Why VCs don’t invest in ‘good’ companies

Every VC says they are looking for great founders that are solving real problems in big markets. So why is it that so many “good” companies that seemingly meet these requirements still fail to raise money from VCs?

Sourced through Scoop.it from: venturebeat.com

Every VC says they are looking for great founders that are solving real problems in big markets. So why is it that so many “good” companies that seemingly meet these requirements still fail to raise money from VCs?  Venture capital is a hits driven business, with ~4.5 percent of dollars invested generating ~60 percent of total returns. This is why the VC model is built on the expectation that most returns will come from companies that pay 10X+ on investment, and on the expectation that many investments will lose money.  Most founders already know this. But what is less obvious to many is that companies that achieve moderate success are not much better from the VC point of view than those that go bankrupt.  This is why any signals that your startup has limits to its upside potential is a reason to say no to investing in you. With that in mind, here are the top reasons why VCs don’t want to invest in your “good“ startup.  

Top 6 reasons to say no
1. Weak barriers to entry

2. Lack of meaningful differentiation 

3. Unsustainable unit economics 

4. Niche markets without explosive growth

5. Bad cap table

6. Founder bait and switch

See on Scoop.itInternet of Things – Company and Research Focus

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