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Tip tidbits: what are VCs looking for?

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In an industry so obsessed with equity it’s no secret that VCs are anything but equitable with their time. They get to engage with dozens of entrepreneurs each week, soaking up new ideas while on the other side of the fence an entrepreneur might have a meeting with a dozen VCs all year.

At Seedcamp one of the functions we serve is as a bridge – when we connect stellar founders with top-notch advisors and investors, all three groups benefit. But we can also be beneficial as a bullhorn, broadcasting out to prospective entrepreneurs some of the thoughts of those we know that usually only make it as far as a dinner conversation. Better-prepared budding business brains are more likely to make a connection, and the VCs with whom they meet will see higher-quality opportunities. So we’ll attempt to, if not even the exposure, at least reduce the asymmetry.

We asked two questions to our network of VC bigwigs:

  1. Where do you see the biggest gap between the supply of new startups vs. the demand thereof, and in what direction is it imbalanced (too much supply or not enough)?
  2. What’s the one thing you wish the start-ups coming into your office came prepared with that they typically don’t?

For those of you hell-bent on venture funding, you could read these as “what can I work on to get in their office?” and “what can I do to stay there?”, but keep in mind these questions are only a small part of the larger investment-worthiness puzzle.

So without further ado, here are some of the responses we received.

#1 – Where do you see the biggest gap between the supply of new startups vs. the demand thereof, and in what direction is it imbalanced (too much supply or not enough)?

  • “Alternative search engines sector, which has too much supply. Sectors generating the cool activity: Semantic search, SaaS/PaaS, Social networking”
  • “I see the biggest gap in the cleantech sector. There are plenty of cleantech funds based in Europe and a strong investment appetite but, relative to other investment sectors, few deals. Several European funds spend a lot of time on planes, looking for deals all over the world. It would great to see more investment going to European cleantech
    entrepreneurs.”
  • “Supply too heavy in the area of mobile advertising – a million and one mobile advertising start-ups. Areas in the UK which are very interesting at present include software as a service; and virtual worlds, where we are looking hard for innovative business with large potential markets (and have yet to find the right ones).”
  • “Too many average Internet content companies”
  • “I’d like to see more startups leveraging networks and communities to revolutionise large existing markets – e.g. trade media, food, creative industries – kind of like eBay did for small retail”
  • “I’d like to see more southern and eastern Europe, more hard computer science talent instead of MBAs, and serious focus on hard tech in semantic web.”

#2 – What’s the one thing you wish the start-ups coming into your office came prepared with that they typically don’t?

  • “In my part of the world, a viable business model.”
  • “An acknowledgement that the start up probably faces serious competition which is often tough, well established and determined to crush opposition.”
  • “A really clear and well substantiated view on the market opportunity (in a macro sense and in terms of the opportunity for the business themselves).”
  • “I find that many entrepreneurs don’t realize that VCs are judging them as much, or more on how they answer a question, than what the answer is. Little gestures and signs can justifiably leave big impressions regarding the entrepreneur’s attitude, management style and level of confidence.”
  • “I would love it if startups had a better understanding of why VCs need to aim high, and what it actually takes to deliver on that sort of objective. Too many startups think their opportunity is much bigger than it really is.”
  • “A really tight pitch they can deliver in 30 minutes and prepped answers to the most obvious questions from VCs.”

So there you have it – a healthy diversity of opinion but without much overlap or disagreement. We hope these points help you to refine your plan, whether it includes applying to Seedcamp or not.

Special thanks to our VC respondents!

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