You might have a great idea for a company, but you’ll need more than that in place before investors will even consider taking a chance on you. If you want to know whether it’s time to start pursuing capital or equity investment, or what else you’ll need to do first, this online tool can help to lay out all of your cards on the table.
The Most Fundable Companies Qualifier Survey from Pepperdine University’s Graziadio School of Business and Management is available to early-stage companies in the U.S. The free survey evaluates where a company stands across 12 assessment areas, from founder background to market opportunity, to predict investment readiness. Entrepreneurs who take the survey receive automatically generated customized feedback on business structure, pitching and more.
It’s a part of a research initiative that, in the long-term, is designed to provide a data-informed look at what makes startups succeed or fail. Pepperdine is partnered with The Venture Alliance, which developed the scoring system and is making it publicly available for this research project. Each year, the researchers plan to select a group of those that take the survey for publication in the forthcoming Most Fundable Companies List.
Any U.S. startup that takes the survey by May 15 is eligible for consideration in the first Most Fundable Companies List, provided the company is less than five years old, with less than $10 million in annual revenue. Finalists that proceed beyond the initial survey round will undergo a more in-depth assessment in addition to the initial survey feedback every participant receives, and 20 companies will make the final list.
“There’s plenty of money out there for entrepreneurs,” says Craig Everett, an assistant professor of finance at the Graziadio School who is working on the project. “I believe that, for the most part, the startups that have a good concept and a good team to execute it, they do get funding.”
For the rest, it can be difficult to understand how to position themselves. Everett says that one of the biggest things entrepreneurs don’t understand about what it takes to be fundable is that they already need to have skin in the game before a pitch meeting — meaning, they need to show they’ve invested real money into their business, not just time, sweat and tears.
“The assumption is that every startup founder is going to be working like crazy, seven days a week, getting their startup off the ground. So, that’s not a differentiator,” Everett says. “If an entrepreneur hasn’t invested anything, and their family and friends haven’t invested anything, that’s a big red flag. It basically means that you don’t believe in yourself, or the people who are close to you don’t believe in you enough to give you money, so why should [investors] give you money?”
The second aspect entrepreneurs miss when seeking funding is that they and their team need concrete industry experience in addition to business know-how, Everett says. This, he says, is more important than having a good education.
Finally, he notes that investors like to see organic relationships within teams — relationships that precede the startup’s founding or the employee’s hiring.
“That signifies a bit more stability in the organization,” Everett says. “If you’re a business person and you just hired an engineer for this project and you didn’t know him or her before, that relationship can dissolve very easily. But with a family member or long-time friend or college roommate, the organization is more likely to stick together through tough times.”
Everett encourages every startup in the country to take the survey, because it might get entrepreneurs thinking about things they’d otherwise overlook. Those who are seeking funding currently, plan to in the future or even those that vow never to take outside money have plenty to learn from the feedback, he explains.
“There’s a reason why certain companies are attractive to investors,” Everett says. “It’s because investors think that those type of companies are going to have high growth.”