How VCs select their investments

April 16, 2024

The top 5 selection criteria

Everyone VC (Venture Capitalist) has its own specific criteria for the selection of start-ups for an investment and the decision hangs from different Factors from. But the following five points are equally important for VCs: You analyse the Team behind the startup and evaluate the experience, expertise and skills of the founders. VCs also examine the current status of the company, including the product or service, the customer base and past successes. In addition, VCs also take into account Financial aspects like the Profitability and the company's growth potential. They evaluate the Competitive landscape and the long-term Sustainability of the business model. VCs also take the risks into consideration and analyse the Exit strategyhow they will manage their investment in the future monetise can.

But how can you convince VCs that your startup fulfils or even exceeds these criteria? With a well-developed and convincing equity story. 


Why an equity story is important for your startup

The Equity Story of your startup can convince potential investors of the attractiveness of your company and its long-term growth prospects. convince. To stand out from the competition, you should develop a narrative that arouses curiosity: What is the story behind your startup? What does your team want to achieve or change? Where can your startup be in ten years? 

But a good equity story is more than just a good story, it answers strategically relevant questions from investors and can support you in these aspects: 

Capital procurement: A convincing equity story helps to attract investors and convince them to invest in your company.

Increase in valueIt shows the potential for future growth and the associated returns and thus contributes to your company receiving a higher valuation in a later financing round. 

Communication with stakeholdersVision and strategy of your company can be presented clearly and consistently to various stakeholders such as investors, employees and customers. be communicated.

Recruitment of talentYou need highly qualified professionals and want to attract talented employees who can identify with your company's vision and goals? Then the Equity Story is your friend!

Differentiation from the competitionIf the story is unique and convincing, it can help your company stand out from the competition and attract potential customers, investors and partners. 

Investors pay particular attention to this

Your team

For VCs your start-up team is a decisiveif not the decisive factor Factor in the valuation of a company and the decision for or against an investment. The following aspects in particular are of great importance when considering the team: 

  • Skills and experience: Teams should have technical and industry-specific knowledge.
  • Vision: A clear, convincing growth strategy is essential.
  • Cooperation: Strong team dynamics and conflict resolution are important.
  • Track Record: Previous successes strengthen the confidence of VCs.
  • Adaptability: Teams must be flexible and willing to learn.

the market situation

VCs are specifically looking for start-ups whose market situation in these areas is optimal:

  • Timing: Offering innovative solutions in growing markets at the right time.
  • Positioning: Stand out clearly from the competition and know your target group precisely.
  • Competitive advantage: Utilise unique advantages such as special technologies or strong networks.
  • Market potential: To be active in large, sustainably growing markets that enable long-term growth.

Business Model & Financials

VCs re-evaluate the business model and finances of a start-up:


  • Capital efficiency: Efficient use of resources and high ROI.
  • Unit Economics: Positive ratio of Customer Lifetime Value (CLV) to Customer Lifetime Cost (CLC) for profitable growth.
  • Churn: Low churn rate as a sign of strong customer loyalty.
  • Scalability: Disproportionately high growth potential with an increasing number of customers.
  • Financial planning: Clear strategy and sufficient funds for growth financing.

The product-market fit

VCs want to see that your startup has a solid customer base and that you are able to successfully address your target group. They are interested in the number of your Customersgrowth in the number of customers and customer satisfaction. Strong customer interest shows that the product fulfils a real need in the market. 

Another focus is on the Turnover of your start-up. It shows that you are able to generate revenue and be profitable in the long term. VCs want to see that your startup has a clear sales strategy and is capable of achieving its sales targets. With steady revenue growth, you are signalling that your company is successful and can expand its market share.


From the perspective of VCs is the ReturnabilityThe potential for a high return on their investment is a decisive factor in the valuation of a start-up. This is particularly important:

Return on investment
  • High growth potential (>10x): VCs are looking for start-ups that can increase their value and profits by a factor of ten or more in order to achieve high returns.
  • Exit prospects: VCs examine possible exit routes for start-ups to ensure that there are realistic opportunities for a sale or IPO.
  • Scalability: VCs pay attention to business models that become more efficient and valuable as the number of customers and market presence increase.

Do you still have questions or want to know what you can do to make your startup attractive to investors? Then contact us and let's work on your equity story together.