What VCs look out for in Seed Rounds

A Startup Founder’s Perspective

Photo by David McEachan from Pexels

The goal is to generate a high return and a quick turnaround on investments.

Contrary to the popular belief, seed funding is not all about having a great idea, it is about having a good team of people who can execute the idea.

How to approach VCs for investment

Step 1: Understand the details about VC investments

1. Product Market Fit — Does the product you are offering solve a real problem in the market? Are people willing to pay for your product? If yes, how much are they willing to pay? It is important that you answer these questions before approaching any investor.

2. Team — Is the team behind your start-up capable of executing the idea on time and within budget? What is their experience and expertise in the sector you are working in? What is their track record of successfully launching products or companies in the past?

3. Company Business Model — How will your business make money out of this idea or how will it be financed? It is important to understand whether there is a strong business case for your start-up since this will be a key factor in determining whether investors want to invest in you or not.

4. Market Size — How big would your market be and how big can it grow to over time? Do not try to over-estimate this figure but do not under-estimate it as well as this figure has an impact on how much capital you need as well as how aggressive your revenue growth projections should be.

5. Competition — How many competitors do you have and who are they? How does your product differ from theirs based on functionality, pricing, distribution channels, industry focus, etc.? What are their strengths and weaknesses compared to yours? What are customers’ perception about each competitor’s strengths and weaknesses compared with yours? You need to have an honest assessment of where you stand vis a vis other players in your industry before approaching any VC for investment! This is also why understanding what VCs look out for helps entrepreneurs pitch better!

Step 2: Approach potential investors through referrals from friends who have done so before

Step 3: Approach a few investors at the same time to increase your chances of securing an investment

Step 4: Do not give up after one rejection

Step 5: Have a clear idea of how much money you want from each investor

Step 6: Do not hesitate to negotiate the terms of your investment

Step 7: Understand what your obligations are

Step 8: Lastly, make sure that your business model and plans are realistic and achievable

Founder of Cudy Technologies (www.cudy.co), a full-stack EdTech startup helping teachers and students teach and learn better. I am also a mentor and investor.