Questions

How much potential value does a startup need to have in order to attract VC funding?

Example: Market size 150,000 or less on a yearly subscription model ($60 per year) for a total of $9 million annual revenue at most. Costs estimated to be less than 500,000 annually.

11answers

Having raised over $100 million in angel and VC funding for startups I've founded and a couple others I've advised, I have some related experience in addressing this question.

The company you outlined above seems more like an angel or friends and family deal for a lifestyle business than a VC financing round for a technology startup.

VC's want to see a billion dollar market opportunity potential, and a company that has a chance of reaching at least $100 million in revenue by year 5.

I'd be happy to talk further with you about fundraising options if you'd like to give me a call sometime.


Answered 2 years ago

Wow, sounds like you have an amazing profit margin. The key is GROWTH. Continuous and stable, with the ability to predict future growth.

Therefore, your market niche is very important, to feed the growth curve within an order of magnitude and can't be too vague.

As others have mentioned, investors look for a $100-200 million valuation potential, as well as the ability to morph or expand as needed.

Contact me if you want to discuss more.


Answered 2 years ago

Potential is relative but PREPARATION IS KEY. You need to be able to understand the vision for the company. I usually tell other entrepreneurs like me to stop calling your company a "startup" and start treating it as a business.

From this point of view, you should have done research on your market. If you've completed a beta test, that's even better. It takes time. Don't go to VCs with just the "idea of being the NEXT BIG THING."

NO.

You have a "million-dollar idea?" Well, prove it.

From the presentation, to market research to connections, you should be able to relay your vision in a clear manner.

If you need more help in organizing these things, you can schedule a call with me.


Answered 2 years ago

Likely best you look through docs on various VC Websites (there are many).

If you have a flow of investment (say for example in traffic) + a flow of sales, so there's a consistent ROI over some period of months, you'll attract far more capitol + have to give away less of your company.

Most VCs I know will be way more interested in consistent, proven ROI (even if total revenue is small), than estimates on paper.


Answered 2 years ago

1. If you are growing by 2,000 users or $1,000 per month.
2. If you have a very high tech idea and are a very good marketer, such as Theranos, Magic Leap, Tesla.

But you should normally start with Angel Funding. VCs aren't suitable for pre-traction startups for a multitude of reasons.


Answered a year ago

More the better. Depends how you define value too. A speculative value will always be laughed at compared to real traction value. Traction will always get attention and demand respect.


Answered a year ago

There is no one right answer, truth be told different investors are going to be looking for different things. There is one key thing i noticed you said though and that is attract. Using the word attract means VC's would be approaching you versus you pitching them. If you want to attract attention you have two options.

1. Get in someone's eco-system, haven something they need, want or love; then you can attract attention. 2. Be outside there eco-system and be some wonderful they search for something like you.

Again, they are two very different opposing views. If you want to attract attention, it comes down to how well are you selling yourself. If you want a certain valuation, it comes down to how well you sell the idea, backed with unemotional market research (What's your business model? How do you see future growth? What's your risk? Where are you to date? What do you need this money for? How will this money accelerate your growth? How will you return my money?)

Reach out to me for more clarity on the subject, I would love to help you.


Answered a year ago

Different Venture Capital firms have different criteria on when they allocate funding. Some come in at a pre-seed or seed stage where all you are is an idea on a paper. If you do a search for VC incubator or VC seed you will get a more readily available selection of where to go. Most VC's raise money from wealthy investors, endowments, and other corporate investors. A lot of these have started to set up their own direct investment platform and act as their own VC's. Feel free to reach out as there are many other alternative financing platforms out there to fund startups.


Answered 7 months ago

I have 25 years of experience working with early stage technology companies and investors.

I’m often asked about fundraising strategies for VC funds and angel investors. After raising capital and exiting from multiple startups and investing through 15 venture funds and dozens of angel investments I have seen thousands of deals.

Since you are already generating some initial revenue from paid advertisers, it sounds like it is the right time to put together a plan to raise your seed round of capital.

I’ve found that the most productive use of time for both of us is scheduling a call through my profile.


Answered 4 months ago

Hmm... if I have such a good profit margin, I will not look for any funding - I feel this is funny. Just within one year I will have more than $8 million to spend, there aren't so many Startups need billions dollar at start, this is not a oil refinery to building aircraft.

Now I do consider a need for funding if all the above are just forecast and there is a need of money to develop the subscription model and marketing activities.

There is no clear answer, it depends the current development ... normally engage a valuer is a good approach, but the VC needs to accept it (this is based on my 20 years in valuing the companies). Normally, the funding can be structured as a project, entity or combined and can be loan, entity or combined too.

Hope the above helpful to you


Answered 2 months ago

A business of the size you described is most likely not of interest to a VC firm. You would be far better off focusing on angel investors or family offices that manage their own capital.

Venture capitalists are looking for places to deploy a large amount of capital with the potential for follow on investments and grand slam outcomes. Each deal costs them money in due diligence, support, legal costs and more. Investing $1 million each in 100 companies would be far less desirable than investing $10 million in 10 companies. This is why most VCs do not participate in seed rounds, even if they say they do.

In general, VCs are going to want your round to be upward of $2M in a Series A, and they will want to own no less than 20-30% of your company for it to be interesting to them. That means your company would need to be worth about $6-10 million prior to their investment with the potential to grow 10-100X that size.

Most companies are not investable and focusing on investment unsuccessfully can eat up a lot of time and resources. If you want to talk about whether your company is investable, please reach out.


Answered a month ago

Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2019 Startups.com LLC. All rights reserved.