Venture capital investment criteria can be defined as the procedures followed by VCs to select suitable ventures for investment. They are based on the company’s potential to grow fast within a limited time and resources. These methodologies define the set of rules for investment in projects to get a high growth potential.
Before making any investment, VCs should follow the some of the basic VC investment criteria. The VCs spend money to raise more money and the VC investment criteria help them to make the right decisions. Here are some important venture capital investment criteria.
More Risk More Returns
If the ventures are chosen carefully, investment in risky ventures generates higher returns. Investors should know for which development stage the investment is needed. This provides an idea of the risk factor involved.
Investors should look for companies that are fast growing and with huge market presence. The selected companies should also boast of abundant intellectual property in order to put a barrier to the growth of its competitor.
The business model
A good business model enables a company to grow fast. Companies fulfil the venture capital investment criteria if products sold by these companies are highly demanded. A good business model should enable a company to generate more returns with limited resources.
Other t significant venture capital investment criteria include company’s development stage, management team, company valuation and the exit plan.