How Venture Capitalists Analyze Companies

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Submitted By atreny
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Case report: Venture Capitalist evaluations of potential Venture opportunities

What are the main requirements that these four VC look for when evaluating a new venture opportunity?

These VCs have analyzed and come to realize that the most important factor when evaluating a new venture is that there is an opportunity in a large market which is growing. VCs always ask and want to know where a company will be in the next 3-5 years. Usually, for a company to be successfully starting-up, they will have a constant revenue of a minimum of 100 million with a market potential of going up to 500 million dollars. This is for company’s with non-software based companies. When it comes to software based companies, investment can be lower in size.

The market size is very important for venture capitalists. They want the size of the markets to range between 500 million and 1 billion dollars to have enough potential to be interesting and worth taking the risk.

Venture Capitalists also primarily look for a key factor that seperates a company and its product apart from others. These factors can range from an advance in technology/ design/ engineering to having a tool that people are used to, a list of consumer’s in specific sectors, but scientific related start-ups are usually kept away from because consumers in general wait for new creations to be tested and aware of them before generating big amounts of interest.

Investors don’t only want a good idea with specific advantages to make a product/company stand apart. They will also look at the members that form these teams to see if they are reliable people. They want to invest in a company that will be stable and won’t give off a bad image to the public. The people that represent the company, are the image of the company which is a very important image to take care of. Investors want to know that someone who wants his…...

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