6 factors for investors to decide to invest in a startup idea

Yariv Cohen is a member of YPO (a global network of young executives). His work in clean energy and impact investing has taken him to Israel, Africa, Europe and Asia. Currently, Yariv Cohen is the Chairman of Kaenaat, an investment firm focused on projects that promote economic and social change around the world, and the CEO of Ignite Power, an organization that seeks to develop clean energy solutions and fund clean energy projects in Africa.

Below, Yariv Cohen shares six factors that make a startup idea worthy of funding and encourages startups to focus on these to successfully develop their ideas.

1. Feasibility

Ideas in the field of clean energy or start-up projects that aim to promote good socio-economic development are always great, but to actually do this is very difficult.

“The first thing to consider is commercial viability. We receive hundreds of proposals, but most of them do not have a real business solution. Whether it is long-term or short-term, the business solution needs to be sound and profitable,” Cohen said. After all, a product or service can only help people if it can truly stand on its own.

2. Reasonable price

Cohen’s organization operates in areas where access and affordability for electricity are relatively difficult, so any company he considers funding must address this issue. “As costs come down, the market expands and we have the ability to get our money back,” Cohen said.

In addition, the idea owner also had to make the product as attractive as possible. “We needed to make our energy product cheaper than any other source, such as candles. The goal here is to improve the product’s accessibility, not limit it.”

3. Be aware of the current state of the infrastructure

Ambitious ideas are great, but making them work requires a deep understanding of the realities of what’s happening in the marketplace. Today, however, infrastructure has improved dramatically, especially in developing markets. Mobile phones, financial systems, and information technology have greatly impacted the ability to reach customers.

4. Creativity in business models

To make a startup’s product idea viable in a market lacking infrastructure and keeping costs low, startups need to be creative. “You need to have new, innovative or different business models,” Cohen said.

“For example, some of our solar and water products use a pay-as-you-go mechanism, similar to prepaid phone bills. This allows consumers to pay in installments over time. This fits their financial situation, and if one day they don’t have the money to pay, they don’t have to go without a supply for too long.”

5. Vision beyond borders

Some entrepreneurs in developing markets think only of the local economy. “If you’re dominating a local market in a certain area, you’re probably doing something right, and you can gain a competitive advantage in the next market. Look at other countries and ask yourself how you can conquer that,” Cohen says.

6. Effort

“If you only invest capital, your impact is probably limited and you will find fewer opportunities. But if you invest both capital and effort, the ideas often yield results that exceed expectations. The difference is effort,” Cohen said.