6 things VCs consider before investing

From great teams to timing, Tech in Asia shows you the ropes

It’s the classic chicken-and-egg problem entrepreneurs face. There’s a great idea on the table and you need investment to take your start-up places.

Here are six factors venture capitalists (VCs) look at before deciding to invest.

1) Focus on solving problems:

For Eden Shochat of Aleph VC, the problem a start-up is trying to solve is the “most important part of an investment pitch.” If it is addressing a grossly inefficient market, his firm will probably take a closer look.

2) Build a great team: 

“Partnering with the entrepreneur is one of the most important elements of what we do,” says Shaun Di Gregorio of Frontier Digital Ventures.

Yanai Oron of Vertex Ventures believes it’s critical to have two or more co-founders.

3) Understand the market:

There’s immense value in start-ups that have demonstrable knowledge of the dynamics of their market, affirms Yanai. This could either be through previous experience in the same industry or via painstaking research and a well thought-out business plan.

4) Timing:

All three investors were hesitant to invest in start-ups that might be ahead of their time.

“The risk of being too early is sometimes bigger than the risk of being too late,” states Eden.

5) Display product-market fit:

Fundraising is “far easier” if founders have relentlessly tried to validate the idea with potential consumers, explains Yanai.

Shaun agrees, saying it’s integral for his firm to “see a really good fit” in the market, entrepreneur, and idea.

6) Talk to several investors:

Eden advises founders to “create as competitive of a funding situation as you can”.

Sometimes for VCs, a fear of missing out can be a compelling reason to invest in a firm. This is an excerpt from Tech in Asia. You can read the full article here