SUB CATEGORIES OF Funding Your Startup

Venture investment is the process by which a venture capital firm invests in a startup. Despite the risks, VCs may offer large amounts of capital to a startup that has the potential to succeed. Even if the startup has an inexperienced management team and no revenue, it might still be a venture capital target if it has a lot of traction or working prototype of its product. Most venture capital firms will invest only in startups that have some traction.

Common criteria that VC firms use when deciding to make investments are as follows:

Team

  • The team is often the most important criteria for VC investors. There usually has to be someone who demonstrates tremendous passion and the drive and flexibility to overcome obstacles and pivot when necessary. Having a strong technical person on the team is very important to many investors in tech-oriented startups.

Opportunity

  • The size and growth of the potential market and competitors in the market are all important. The market has to be large so that the startup has the potential to generate significant revenue. The larger the market, the higher probability that there is a market for the startup to generate substantial revenue.

Product and Services

  • The startup’s product or service is important as well and the problem the product or service is trying to solve. It is easier for a VC to understand a product or service that solves or mitigates an existing problem. The startup’s IP protection that could fend off competitors is also important.