Royalflush

What do VCs really look for in startups? How do they evaluate?

Asking this on behalf of many founders like myself, wanted to collate across multiple inputs: what is it that VCs really want to hear/see from a startup?

Would love to get inputs from VCs and other founders alike - basis your experience on what has worked what hasn't worked.

The usual suspects: obviously the founder credentials, TAM, insights, metrics. But, what else? Look forward to informed answers.

6mo ago

Dihaadi

Stealth6mo

Good ones look for building capabilities (read velocity) , selling capabilities, founder-product-market fit, conviction, traction, growth, industry familiarity, financial & organisational due diligence and other personality traits. Ref checks is also very important. Bad ones invest in FOMO, the more you are able to create, the better.

Bumpy_Stock

Stealth6mo

For B2C I believe they also look at the story of the startup

19 yo old start-up entrepreneur, India's youth bringing impact
Female entrepreneurs employing 1000 rural women

Helps get easy media attention and enables hype driven sales. Atleast till they exit through IPO.

Interestingly every VC startup has a bittersweet emotional problem statement.

Dihaadi

Stealth6mo

Great point, generally true across B2X . Any brand building asset is a great to have .

jake_peralta_B99

Freelancer6mo

I talked to a startup founder(young 22yr old bloke). He got seed funding from Y combinator.

I asked him what that experience is like, how do they select people to incubate and invest in. He replied - They see how well you have thought of the problem. Do you have the metrics required for the problem, do you have the solution and it's expected metrics. Have you thought of making your company 100m$ or more worth in years to come(do you have the vision to scale it).
How well do you know the demographics, the minutest of the details of the problem etc.

That's all, once you have clarity on your idea and a plan to make it successful in the long term, you can get the funding.

Bumpy_Stock

Stealth6mo

If the VC fund doesn't make investments, the LP who funds these VCs will pull back and VCs will have to shut shop. 22 yo don't know this. VCs sell these portfolio companies to raise funds for themselves too.

Bumpy_Stock

Stealth6mo

YC's story could be different

SolidSpleen

Walmart6mo

What does Y combinator do actually? How people get funding from there?

LawfulScrip4

Samsung6mo

YC is a spray and pray model with small valued bets on a heavily select set of startups. They hope to double down on startups that perform on the top percentile of each cohort.

Bebo

Stealth6mo

Matrix india partners ka YouTube channel dekh le bro, sab mil jaega

SuttaParatha

Student6mo

Is it really that good, some other person also recommended it few weeks back?

Bebo

Stealth6mo

It's awesome

Qwerty2398

Stealth6mo

Every point in the below thread is valid. Each comment appears to be from experience they look very possible and close to reality. Never dealt with a VC before. But I deal with greedy and entitled people every day.
What if VC investing is based on commissions in addition to equity?. Meaning, the VC strikes the deal with the founder not just for equity but also contracts from the company. The founder has to purchase/outsource something to a "designated vendor".
In our country companies keep track of how many times employees take a break. So, VC's investing million dollars in startups with just the belief they can make more money in the next round of fund raise seems to gentlemanly. Considering that founders buy luxury cars after every fund raise is an open secret.

redWiper

Student6mo

On your point on kickbacks/ preferring specific vendors -

In a way this does happen. VCs promote their portfolio companies - if one start-up sells an HR platform, the VCs would push for this HR Saas product across their other investment startups.

But understand that VCs really want startups to grow multiple times in value - that's the only way they can make money. If VC invests 10cr in a startup, and asking start-up to take services of only a specific company - the 2-3cr they make in this commision is of little value.

Discover more

Curated from across

UrbanLoss35Stealth21mo

VC with 5+ yrs of exp - AMA

Go for it :)

ApothecaryStealth17mo

AMA: Worked at tier 2 VC - got in post a few years of workex and a tier 2 Indian uni

Go ahead, ask if we pushed founders to commit fraud.

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