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VC by DC: What Startup Founders Need to Know About the VC Business Model
- At the core of the VC ecosystem is the venture capital fund, typically structured as a limited partnership comprising: General Partners (GPs), and Limited Partners (LPs).
- VCs are in the business of seeking high returns on their investments due to many startups fail or yield modest returns, so VCs rely on a few successful investments to offset losses.
- VCs look for startups capable of rapid scaling in large markets investment thesis match what they invest in industries, technologies, and stages.
- Every VC fund has an investment thesis based on industry focus, stage preference, and geographic focus that target approach to pitching to VCs whose investment thesis matches your business increases the likelihood of securing funding.
- Aligned VCs can offer more relevant guidance, resources, and networks, and efficient fundraising, Access to industry-specific advice and resources, and shared vision and goals facilitate smoother collaboration.
- VCs conduct rigorous due diligence, focusing on market opportunity, product-market fit, and competitive advantage.
- Beyond skill and strategies, evidence of an entrepreneurial mindset is crucial: Resilience and Adaptability, Innovative Thinking, and Risk Embracement that investors are more likely to support founders who demonstrate the mindset needed to achieve exponential growth.
- VCs are focused on how and when they will realize returns via common exits and aligning exit expectations by discussing possible exit strategies that are realistic for your industry.
- Aligned VCs offer more than capital, relevant connections, credibility boosts association with reputable investors enhances your company’s reputation, and strategic partnerships opportunities for collaborations facilitated by the VC.
- Securing VC funding is not just about the capital — it’s about forging a partnership with investors who understand and believe in your vision by recognizing the pressures and expectations VCs face, targeting investors who are a natural fit for your industry or stage, demonstrating resilience, adaptability, and innovative thinking, and viewing VCs as long-term partners, not just financiers.
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