Aug 12, 20231 min
Investors use a combination of qualitative (e.g. founding team, competition) and quantitative factors (e.g. market size, traction, ROI) to evaluate early-stage startups for their investment readiness i.e. whether to invest in it?
Here are some of the key criteria and considerations that investors review in a startup:
The most important slide, especially at Pre-Seed & Seed rounds.
Founding team, list of advisors, past startups/exits, industry knowledge, skill sets, attitude, passion?
Podcast: Founder-Market Fit, The Why and How?
Growing MRR/ARR, LTV:CAC ratio, NPS/reviews?
If you’re raising from VCs, it’s crucial that your SOM is large enough for min. 10X ROI.
Do your solution (product/service), and its business model make sense?
Is the Unique Value Proposition defensible in the long run?
Are the numbers with reasonable assumptions and well-justified?
How much are you raising, and at what valuation, terms, and any lead/commitments?
Is there a potential for a strong (> 10X) exit?
Matches investment thesis (funding round+ask, valuation), and purpose (impactful/sustainable)?
Overall, investors use a comprehensive approach to evaluate early-stage startups for their investment readiness.
Startups that can effectively showcase their strong team, market potential, scalability, and high growth trajectory are more likely to attract investment.
It's also important for founders to present a compelling and well-structured pitch that addresses these key criteria.
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