Description
Describe the attributes of companies that are likely to attract classic venture capital.
Explanation & Answer
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Every VC firm has their own methods to select a company of investment, but on a broader view VCs usually look for following in a company to invest -
1. Sales - As VCs invest in a business that is in operations for atleast couple of months (or years), first thing they look at is sales. Having a considerable volume of sales with increasing graph is important
2. Previous funding - They look at the amount of capital invested by founders and angel investors (as % ownership of each)
3. Business potential - As VCs invest a lot of money, they prefer to invest in the companies whose business model has the potential to become very big (e.g. they might invest in an internet company with a global reach rather than a standalone retail store. Though it is not a rule)
4. Exit Options - VCs invest their money as multiply it with a large number and make profits. They always look for exit startegy
5. Founders - VCs also look at the personality of the founders. At the end of the day, founders are going to run the business (until professionals come)
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