be sure to not just say, but show, how much blood, sweat, and tears you have put into making the vision you have for your business come true.
Remember, as an early-stage startup with little to no success yet, investors are investing more in you as the founder, than the actual company itself.
Make sure to give them a reason to invest!
Putting Yourself Out There
Ask any entrepreneur who pitched their business to a round table of VC firms or angel investors and they will tell you it is a much different atmosphere compared to relying on friends and family. Professional investors don’t know you and don’t owe you anything. This is business, and sometimes, business can be harsh.
However, as long as you come prepared and can articulate the value your business offers and the potential it holds, the chances of you finding the capital you need greatly increases. For Metiquity Ventures this means emerging market technology based business.
A lot is expected of you as a founder, and that may seem overwhelming, but don’t worry. Behind all the financial statements and analysis lies the underlying truth: if you can clearly articulate to investors the potential your company has, and show you are the leader to execute on this potential, the right investors will believe in your vision as much as you do.
It’s not just about trying to impress investors, it’s also about finding the investors that impress you.