Surely the biggest challenge for start-ups is funding.

Many great ideas remain exactly that because business owners are either unwilling or unable to secure the funding they need to turn concept into reality.

Having worked with a pile of start-ups over the last ten years we have experienced our fair share of companies that have received funding, those that have tried and failed and those that looked to grow a business without external investment.

No hard and fast rule
As always (and like any other question a business gets asked) the answer to “should I look for external investment?” is “that depends”. Generating rounds of funding for a business can be immensely time consuming. It is also distracting from the actual effort required to run a successful business. Furthermore, many entrepreneurs find that, once they have received funding, the external pressures applied by investors can be an unexpected irritant.

My experience is that people that make a living from investing in companies (the likes of private equity and venture capital firms) have very clear criteria about what they want to see from a business. These companies vary in the size of investments they make and the industries they focus on, but they all know what makes an investable proposition.

The ideal investment
An investable business will always be extremely scalable, with not only a clearly demonstrable global market opportunity and few competitors, but also minimal costs for scaling from one hundred customers to one million.

Investors will always want to see evidence of success to date. Gone are the days when ideas alone got funded; demonstrating revenue is essential. If the management team has a track record in other businesses, this also helps; as will ownership of protected intellectual property or “secret source” software. Finally, business model is critical. Most investors I speak to want to see recurring revenue as a large part of the business.

Ultimately any investment company will be focussed on how they can generate a significant return on their investments as quickly as possible.

It’s just like dating
The more an entrepreneur can do with their business to fit these criteria, the more likely investment is to be forthcoming. I’ve worked with several start-ups that have tested their business model though limited social media advertising to demonstrate viability. Others that have tweaked their business model to focus on elements that deliver recurring revenue rather than initial hardware sales.

Ultimately getting external investment from the pro’s is a bit like dating: the more you do to make yourself attractive to the other side, the more likely you are to succeed. The challenge comes in ensuring that the picture you paint is both appealing and accurate. If, six months down the line, your previously clean shaven, well dressed company is doing the equivalent of lying on the sofa drinking beer all day, the consequences will be much as in life: swift and unpleasant.