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What do venture capitalists look for?

Find out the twelve things that senior venture capitalists look for in the companies they invest in, including team, market size, traction and more
Julian Carter

/ Last updated on 20th October 2017

Venture capitalists, what do they look for? I launched EC1 Capital just over a year ago on Feb 9th, 2012. Our mission was to connect with entrepreneurs at the grassroots level in East London. This is a pivotal time, a time when technology now permeates all our lives, the falling cost of launching a startup along with many other factors.

Related: A guide to business angels

Today, I still work in one of Tech City’s oldest co-working spaces. I run EC1 Capital like a start-up, last year was about proving deal flow and making the initial ten investments as well as building a network that generated filtered deal flow from trusted and respected sources. Today EC1 Capital enjoys enormous deal flow from the burgeoning London tech scene and beyond and we will be scaling by employing up to four more people as well as looking for offices to create our own tech ecosystem.

I have met many entrepreneurs on my journey. It is an honour and a privilege to meet such talented people. Always, it’s a hard choice to choose which of the hundreds we will fund. There is an abundance of information on the web now about how to approach venture capital funds & venture capitalists and also what to say, there are general rules, and there are ones specific to the fund you are talking to. Do your research.

Most entrepreneurs seek the silver bullet. There is none. However, I will mention some things we look for. In an early stage start-up, there is very little ‘hard’ data to go on.

12 Key points venture capitalists look for

1.    Team. You will hear this everywhere. We back people first and foremost.

2.    Market size. You should be addressing a big market.

3.    Traction. What have you achieved so far, what does it tell you?

4.    Revenue Model. Time to break even.

5.    Ideally, you should be disruptive.

6.    Product. Innovative and defensible.

7.    Clear articulation of how you will acquire and retain customers.

8.    Know all your numbers.

9.    Enthusiasm. Something that cannot be faked.

10.  Honesty. Never ever lie or stretch the truth. You will be found out.

11.  Motivation. Why are you doing this, what have you sacrificed to do this and how long can you keep going for?

12. Can you build things? Can you actively ‘do’.

At EC1 Capital I run office hours every other Friday for up to six companies over two hours. Also, if you attract funding from us and join the family, our portfolio have quarterly get-togethers where we also invite late stage investors to informally meet our portfolio. For investors, it is as much about getting to know you and ‘de-risking’ you as it is about your startup. 

Related: List of UK venture capital funds

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