When Do VC’s Prefer to Invest In Companies?

Question: When do VCs prefer to invest in companies? After they have completed their beta? After they have a certain amount of customers?

Our Take: There isn’t a cut and dry answer to this question. The answer really depends on what the investment thesis is for the venture firm you are working with and the particular partner looking at the investment. Depending upon expertise, risk profile and stage(s) that interests them, VCs run the gamut from preferring very early stage deals (think 3 folks and a set of PowerPoint slides) to ones who want to invest in proven concepts, completed technology and built out management teams.

So in short, no matter what your stage, there are folks out there who probably invest in it. 

  • good question and great response.
    I agree there isn’t a cut and dry answer.
    i guess it also depends on the team. if the founder is someone we know than we are willing to take on much more risk (e.g. powerpoint ware).
    if it’s an unknown founder or other issues with the team than we like to see stuff a bit further along.

  • Hi,
    I think that this is a really great blog and thats why I want to point this out. Answers like this are not helpful. Obviously, the answer to most questions depend on circumstances.
    We look to you to tell us what you prefer and typically do.

  • Jason

    We always try to be helpful. The question asked about “VCs in general.” If you are inquiring what we specifically do – we love early stage stuff. In fact, we’ve routinely done seed deals prior to larger VC-type financings. It is one of the pleasures of the job to meet companies that are just getting off the ground. So for us, there really isn’t a “too early” if the deal is right.
    That being said (and don’t get mad for me waffling), we also do deals that have more traction and maturity.

  • joe

    With Web 2.0 consumer internet companies, is it safe to assume VC’s want to see much more traction – certain traffic/userbase milestones?
    Since it so cheap and quick to launch Web 2.0 sites, I’d imagine powerpoint foils (even from proven entrepreneurs) aren’t very compelling to investors in the consumer internet space.

  • Actually, I don’t think the category of consumer internet really changes the answer. “It depends” – while not a terribly useful answer – is the truth. In the past, we’ve talked about how every VC firm (and actual partners within the firm) tend to approach this differently. So – knowing and qualifying the VC you are talking to is important. I’m sure this will end up in the “recurring theme” category – we’ll try to give real examples and be specific whenever we can.

  • Okay a little guidance please
    First a couple of facts
    Proven people in the industry for many years
    A strong relationship with MS for something they would like to see
    Sizable investment in first product which is in final real world testing
    A mostly untapped market (very large market)
    Patent’s filed
    Angel investor being advised that he should have major stake (given) his investment returned and a 40 percent return is standard VC return

  • Jason

    It’s hard to tell exactly what you are asking, but VCs don’t have any “pre set” return that we look for. Frankly, given the risk profiles of our investments, we need to shoot for a much higher return than 40% to be sucessful.