What does a VC look for before making Investment?
- Do I want to invest in this CEO and their business?
Investors are always known to seek face-to-face time in conversation with their prospective investment as it is important for them to know who they're investing into. VCs don’t invest in spreadsheets, they invest in people.
- Does the CEO know their business inside and out?
However, every situation needs to be dealt in its own specific approach, there are a few characteristics that VCs definitely look for in a CEO during a pitch. The answers to the following questions are the most important to them.
Does the founder know their stuff? Do they know their business model inside and out? And do they know their market very well? Are they able to see the opportunities and challenges ahead?
- Does this founder have leadership skills?
Does the founder have the ability to lead people? And with leadership, it’s not just about managing, it’s about true leadership. Before any VC invests in a startup, they want to know that the leadership team can take a startup from the theoretical idea phase to a business plan that makes money is a difficult task.
- Does the business idea have a sound economic engine?
Is there something in the idea that can really be turned into a business? Not a hobby. Not just a good idea. But an actionable idea that can be adjusted and tweaked as it relates to the founder and the team they are leading.
- Is this founder, focused?
Are they focused? Is the “simple solution” provided by them really a simple solution? Or is it a mess of ideas? It is frustrating to hear the CEO branch into other ideas or the potential business without fully explaining the one which they came for, for the Investor, while they are sitting through the presentation.