4 Factors affecting VC funding 

Not all startups are designed for venture capital. There are several criteria that Venture Capitalists look for when deciding whether to invest capital or not and there is a reason for that. Some startups are just not capable of deploying such a massive influx of cash. These start-ups need to have the ability to scale quickly and take over the market. These are also expected to pull this off within 3 to 5 years of their inception.

As much as I might want to state that everyone can utilize this growth quickening agent to accomplish domination, lamentably, I can’t. Here are a few guidelines to decide if venture funding is appropriate for you.

1. Scalability 

Is your startup scalable? What does this mean? It means that your start-up can grow without collapsing on itself. In the event that your start-up is not scalable, you will perhaps come up short on resources when the demand increases. For example, take the Impossible Burger. The Impossible Burger seized the deal with Burger King and almost with McDonald’s, but they collapsed under their own success. They did not have the appropriate infrastructure in place to keep up with demand.

2. Market Takeover 

Can your company take over your target market? Does it have the ability to crush the competition? Facebook is an ideal case of a company taking control over a market. In addition to the fact that they did that during their rapid growth period, they yet maintain this growth and market predominance by buying out possible contenders. The other case is Google—it was not the first search engine in history. They just had a superior quality search algorithm, which enabled them to capture the market share.

They did this in the face of Yahoo! and other search engines. Just like Facebook, they continue to buy potential competitors to extinguish threats.

3. Market Size

Your target market needs to be large enough. A one billion dollar market may seem important, but it is not. A rough rule of thumb is to assume that you will be able to acquire 1% of the market. If you did catch the 1%, it means your startup’s revenue is 10 million. By using a revenue multiple of say, 4x, your startup’s valuation is now 40 million. Although good, this is not what a VC is looking for.

4. Is there a need?

May be your market is enormous and the potential upside is gigantic.. But is there a need? Innovation needs to be continuous within each industry because this is how things improve! Does your start-up accomplish this? You might have the option to discover a market that can deliver enough income to make you comfortable, but that is where it stops. Companies like this may not be appropriate for venture funding. Why? To be gruff, it may be because your startup might not serve the market.

It is a natural desire to want capital to scale up the business and every startup could have this opportunity, but each path is different. Unfortunately, some doors are open to some and shut to others.