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3 Things VCs Are Looking For Pitching to a venture capitalist? Be ready to answer questions about these three topics.

By Sam Hogg

This story appears in the June 2015 issue of Entrepreneur. Subscribe »


People are often surprised when I respond to their pitch with glowing remarks on the idea, only to tell them there's no way it'll get venture capital funding. I go on to explain that VCs want to see potential for the classic hockey-stick growth curve before they make an early-stage investment. Here's what they're looking at.

Market size. Venture-backed businesses need to create or be a part of massive addressable markets—think, the entire world or at least $1 billion in lifetime revenue. Addressable is the key word, and here's what I mean by it: Your favorite local burrito joint with lines out the door may be making money, but it's not addressing the total global market for beans, rice and tortillas. This is the biggest kind of nonstarter for sophisticated VCs.

Scalability. Assuming the market is big enough, the next check box is whether the product or service can scale. There is a reason drugs and software fit easily into the venture model. Once these are developed, manufacturing is cheap, and there are few barriers for distribution. The need for scalability often rules out businesses that hinge on manufacturing complex physical products, those that require substantial investments in real estate and inventory, or those that take extensive time to sell to customers individually.

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