At only 27, Michelle Arbov is the Vice President of Mergers & Acquisitions at IAC, which has acquired and developed companies like Tinder, Match, Expedia, and HomeAdvisor. Ahead, Arbov shares what investors like her are really looking for.
Starting a company is a massively rewarding and challenging experience. One of the most challenging pieces can be learning how to raise money, especially if you’re doing it for the first time.
In my role heading up the mergers and acquisitions team at IAC, I’m always searching for the right product, the right story, and the right leader to take our next bet on. As a result, I find myself frequently approached by entrepreneurs asking, “What do investors care about?”
Here’s what I tell them:
Don’t assume investors know anything about your business.
When in doubt, over-explain. Crisply define what your company is tackling in its category and make your growth plan for the next 6, 12, 18, 24, and 36 months crystal clear. Clarify your financial goals (revenue, operating expenses) as well as your product traction (what feature sets you’ll have, how many consumers you believe you will reach by when and why).
Most importantly, be concise when delivering your story. You should be able to tell a random person on the street what your company is about and they should be able to understand.
Unit economics can be even more important than the product.
The key to the success of any business is the unit economics (what you’re making on each transaction). While most startups aren’t profitable when they begin raising money, it’s important for the entrepreneur to be able to credibly model the future with an argument for why things will scale. Know the numbers of your business just as deeply as you do the product. If you aren’t a numbers person, that’s OK — just make sure to have someone in the room that can represent the business’ finances.
Talent trumps all.
Product is key, but most investors look for a strong team first and foremost. It’s the talent within an organization that will ensure its offerings remain fresh and relevant. Being transparent about team gaps and weaknesses should also be part of your case for investment, as those funds will often go to procuring the crucial talent you need on your team.
Find your competitive moat.
More likely than not, your company has competition or is part of a larger industry with incumbent players. The more you can articulate what other companies are doing in your space, how you fit into the broader landscape, and what differentiates you, the more confidence you’ll instill in potential backers. You need to emphasize your “competitive moat” ie. the barrier to entry for anyone to compete with you. The harder it is for competitors to replicate your business, the better.
Not all money is the same, so know the type of capital you need.
At first glance, you may think money is money, but it’s critical to choose an investor or investors who align with your goals. There are various forms of capital available and ensuring you have a solid understanding of what makes the most sense for your business is crucial.
For example, take short-term/return-oriented capital and strategic/longer-term capital. Short-term capital is focused on your results, ability to scale quickly, and generate liquidity, either through a sale or other exit. Strategic capital can be more patient, looking to build a clear leader in a category. If you’re looking for guidance and expertise in certain areas, an experienced investor with an applicable background and connections may be more helpful than a pure cash investor willing to pay the highest price.
No matter where you are in your company’s lifecycle, raising money will always have its ups and downs. Be passionate and confident about your story and opportunity. Trust me, investors will take notice.