What VC’s want in a software/services startup

Here are some notes from a seasoned entrepreneur who attended this SDForum VC Roundatble event last night in Palo Alto featuring the following panel:  Rebecca Lynn (Morganthaler Ventures), Evan Liang (Shasta  Ventures) and Rohit Gupta (Opus Capital).

Comments re. what VC’s are seeking in a software/services startup:

  • subscription models are favored; free first, subscription later  is problematic
  • most startups need a rockstar CTO (engineer) to get traction
  • 1st VC meeting: fewer people is better (no entourages); leave the white-haired advisors at home
  • common process for startups that get funded: prove your product, get customer response, need money to scale to acquisition
  • startups seeking seed funding need to have already done surveys, testing and research to prove their business viability
  • FOR SERIES A FUNDING: – SaaS: more a bet on the team (product in market, ~$1M in revenue); $10M ceiling is common, often VCs are waiting until that ceiling is hit before jumping on board
  • Consumer Internet: need more on product development and having more  traction (site launched with a real non-Ad based rev model)
  • in either case, the company has to have potential to be a billion dollar company to be fundable

There ya hav’t.

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