Finding investors who are interested for investing in startups can be demanding. But some things will make them more attractive and competitive.
Victor Aguirre Lopez (founder of BlackBox Startup Law) says that the pandemic was a factor in favor of national startup investment. It led to an acceleration in technology adoption across the country.
Statista data shows that Mexican startups are focused primarily on software and data issues (31%), followed by Fintech (23%), E-commerce and Retail (13%), and leisure and social matters (9%)
Because of their innovative nature, startups are less likely to use traditional financial institutions.
BlackBox Startup Law’s legal counsel stated that although startups present a greater risk due to their nature, they are likely to produce significant returns that can change market conditions, consumer preferences, or the investor vision.
Aguirre says that although there are many factors that investors must consider when considering investing in a startup, three stand out.
The project’s traction. Investors seek projects that are traction-based. In other words, they look for projects that can impact the market and appeal to consumers.
Disruptive innovation. Investors also need to consider disruptive innovation. According to BlackBox, this is crucial because it allows many people to access a particular market eventually.
Even before the advent of startups, disruptive innovation was a common feature in many industries. Henry Ford, an example of disruptive innovation, invented mass production and lowered costs for the automobile industry. This enabled more people to have access to these products.
“This is what disruptive innovation does,” says the litigant. As a product/service becomes more sophisticated, it can reach new markets and generate benefits that other markets could not otherwise receive.”
The journey of the founders. For investors to decide on funding a project, it is essential to see the track record and experience of the founders.
Investors will consider factors such as the leadership team’s experience, past projects, and relevant ones.
“Investors must look at all aspects of a company to be able to make an informed decision about its economic potential. However, the legal aspect of the company is just as important. They are worried about lack of clarity around the regulation of their project, who owns the brand, and what prestige it has in the professional world,” he concluded.