Venture Capitalist Secrets: What Do VCs Look for Form Startups?

By  Maham Qasim

October 22, 2021 3:03 pm EST

Who are venture capitalists? 

And what do they want from startups?

The first question is easy – venture capitalists are investors who invest in private companies. They take a percentage of ownership in the company and help it grow by providing money, experience, and resources needed by growing startups.

Most early-stage investments are made through funds run by professional VCs. These people usually have at least ten years of experience working with startups, so when you’re talking to one of them (in the context of funding round), remember that you’re talking to someone who has a decade or two worth of advice they can share with you about how to succeed as a startup.

That should be motivating enough to impress VCs – if any of this sounds like “a challenge,” remember that VCs see thousands of startups a year, and they’re not just going to throw money at everyone.

If you impress them enough with your team, product, traction, and overall potential, it should be obvious why they would want to support your business. 

What Are The Things Venture Capitalists Look For In Startups?

Here are the most common points they consider:

1) Market Size and Growth Potential 

Venture capitalists want to invest in your idea only if they know there will be many people using the product. They need to see how much potential for growth you have and its size as well.

2) Business Model 

When starting a business, there are two types of models you can work with. You could start an online or offline business, and the choice is up to personal preference! However, investors might ask what you plan to do with their money once they provide funding for your company.

3) Team 

Having a good team is the most important thing for VCs. Teams that can execute what they intend to do are attractive to them, and those who can’t will have difficulty raising funds with their business plans. 

A track record of past successes is also an attractive factor for venture capitalists, but it doesn’t mean that you cannot get investments from VCs if you don’t have any success in your background. 

Rather, some investors take great interest in startups led by experienced entrepreneurs because they already have ideas about building a startup into a great company even without prior success records.

4) Competitive Advantage 

What makes your product different from others? Competitive advantage could be identified in various aspects such as business model, technology, or market factors.

5) Investor Track Record 

Investors with a good track record in the past are more attractive to VCs than new ones without any portfolio successes. New investors can still raise funds, but it is much more difficult because they don’t have an established reputation or know what makes these companies successful.

Last Thoughts

You should not be intimidated by the idea of competition because it is good for you. Investors will ultimately give more attention to companies with competitors, and if there are more startups, they’ll have higher valuations on average.

Therefore, do not spend too much time worrying about other startups because you will not delay the inevitable. Instead, build something great, focus on your product and show it to investors. 

Venture Capitalists are looking for opportunities to have that “big idea” breakthrough; however, it is sometimes better to solve a smaller problem with wider appeal. Chances of success might be slim, but the reward can also be great – and more likely than not, you’ll make your investors happy in return!.  


Maham Qasim

Maham is a copywriter and content creator who's always been drawn to the idea that there's more than one way of getting things done. Her writing career can be thought of as just another side hustle for her; when she isn't crafting content or reading Oscar Wilde, Maham often strategizes about how best to reach out with an engaging voice in this ever changing marketplace!

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