What Do V Cs Look For In Early Stage
- 2. Problem Description Solution (how does the product/service solve the problem) Market Team – Integrity & Complementing Opportunities & Threats Financials
- 3. Whom is it Impacting What is the extent of Impact The Problem What is the cause of pain What is the benefit of relief
- 4. Problem Definition ◦ Must be customer specific and quantitative Quality of data ◦ From multiple sources & specific Customer Validation ◦ Data backed and not vague
- 5. Extent of relief ◦ Does the proposal significantly solves the problem Validation with customers ◦ Do the customers also feel that their problem is solved Market Insertion strategy ◦ Should be compatible with existing system Simplicity of Solution ◦ Should not use too many technologies ◦ Must be simple Solution Risk ◦ Should be compatible with existing standards
- 6. Total market potential ◦ Large addressable market should be existing ◦ Too small a market trying to aim a major share is not attractive Industry Growth ◦ Proposed industry should be high growth & not contracting Barrier to competition ◦ A unique technology or process not easy to copy Customer readiness ◦ Provisional order in hand is a very strong point Expected market share ◦ Even a small market share must be capable of giving returns Barrier to entry ◦ Should be difficult for competitors to enter- atleast 6 months into operations
- 7. Opportunities Threats Other Risk of time & applications Cost for the product Other By Market risk products or Other markets Legal risk
- 8. Market regulations ◦ Too many regulatory obligations make idea unattractive Monopoly vendor/client ◦ If there is just 1 buyer/supplier of the related product it makes proposal risky Gorilla competitor ◦ The idea should not have any major competitor or entry threat in near future Time to market ◦ The idea should be capable of being commercialized in a very short time Potential Application ◦ If product can be applied in many domains it becomes less risky
- 9. Fund requirement ◦ If the fund requirement is spread out it makes funding easier Expected ROI Cash Flow Costing Assumption ◦ Concrete quotes should be in hand and costing should not be arbitrary
- 10. VCs look for concrete plans, with proper research done on same Team is very important i.e. it should be trust- worthy & possess complementary skills The founding team must be flexible and not too obsessed with idea Some of the above criteria may over-power all other criteria in some cases
- 11. Amit Chopra