Top 5 Things VCs Evaluate Before Funding Early-Stage Startups
If you’ve ever pondered how early-stage startup valuations are determined by founders, investors, venture capitalists, and seed fund managers, you’re not alone. Without an appropriate funding plan in place, founders are rarely able to hire key personnel, execute marketing strategies, or develop the right products.
In this article, we'll go through five investing criteria that investors frequently consider:
1. Founding Team: The businesses that thrive have outstanding founding teams who work tirelessly to take their products from concept to reality. Investors are driven by passionate, adaptable, and dynamic teams with excellent chemistry.
2. Return on Investment (ROI): Investors will want to know when to expect a return on their investment during the pitch presentation. Don't overpromise; go in with what you know and address those concerns proactively.
3. Competitive Advantage: Competition is a positive indicator that your startup has tapped into a viable market segment. The key to impressing investors is to explain how your business is uniquely positioned to meet consumers' needs more efficiently.
4. Momentum & Market: Investors want to see proof of traction. Demonstrate that you have a solid customer base, a market that can be addressed, and enough forward momentum to take your product to the next level.
5. Mission: A rising number of investors is prioritizing investments that foresee a positive social impact. When pitching to investors, communicate how your missions drives your company culture. The culture determines the unwritten but very real standards of conduct, from recruiting procedures to how individuals operate, make choices, resolve differences, and handle change.
Your startup can and will achieve a funding round with the right approach and the vigilance to address investors' concerns. To boost your chances of getting funded, emphasize your team's strengths, your mission, competitive advantage, and momentum achieved during your next pitch presentation.
