What VC’s Look for in Startups  

One of the most frequently asked questions we hear from startup founders on our platform is “what do VC’s want.”  

No matter what vertical your startup is in, chances are you have competitors breathing down your neck and other startups vying for the same VC investment as you. So who do the VC’s choose? When given the choice (which they usually are), VC’s will handpick the crème of the crop to invest in; that means the best idea with the largest potential and the most powerful team backing it.

So how can your startup secure an investment? Easy. Understand what VC’s want and focus your growth in a way that is in line with what they want to see.

To secure an #investment, understand what VC’s want and focus your growth! Click To Tweet

Premium Product with Serious Market Penetration Potential

The first thing to remember is that VC’s want to see their money spent in a way that will double and triple it’s worth. That means you need to have a product that is premium in its technology, offering or capabilities.  If you realize that VC’s operate as businesses, you will understand their need to maximize ROI, hence their emphasis on a premium product that can be rapidly scaled and capitalized for maximum market penetration.

Since VC’s are based on the individual investment of Limited Partners, their commitment is to return that investment. If you put this in perspective, it becomes a sheer numbers game – in order to see an investment as worthwhile, it needs to have the proven potential to make a significant impact in the current market and either grow the overall market valuation or take a significant chunk of it.  

So what can you do? Of course we always recommend having a successful PoC because it shows the company’s ability to scale as well as its ability to achieve market penetration, which is best seen through proven success with a large enterprise. By showing your products need and its successful implementation in an existing enterprise ecosystem, you’re one step closer towards VC investment!

Top Talent

If your startup is sitting in front of a VC, they want to see that beyond having a winning product, you have a winning team. No matter how groundbreaking the technology is and how big the market can be, a team that spends time bickering, founders that don’t respect one another and core team members without natural chemistry will be a huge red flag for any VC. The winning combination for a VC is a powerful product that is backed by a winning team.

How do you build a winning team? If you are the founder of the company, understand that the winning team starts with management. Beyond friendship and respect, partners need to work well together and complement one another.  Beyond the management team, it is important to bring talented hires early on in order to showcase your expertise in all aspects. If you have a top product with great management but sub par marketing and design teams, it’ll be a lot harder to impress the VC’s looking for the ‘already there’ startup.  Stack your startup with serious talent and expect serious results.

A Better Business Model

Some startups get huge investments even though their product isn’t revolutionary, their competitors are prevalent and their technology is based on something that already exists. So what did they do differently? They probably looked at the market in a unique way.

If you have a product that isn’t earth shattering in its core, focus on a business plan that positions you in a new vertical and see how you can take an existing product or technology and adapt it to suit a new market- not only will this sort of thinking get you noticed, it will give you the ability to enjoy the first mover advantage, even if you didn’t come up with the technology.

At the end of the day, the market is huge and no single company will ever truly dominate it – no matter what industry you are in. If you have a product with a powerful business and marketing plan, sometimes all you need is a new way to look at things that just “clicks” and you’re on a roll.  

Don’t forget …

As you make your rounds between VC’s, it is important to remember that criticism and rejection are part of the journey. The chances of your first VC being the one to take your startup to unicorn status is unlikely (we wish we could tell you otherwise but that’s the harsh truth).  Many successful startups and enterprises started out with the strongest and most resonating rejections and still went on to shake the market and change the world.
If you continue to strengthen your product, cultivate your talent and grow your passion, you’re one step closer towards the VC investment of your dreams.

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