Sup founders, VCs are saying no to you for many reasons. If you pass the first meeting, it’s essential to understand the risk factors VCs consider when evaluating your deal. Here are some top risk factors and actionable insights to help you navigate these challenges:
🎯 Market Risk - Ensure your target market is $1B+ and growing. Demonstrate thorough market research that makes it easy for VCs to believe your market is VC backable.
Action: Make sure you are solving a real pain that it’s worth solving at scale.
🧗♂️ Execution Risk - Showcase your ability to execute your plans. VCs want to see a strong team with a track record of success and a clear plan to perform on a roadmap.
Action: Build a diverse team with relevant expertise and show them you can execute together by demonstrating traction.
💰 Financial Risk - Provide realistic financial projections and a clear path to profitability. These days, VCs need to see a sustainable business model.
Action: Highlight your unit economics and show strong gross margins that support sustainable long-term growth.
🔍 Competition Risk - VCs don’t like saturated markets with easy-to-copy business models. So make sure you can clearly define who your competitors are and why you will be the winner who takes it all.
Action: Prove you can outperform, differentiate from your competition and build a moat around your business.
⚖️ Legal and Regulatory Risk - Don’t be another SBF at FTX. Diligence is back in fashion. So ensure you have your legal boxes checked and comply on all fronts.
Action: Consult with legal experts and let them do their jobs, it costs money but allows you to be fundable.
🌐 Technology Risk - Showcase your technology and its ability to scale and retain customers. Be prepared to defend your tech capabilities and can handle an audit.
Action: Build a capable technical in-house team, maintain up-to-date documentation, and give credit to where credit is due (open source libraries).
🎲 Timing Risk - Is your tech and sector hot right now? Timing is critical. Just ask the crypto peeps who are working on AI now about timing…
Action: Monitor market trends and be ready to pivot or adapt your offering as needed.
By addressing these risk factors and implementing these action items, you'll be better equipped to attract venture capital investment and navigate the challenges ahead.
If you’re looking to see which VCs are a good fit for your company, be sure to create a free profile on Thunder.