Wednesday, October 04, 2006

What Makes a Good VC Investment

David Beisel's posts over at www.genuinevc.com are a great insight into how a VC develops an investment thesis for a particular opportunity. There are lots of generic pieces out there in the blogosphere that discuss what VCs are looking for, but this is the closest I've seen to a VC revealing his scorecard.

I've developed my own shorthand list for what won't make the grade with a VC. I look forward to your comments:

You are NOT a good candidate for VC investment if:
  • Adding the adjective "artisanal" to your product description would increase margin.
  • Success is dependent on securing large channel partners. Channel partners are like nightclub bouncers. They aren't going to let you in unless you deal with them in a generous fashion. This strategy (if successful) most often leads to a licensing deal or outright acquisition by a channel partner early on, before venture-capital level returns are likely.
  • Your patents can be characterized as defensive. Having a patent, or a provisional patent, is no longer enough. The quality of your patents , and your patent strategy, are becoming table stakes in even the earliest of technology deals.
  • Your CEO waxes his eyebrows. Waxing= trend follower. Plus, it's just weird. Unibrow=power. Ask Leonid Brezhnev.

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