How to attract investment in a startup

20 September, 2021

According to CB Insights research on the reasons for the failure of IT startups, 38% of failures lie in the lack of funds for development.Magzhan Madiev, General Director of the Astana Hub International Technopark of IT Startups, co-founder of the marketplace for finding self-employed specialists, spoke about how to properly attract investments in an IT startup.

Creating your own IT business is always associated with risks and new challenges. In 2014, when my partners and I launched the project, developing a startup in Kazakhstan meant acting blindly: there was no smart money industry in the country, no venture capital investments, IT projects were evaluated according to the financial metrics of traditional business.

Now the situation has changed: since 2018, the Digital Kazakhstan program has been in operation, within the framework of which an ecosystem for the development of startups is being formed on the basis of the international technopark of IT startups Astana Hub. Professional venture capitalists, funds and business angels have emerged who understand the specifics of investing in the technology sector.

When to attract investment

When attracting investment, it is important to be sure that the investment will pay off. For this, it is desirable to have not just a development or a prototype of an IT product, but also to receive positive feedback from users, to effectively solve their specific requests. When customers are ready to pay for the service and recommend it to their loved ones, feel free to attract investments. This means that the product is in demand and you have reached the product-market fit (PMF) stage.

There is a widespread belief that investments from outside should be attracted as late as possible. I am not a supporter of this approach, because time is more valuable than money. If investments will accelerate growth, then I recommend attracting them after reaching PMF. This will make it possible to significantly outstrip competitors and become the "king of the mountain", which occupy up to 80% of the market.