11/11/2014

What Investors Are Looking For

Early-Stage Investment
How many startups get funded each year?
1,500 by venture capital.
50,000 by angel investors.
VC look at 400 companies for each 1 in which
they invest.
Angels look at 40 (David Rose, CEO, Gust).

What are early-stage investors looking for?

11/11/2014

The Four Ms of Early-Stage

Investing*
Ranked in order of importance.
1. Management Team

Absolutely essential.
If an investor isnt impressed with the team,
almost impossible to get them to invest.
Bios of the team should be the FIRST thing you
discuss in your pitch.
If the team is experienced, the investor will be
much more interested in the rest of the pitch.
Source: Mark Suster

The Four Ms of Early-Stage

Investing*
2. Momentum:

Users/customers.
Revenues.
Partners.
MVP (in beta preferably).
Press.
New pricing.
Evolving market positioning.
A growing team.
Source: Mark Suster

11/11/2014

The Four Ms of Early-Stage

Investing*
3. Market Opportunity:

Investors may want you to start lean and be

willing to accept that a $50M outcome will drive
good returns given initial investment size.
Almost all investors care about investing in BIG
markets with AMBITIOUS teams.
NEVER talk about early exits, quick flips, early
interest by potential acquirers during the meeting.
Most importantly, support the market opportunity
with verifiable metrics or research.
Source: Mark Suster

The Four Ms of Early-Stage

Investing*
4. Money:

Most investors will want to be able to put a

certain amount of money to work.
Will want to own, initially, 20-25% of your
company.
They may consider 15% if co-investing.
Only a few investors (angels, seed) will want to
own 8%.
Unless theyre buying an option to invest more later.

Source: Mark Suster

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What Investors Look For - Summary

Investors care about management, markets
and products.
Invest in deals where they can own enough
to make a difference (move the needle).
All wrapped up in forward progress that you
can demonstrate over time.