Fundraising: What investors want

“How did the meeting go?” I asked the Founder.

“Well, he seemed quite interested” came the reply.  “However at the end he said he was not comfortable with this technology and is going to pass”.

Something didn’t make sense.  I knew the VC well, knew he liked this particular space, and made the introduction on that basis.  I expected him to suggest at least a follow-on meeting.  So the next day I gave him a call.  “I heard from the Founder that you passed.  Curious to know why, so I can better calibrate to what you are looking for”.

“Chris”, he said, “I really appreciated the introduction.  I liked the problem he was solving, the solution, and the high margin business model.  I also saw great signs of customer traction.  You were spot-on in bringing that deal to me”.

Then his mood turned thoughtful.  “I might miss a great one here”, he started slowly, “but I passed for an important reason:  the Founder does not understand my business”.

He continued, “an early stage investment is like a marriage:  both sides commit to know and support each other.  I make a 100% commitment to learn a Founder’s world:  their customers, market, solution and financing needs, team, milestones – everything.  When things become rough, we will need to trust and understand each other.  I just did not feel he understands my world of early stage financing.  So I passed”.

His comment stuck in my head over the next few days.  More importantly, I began to see this from the Founder’s point of view:  he had no idea what the VC really wanted to see.

This lead to the broader question:  Do startups really understand what investors want to see?  What is important to them?  Entrepreneurs who seek funding would do well to understand this.

So I wrote a list of ‘What Investors want to see in your idea”.  A cheat-sheet, if you will, for startups.  Mind you, this is just one investor’s perspective (mine), but I’ve heard many investors echo the same thoughts, so I feel it is accurate.  Knowing – and being able to explain each of the questions below, will significantly improve your chances of getting quickly to ‘Yes’ or ‘No’ from an investor (and avoid the dreaded “Let me get back to you…”).  That’s already a significant step forward, right?

What follows are 9 areas where investors see risk, each crystallized to three questions

(1)  Problem / Need

What is the problem you are solving, or the need you are filling?  How urgent is this problem?  What evidence do you have that the problem exists (quantifiable, measurable)?

(2)  Market

What market(s) have this problem?  What is the size and growth rate of this market?  How do customers currently solve this problem, and why is this insufficient?

(3)  Approach

Describe your approach (solution, service, product) for solving this problem.  What is your unique insight?  What is innovative and defensible about your approach?  What benefits does the [User, Customer, Channel, Partner, Market, insert..] realize?

(4)  Go-to-Market

How will you reach the target market?  What will it cost (money, time, resources) to reach and service this market?  Describe your Customer and Market development activities (very important).

(5)  Monetization (business model)

Who do you invoice, and why do they pay?   What are your expected margins and the margins for your channels and partners?  How have you validated this strategy to date?

(6)  Competition and Freedom-to-operate

What competing solutions currently exist?  Soon to exist?  What barriers could reduce your market traction (competitive, IP, regulatory, etc..)?  What is your unfair competitive advantage and how is it sustainable?

(7)  Financing

What capital have you raised to date, and what milestones have you accomplished?  What capital are you raising now, and what milestones will you accomplish?  Approx. how much additional capital will be needed beyond this round and for what purposes?

(8)  Team

Describe the team and how their experience is relevant.  Describe the extended team:  Board, Advisors, Investors, etc..  What gaps exist in the team and how will they be filled?

(9)  Exit

What are the possible exits for the investor?  If acquisition, show 5-10 possible acquirers and explain which department would be interested in you, and why they might buy you.

So there you have it.  Do you know the answers to each of these questions?  Think about it.

Last thought:  what is the most important investor decision criteria?  Each investor will differ… but I believe it is ‘rate of adoption’.  How fast does the market pull product out of your hands?  How quickly can it integrate your solution? The rate of adoption directly correlates to your growth rate which directly correlates to your future valuation – which is a pretty important metric for investors.

Chris Vargas

Helsinki, Nov 2nd, 2012

About these ads

46 Responses to “Fundraising: What investors want”


  1. 1 ultimate landing page system August 14, 2013 at 2:26 pm

    Superb issues permanently, you simply received a new readers. What might a person highly recommend regarding article for you to created a day or two during the past? Any kind of specified?

  2. 2 hemorroides internas August 3, 2013 at 1:18 am

    Apply directly after having a bath or gently cleaning the area.
    There are several things you can do to overcome hemorrhoids, there
    are plenty of home remedies as well as medications
    you can get from the doctor or pharmacy. Do it three times a day for 10 to 15 minutes and experience
    its marvelous effects.

  3. 3 canspace August 2, 2013 at 7:15 am

    As a matter of fact these informative and great blogs have amazed me.
    clickhere

  4. 4 オロビアンコ バッグ July 24, 2013 at 4:25 pm

    Great post. I was checking constantly this blog and I’m impressed! Very helpful info specially the last part :) I care for such info a lot. I was looking for this certain info for a long time. Thank you and good luck.

  5. 5 hote June 29, 2013 at 9:18 am

    And some fortunate members of your path to tip the housekeeper
    and bell station. It is one of these. But now she is considering suing the flour bomber.
    And this sets so much relevancy on selecting the most effective treatments seem to work
    for the rapper’s harsh fashion criticisms.

  6. 6 Suggested Resource site June 19, 2013 at 9:01 am

    Hey there would you mind letting me know which webhost you’re using? I’ve loaded your blog in 3 completely different internet browsers and I must say this blog loads a lot faster then most.
    Can you suggest a good web hosting provider at a fair price?
    Thanks, I appreciate it!

  7. 7 Madchatroulette.De June 19, 2013 at 8:05 am

    Everything is very open with a clear clarification of the challenges.
    It was truly informative. Your website is very helpful.
    Thanks for sharing!

  8. 8 Susanne June 17, 2013 at 7:44 am

    Thanks for sharing such a fastidious thought,
    post is fastidious, thats why i have read it
    fully

  9. 9 Janet June 17, 2013 at 7:09 am

    Excellent goods from you, man. I’ve take into account your stuff prior to and you’re
    just extremely great. I actually like what you’ve got here, really like what you are saying and the way in which wherein you say it. You make it enjoyable and you still take care of to keep it wise. I can not wait to read much more from you. This is actually a great web site.

  10. 10 chatroulet June 13, 2013 at 7:32 pm

    Great post. I was checking constantly this blog and I am impressed!
    Very helpful info specially the last part :) I care for such
    information much. I was looking for this certain info for a very long time.
    Thank you and good luck.

  11. 11 Aubrey June 13, 2013 at 4:55 pm

    Heya! I understand this is sort of off-topic however
    I had to ask. Does operating a well-established website like yours
    require a large amount of work? I’m brand new to blogging however I do write in my journal on a daily basis. I’d like to start a blog so I can easily
    share my personal experience and thoughts online. Please let me know if you have any kind of suggestions or tips for brand new aspiring bloggers.
    Appreciate it!

  12. 12 Hämorrhoiden Blutung Marcumar June 13, 2013 at 4:30 pm

    Have you ever considered publishing an ebook or guest authoring on other blogs?
    I have a blog based upon on the same ideas you discuss and would love to have you share some stories/information.
    I know my viewers would value your work. If
    you are even remotely interested, feel free to send me an
    e mail.

  13. 13 webcamchat June 13, 2013 at 2:56 pm

    Wow, this piece of writing is fastidious, my sister is analyzing these
    kinds of things, thus I am going to convey her.

  14. 14 jackpot 6000 June 12, 2013 at 9:01 am

    I really like what you guys are usually up too.
    Such clever work and coverage! Keep up the wonderful works guys I’ve included you guys to my personal blogroll.

  15. 15 free templates June 10, 2013 at 11:30 pm

    I’d like to thank you for the efforts you have put in penning this website. I’m hoping to see the same high-grade blog posts from you
    in the future as well. In fact, your creative writing abilities has motivated me to get my own website now ;)

  16. 16 Verdopple Deine Dates June 6, 2013 at 7:14 am

    Thanks for any other great article. Where else may just anybody get that type of info in such a perfect way of writing?
    I’ve a presentation subsequent week, and I’m on the look for such information.

  17. 17 Latanya May 30, 2013 at 4:46 pm

    Thanks for sharing your thoughts about weary waste. Regards

  18. 18 Nagelpilz-Killer.De May 30, 2013 at 8:53 am

    I enjoy what you guys are usually up too. This kind of
    clever work and coverage! Keep up the very good works
    guys I’ve incorporated you guys to my own blogroll.

  19. 19 chatroulet May 30, 2013 at 7:58 am

    What’s up, just wanted to say, I liked this blog post. It was helpful. Keep on posting!

  20. 20 chatroulette May 30, 2013 at 6:41 am

    My family all the time say that I am killing my time here at net, however I know I am getting know-how
    all the time by reading thes good content.

  21. 21 http://stophemorroides.org/ May 30, 2013 at 1:43 am

    I think this is one of the most significant info for me.
    And i am glad reading your article. But should remark on some
    general things, The website style is wonderful, the articles is really great :
    D. Good job, cheers

  22. 22 Bauchmuskelübungen May 29, 2013 at 9:04 pm

    I am truly delighted to read this webpage posts which consists of plenty of
    valuable data, thanks for providing such information.

  23. 23 フルラ バッグ May 24, 2013 at 10:15 pm

    I do not even understand how I finished up right here, but I thought this post was good.
    I don’t know who you’re however certainly you are going to a famous blogger in case
    you aren’t already. Cheers!

  24. 24 Rodrigo May 22, 2013 at 6:59 am

    My developer is trying to persuade me to move to .
    net from PHP. I have always disliked the idea
    because of the expenses. But he’s tryiong none the less. I’ve been using WordPress on several
    websites for about a year and am nervous about switching
    to another platform. I have heard fantastic things about blogengine.
    net. Is there a way I can transfer all my wordpress posts into it?
    Any kind of help would be really appreciated!

  25. 25 Penney May 16, 2013 at 7:17 am

    Excellent post. I was checking continuously this blog and I’m impressed! Very useful information particularly the last part :) I care for such information a lot. I was looking for this particular information for a long time. Thank you and good luck.

  26. 26 click through the following web page May 12, 2013 at 7:30 am

    It’s actually a nice and helpful piece of information. I’m happy
    that you just shared this useful info with us. Please keep us informed
    like this. Thank you for sharing.

  27. 27 haarausfall May 11, 2013 at 3:20 pm

    Hi there, everything is going perfectly here and ofcourse every one is sharing information, that’s in fact excellent, keep up writing.

  28. 28 haarausfall ursachen May 3, 2013 at 5:48 am

    WOW just what I was searching for. Came here by
    searching for go astray

  29. 29 Www.seomofo.com May 3, 2013 at 5:38 am

    Appreciation to my father who informed me concerning this blog, this weblog is genuinely awesome.

  30. 30 chatroulette online May 3, 2013 at 12:05 am

    For newest information you have to visit the web and on world-wide-web I found this web site as a best web site for most recent updates.

  31. 31 chat forums May 3, 2013 at 12:03 am

    I like it when folks get together and share thoughts. Great website, continue the
    good work!

  32. 32 Michaela May 2, 2013 at 11:52 pm

    Hi there, I log on to your new stuff like every week.
    Your writing style is awesome, keep up the good work!

  33. 33 chatroulett May 2, 2013 at 5:44 pm

    This is a really good tip particularly to those new to the blogosphere.
    Simple but very accurate info… Thank you for sharing this one.
    A must read article!

  34. 34 Kreisrunder Haarausfall May 2, 2013 at 4:45 pm

    Hey there, You’ve done a fantastic job. I’ll
    definitely digg it and personally suggest to my friends.
    I’m sure they will be benefited from this web site.

  35. 35 Iamsport.Org April 30, 2013 at 7:27 am

    It’s really a nice and helpful piece of info. I am glad that you just shared this helpful info with us. Please stay us informed like this. Thank you for sharing.

  36. 36 Http://Dorazcit.Bravejournal.Com April 30, 2013 at 7:15 am

    Thanks for sharing your info. I truly appreciate your efforts and I will be waiting for your next
    post thanks once again.

  37. 37 stop hémorroïdes April 29, 2013 at 7:02 am

    There’s definately a lot to find out about this subject. I really like all of the points you’ve made.

  38. 38 http://blabbermouth.net/news.aspx?Mode=Archive&Date=11/1/2012&PageNum=2 April 28, 2013 at 2:37 pm

    Hi! This is my first visit to your blog! We are a collection
    of volunteers and starting a new project in a community in the same niche.
    Your blog provided us valuable information to work on. You have done a wonderful job!

  39. 39 generationsiliconvalley April 27, 2013 at 1:06 pm

    I can be found on LinkedIn (christophervargas)!

  40. 40 generationsiliconvalley April 27, 2013 at 1:04 pm

    I use WordPress. My blog may load a bit faster than most, as I intentionally do not use pictures…

  41. 41 http://Www.Weeklyvolcano.com/community/people/LizaQuiro/posts/Nagelpilz-Canesten-Forum April 25, 2013 at 10:02 am

    Hello would you mind letting me know which webhost you’re using? I’ve loaded
    your blog in 3 different browsers and I must say this blog loads a lot quicker then
    most. Can you recommend a good internet hosting provider at a honest price?
    Many thanks, I appreciate it!

  42. 42 Sterling April 25, 2013 at 8:09 am

    This is a topic which is near to my heart… Cheers! Where are
    your contact details though?

  43. 43 Jeffery April 23, 2013 at 7:16 pm

    Hello there! This post couldn’t be written much better! Reading through this post reminds me of my previous roommate! He always kept preaching about this. I will send this article to him. Fairly certain he’ll have a very good read.

    I appreciate you for sharing!

  44. 44 3:03 AM April 20, 2013 at 8:56 am

    Your means of describing everything in this paragraph is actually pleasant, every one can without difficulty be aware of it, Thanks a lot.

  45. 45 Tanesha April 9, 2013 at 7:10 pm

    Quality content is the key to be a focus for the visitors
    to go to see the web page, that’s what this website is providing.


  1. 1 Pet Clothes for Small Dogs Trackback on September 9, 2013 at 4:33 am
Comments are currently closed.




Small World Group

Silicon Valley is a state of mind...

Greentech Media: Headlines

Silicon Valley is a state of mind...

TechCrunch

Startup and Technology News

ArcticStartup

Silicon Valley is a state of mind...

Follow

Get every new post delivered to your Inbox.

Join 44 other followers

%d bloggers like this: