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Factors that Influence Investors’ Decision In Start-up Financing

Factors that Influence Investors’ Decision In Start-up Financing

One of the things that determine the financial success of a business, especially a start-up, is its capacity to woo both local and foreign investors as well as individual and institutional investors. When a business has little or no funding from institutional investors such as angel investors and venture capitalists, it may mean that such a business is yet to develop the capacity to deliver sustainable value to its shareholders or stakeholders, and this negatively impacts its financial credibility.

The following are factors both individual and institutional investors consider before funding a start-up:

Antecedents

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Generally, in accessing the financial credibility of a business, both individual and institutional investors often want to find out how much has been raised by the company in the past, and how it has been able to pay returns to investors.

Social Proof

There is a direct link between financial credibility and social proof. While financial credibility indicates a company’s ability and capability to attract influential investors, social proof increases when this happens and is debated constructively by subscribers and non-subscribers of the businesses on social networking sites.

In our context, social proof signifies strategic review of people’s mixed feelings about the businesses’ value creation and strategic engagement with the stakeholders and shareholders. What have people said about this particular company? Where is the context of the messages or views? How trustworthy are the actors in the forum/social networking site where the company is being discussed?

Consistency

Investors are also interested in how consistent the business is with regard to their methodologies and implementation strategies. If a company is consistent with its production methodologies and management strategies, there is a possibility that it would generate expected revenue and be profitable when uncertainties are managed effectively and efficiently. A company that lacks consistency as a principle won’t be accountable because accountability connects with how the people internally see their tasks and their roles towards the end goals of maximizing shareholders and stakeholder’s value.

Customer/Investor Relations

Apart from seeing commitment within the context of how employees work and behave towards corporate and personal goals in relation to value creation, the company is expected to also exhibit commitment to a cordial a relationship with customers, investors and its immediate host community members, especially the vulnerable. If they are giving back, it’s a great sign that they are empathetic and act in a meaningful way. Some investors, especially international non-profits, want to know how the businesses they want to commit their fund to are giving back to the society.

Also, the relationship between the staff and inventors is very paramount as it creates room for proper interaction and a sense of relief for potential investors. Investors want to be sure that the business is not only concerned about getting funding but are also committed to ensuring the continued trust and happiness of their investors.

Resources:

The Rules of Investing In Nigerian Agritech Business. 2021. FIDAS Africa

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