These are some slides I put together -- its not a very organized deck, more of a stream of consciousness. Decided to leave as is!

1. What
do
VC’s
look
for
in
a
Poten4al
Investment

2. The
Top
10
List
1.
Team
2.
Size
of
total
available
market
(market
opportunity)
3.
Can
the
company
be
a
market
disruptor
(new
business
models)
4.
Poten4al
for
superior
growth
momentum
5.
Focus
on
reach
and
engagement
as
a
precursor
to
mone4za4on
6.
Forgo
near
term
profitability
for
superior
top
line
growth
and
returns
7.
Fully
integrated,
homegrown
solu4ons
(not
just
licensed
technology)
8.
Look
for
deep
moats
-­‐
barriers
to
scale
more
important
than
barriers
to
entry
9.
Definable
"network
effects"
that
drive
sustainable
compe44ve
advantage
10.
Team

3. Here
is
another
view…
• The
Physics
– Product
Market
Fit
– The
“secret
sauce”,
barriers
to
entry,
barriers
to
scale
• The
Chemistry
– The
founding
team
dynamic
(2+
founders,
tech
skills
a
must)
– Entrepreneurs
must
demonstrate
humility
and
confidence
– Flexibility
and
ability
to
“move
with
the
market”,
resourcefulness
• The
Mathema4cs
– Business
model
– Opera4ng
plan

4. A
few
addi4onal
thoughts…
• There
is
no
“perfect”
team
and
no
“perfect”
idea
and
no
formula
• Ideas
are
a
dime-­‐a-­‐dozen,
the
ability
to
execute
is
not
• The
funding
process
is
usually
4me
consuming,
frustra4ng
and
not
for
the
faint
of
heart

5. Team
• The
team
MUST
have
an
acute
understanding
of
the
space
they
are
targe4ng
– Includes
buyers,
poten4al
partners,
compe4tors
(present
and
future)
• The
team
MUST
have
some
sort
of
unfair
advantage
– Market
knowledge
– Ability
to
create
and
con4nue
to
create
a
superior
product
– Rela4onships
• PASSION
–
this
is
cri4cal
not
only
to
succeed
with
customers
but
also
to
recrui4ng
great
people
• BONUS:
The
team
should
have
worked
together
before

6. Product-­‐Market
Fit*
• “The
only
thing
that
maiers
is
Product-­‐Market
Fit”
–
Andy
Rachleff
• This
includes:
– Market
MUST
be
large
and
growing
fast
to
give
the
entrepreneur
some
room
to
make
mistakes
– The
product
MUST
solve
a
key
problem
for
the
market
– The
product
MUST
be
cri4cal
for
the
decision
maker
to
be
successful
• You
cannot
afford
to
“educate”
the
market
–
either
the
market
is
ready
for
your
product
or
it
isn’t
• DO
WHATEVER
IS
REQUIRED
TO
ATTAIN
PRODUCT-­‐MARKET
FIT
• Includes
changing
the
team,
changing
markets,
changing
the
product
–
no
sacred
cows
*
Derived
from
hip://pmarca-­‐archive.posterous.com/the-­‐pmarca-­‐guide-­‐to-­‐startups-­‐part-­‐4-­‐the-­‐only

7. More
from
Andy
Rachleff
• When
a
great
team
meets
a
lousy
market,
market
wins
• When
a
lousy
team
meets
a
great
market,
market
wins
• When
a
great
team
meets
a
great
market,
something
special
happens

8. Business
Model
and
Sales
Model
• Business
model
– Who
is
the
buyer?
(“Who
is
Bob?”)
– Possible
pricing
strategies
– Detailed
understanding
of
compe4tors
business
models
• Sales
Model
– Must
be
extremely
efficient
– Must
be
able
to
sell
product
online
or
on
the
phone
– Freemium
model
almost
a
must-­‐have
–
market
is
now
accustomed
to
trying
products
before
buying
– Any
product
that
does
not
have
a
low
cost
sales
model
is
a
non-­‐starter

9. Momentum
• The
days
of
the
“Two
guys
and
an
idea”
are
gone
– A
prototype
is
a
MUST
HAVE
– A
beta
customer
is
almost
a
MUST
HAVE
– A
paying
customer
is
a
“mixed
blessing”
• Momentum
is
also
important
because
it
gives
the
entrepreneur
leverage

10. We
love
entrepreneurs
who
do
their
homework!
• Find
investors
who
understand
your
space
• Develop
a
detailed
financial
model
– While
we
understand
that
it
is
a
virtual
certainty
that
your
model
is
wrong,
it’s
a
useful
insight
into
how
you
think
and
what
you
want
to
spend
on
• Find
a
connec4on
to
a
VC
– Cold
Calls
probably
won’t
get
you
anywhere
– LinkedIn
probably
the
most
valuable
tool
–
use
it
oqen
and
use
it
well

11. In
closing….
• It
should
ALWAYS
be
your
goal
to
DOMINATE
your
market
• Your
startup
MUST
be
your
obsession
–
if
its
not,
don’t
do
it
• Don’t
spend
too
much
4me
thinking
of
exit
strategies,
instead
just
build
a
great
company
• Don’t
focus
on
making
money
for
yourself,
focus
on
crea4ng
something
you
will
always
be
proud
of

12. Stay
in
touch
pree4sh@cervinventures.com
www.cervinventures.com
@pnijhawan
@cervinventures