What Does A VC Look For In A Startup?

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Mar 14, 2016

Raising money is critical for any early stage startup. In a growing ecosystem like Bangladesh, it is hard to raise money. Simply because we don't enough angel investors and VCs here are more conservative when it comes to investing money in early stage startups. Hence, the most perplexing question for early-stage entrepreneurs is often, “What do investors look for when they invest in a startup?”

We recently asked few prominent early stage investors the same question: What do you look for in a startup when you invest? and what follows is a compilation of their answers.

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Hideki Fujita

Hideki Fujita
SEGNEL Ventures
Investment Profile: Here and here.

The first thing is: what is the problem and then what is the solution you are proposing. Then comes market: how big the market is. The third is team: who they are. The management team is very important to us. And finally, why they are the right team to build the company, what makes them different and important.

Being a good businessman is important for me, and one should think about making a platform for the business, and have good communication skills. I invest in entrepreneurs and management. An entrepreneur must have strong passion and conviction.

You may see Hideki's interview on On Bangladesh Market, Investment and Good Pitch here.

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sajid rahman
sajid rahman | click on image for more

Sajid Rahman
CEO, Telenor Health
Investment Portfolio: FSindex, Angel.co, and here

I personally look at the experience and track record of founders, whether there are 2 or more founders, whether they have launched and executed the product, traction beyond the idea-stage, and also how big the market is for the product/services in terms of customer and dollar value.

Saying goes, if you want to build a billion dollar company, try to solve the problems of a billion people. If you look at all the companies that are big today, such as, Facebook and Google, they are not trying to solve one problem in a particular geography , they are solving problems globally.

The good thing about today’s start-up environment is that a number of them are showing very good early traction unlike the times in dotcom bubble. There are companies that are generating million plus in revenue within a few months of the launch. The market for technology startups has grown exponentially. With billions of customers connected online via smartphones, a great product with the right team behind it can grow very fast.

You may see Sajd's interview on On Investment, Big Ideas, Great Founders, And Startup Eco-system here. 

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Shawkat Hossain of BD Venture speaking at FSindex launch event
Shawkat Hossain of BD Venture speaking at FSindex launch event

Shawkat Hossain
Managing Director, BD Venture
BD Venture Investment Portfolio: here 

BD Venture now focuses in few sectors like technology, energy, agro-processing, food processing, light engineering, health, and education. For now the firm is only investing in companies that are operating in above mentioned sectors and have extraordinary growth potential. “Growth is one of the key elements we look for in a company when we decide to invest”, says Shawkat, “if a company can’t grow at least 5X in few years we are not interested”.

‘We do value good idea, great growth potential and all, but then and again if a team is not committed enough and hard working enough the company is never going to take off. We try to understand the team and how committed the team is.’

You may see our profile of Shawkat Hossain here.

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Jim Davidson
Jim Davidson

Jim Davidson
JGD Ventures

I invest in “social ventures”, also called “impact investments” so I look for:

  • A business whose activities generate a clear environmental and/or social justice goal
  • A business model with a “plausible narrative for future revenues”
  • A capital plan with a clear use of funds, i.e., a plan with a specific amount that will go to a specific list of objectives which predicts a specific list of outcomes, all of which lead to a next logical step in the business
  • A founder who is passionate and coachable
  • A team who works well together and is smart

It’s important for entrepreneurs to understand they are providing an opportunity for investors, not asking for investment. This means when they have a clear plan and they truly believe they can turn that investment capital into a 5-10x return in 5-7 years, then the time is right.

You may read Jim's interview on How Startup Funding Works here.


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Ibrahim works as an Intern at FS. He takes interviews, writes features, and meets entrepreneurs and makers and doers.

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