What VCs want (part 1)

17/09/2025 - Startup life - 2/3 minutes

If you're a young founder seeking funding—or simply curious about how startup valuations work—you might have wondered: “How do venture capitalists (VCs) decide where to invest their money?” Understanding VC investment criteria is crucial, as funding is the lifeblood of any startup. Without it, a startup is like a plant without water.

So what Vcs wants They primarily focus on three factors: Team, Product, Market Size.

  1. People

Why people is the first thing they look? Even before the product?

Becuause VCs start from the premise that ideas aren't unique. They've learned that any given idea—no matter how original—will likely occur to multiple people, meaning that multiple teams may be working on it at the same time.
This may seem counterintuitive, or even heretical compared to the “entrepreneur genius” narrative—after all, Steve Jobs must've been a genius to invent the computer. But you're forgetting all those who failed. Apple wasn't the first (think Kenbak‑1 and Altair 8800); it just succeeded the most. And for better or worse, the law of large numbers validates the VC mindset. That's why they look at the team before the product.

So what to look for?

Founder–market fit—a cousin of the well-known product–market fit—refers to the alignment between the founder’s skills and their target market: the more aligned, the better.
The most credible founders are often experts in their field; they've recognized a market gap and have the ability to fill it. Outsiders typically lack that insight, and low competition means others may not even see the need.
This is the case with many deep-tech founders, including the Traitorous Eight: eight researchers and engineers who left Shockley Semiconductor in 1957 to found Fairchild, revolutionizing the transistor industry and later spawning giants like Intel and AMD.

Uniqueness of the Eureka Moment - VCs also evaluate how unique the moment was when the idea for their startup first materialized in the founder’s mind—and the more distinctive that eureka moment is, the better.
If, for instance, your startup idea for managing supermarket queues popped into your head while standing in line at the checkout, it's likely that many others have had the same thought. Since the experience is so common, other people would likely have thought of it too—and that means competition is probably already intense.

Founder’s Leadership - a great company can't be built by one person (even though AI is changing the game). Success hinges on a founder's ability to attract talent and convince top people to join.
This is especially tricky when persuading researchers paid millions at FAANG companies. In that case, your charisma and your ability to craft a compelling story around your idea make all the difference.

This articles continues in the “What VCs wants (part 2)”


Good luck and be prepared

Author: Marco Carabelli

Inspired by: “The secrets of Sand Hill Road” - Scott Kupor (book)