All about the Investibility Index: Investible’s framework for early-stage investing

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April 26, 2022

" The process of raising seed capital or deciding whether or not to invest in an early-stage startup can be daunting. "

For founders, it’s a catch 22; the capital raising process takes precious time away from the day-to-day running of your business but may also be critical in getting to the next stage of growth.

For investors accustomed to evaluating listed or later-stage companies, assessing a seed-stage startup can also be tricky. The companies rarely have detailed historical data and forecasts can be unreliable, making the decision more subjective than substantive.

Having worked with thousands of startup founders around the world and invested in early-stage businesses for over a decade, we have gained valuable insight and hard data on what makes a business ‘investible’ at the seed funding stage. Our experience has been catalysed into our Investibility Index – a 15-point methodology covering the factors that offer the best glimpse at a startup’s future.

This framework allows us to bridge the gap between founders and investors. It keeps the process streamlined so founders can focus on their business, and helps investors make better, faster decisions as they build diversified portfolios.

So what exactly is the Investibility Index?

At its simplest, the Investibility Index is designed to help us effectively evaluate investment opportunities by focusing on the factors that matter most to a startup’s long term success. Essentially, we use it to find out whether we’re looking at a great investment opportunity or a founder who simply excels at pitching.

To uncover the world’s best founders, we’ve looked deeply at thousands of companies. Our methodology has mileage.

The Investibility Index covers a mix of both qualitative inputs and quantitative data. It’s designed to give us an indication of how ‘thriveable’ a startup is (meaning its potential to grow exponentially) and how ‘survivable’ it is (meaning its ability to withstand significant challenges and disruptions).

As you can see, there are a lot of different factors we can track to paint a picture of the founder, their ability to communicate their vision, their business, the opportunity and whether the deal is suitable. Founders who can effectively communicate across each of these areas will have a better chance of success.

The centre focuses on the founder and the two main ways that founders can share their business story: the investor pitch and deck and our proprietary Business Model Blueprint framework.

The Founder

Having the right founder(s) is the most impactful factor in startup success. That’s why founders sit at the centre of our model. Investors need to understand founders’ experience, skills, attributes, attitudes, vision and values to determine their likelihood of success.

This is primarily a qualitative assessment; do they have a passionate connection to the problem? What makes them uniquely placed to solve it? Are they coachable?
But we don’t just rely on a gut feel. We also use Fingerprint for Success (F4S) to analyse founder attitudes and motivators. F4S assesses founders across forty-eight different components, modelling the results against the behaviours of the world’s most successful entrepreneurs. This helps both us and the founder understand the factors that will help their team realise success and the blindspots that once identified can be addressed and mitigated to avoid challenges along the way.
The inner-circle contains the Business Factors, which tell us about the overall health of your business and how well you can execute on your plans.

Business model

Assessing your business model depends on the type of model you have. For instance, if you’re creating a marketplace-style business, investors will want to understand whether the business taps into a latent supply, if it’s aggregating an existing but fragmented market and the potential for leakage – which is when your sellers and buyers can transact without you.

If you have a SaaS model, investors will likely ask about the customer’s propensity to move from free to paid subscriptions, whether it’s a one-off or recurring model, and the unit economics. If you know your business model inside and out and go into investor meetings prepared to position these factors in the best light, you’ll be much more likely to keep investors interested.

The business model is the foundation of a growing business, but it is often the factor that startups don’t spend enough time thinking about and validating. One way to validate your business model is via Investible’s Business Model Blueprint. The BMB is a framework that helps founders through the process of validation for their business model including value financial and delivery propositions.

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