What Key factors that investors consider when evaluating early-stage startups for potential funding?
Neha
6 replies
Replies
Himanshu @himanshu_28
Different investors may have varying priorities, but generally they consider the business model, market size and potential, value to the target audience, and the uniqueness of the product or service.
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'Will this make me money' hahaha
As simplistic and blunt as that sounds, that's actually the only thing investors consider.
Everything after that fact is a rationalisation of the decision.
Totally agree with @cillian_burns up there! VCs ultimately want to make money for their bosses (LPs) too.
🤯 However, I'll say the #1 factor determining VCs' interest in a company is 'what other VCs think of this company'! This is not something I made up but what top-tier VCs say. It's FOMO.
Besides, 'being very profitable' is not something they care most about. They want you to be able to further raise money - it's their KPI. Most rather see you being able to scale ultra-fast without losing money (aka breakeven), so that your valuation can be higher than just being profitable. Eventually, you can raise even more money / exit / IPO faster.
It's not that every VC thinks like that, but a lot do haha!😂
@harrischh
I really like this answer, you are completely right in a sense, it's all about the raising of the valuation rather than what that company brings in revenue.
Hahaha the FOMO or looking what your 'mates' 'competition' are doing is also a huge factor. Can't get around the human elements of business.
Spot on