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Key Factors Considered by VC’s & PC’s Before Investing 1. Financial Performance & Potential • VCs: Focus on high-growth potential rather than immediate profitability. They look for businesses with scalable revenue models and a large addressable market. • PE Firms: Prefer companies with stable revenues, strong cash flow, and proven profitability. They often invest in mature businesses with a history of financial success. 2. Market Opportunity • The market size should be large enough to support significant growth. • VCs look for disruptive business models with high scalability. • PE firms assess industry stability and long-term sustainability. 3. Management Team • Strong leadership is crucial for execution and growth. • Investors evaluate founders’ experience, track record, and adaptability. • A capable and committed team increases investment confidence. 4. Product Differentiation & Competitive Advantage • VCs: Seek unique, innovative products with a competitive edge (e.g., proprietary technology, strong brand positioning, or first-mover advantage). • PE Firms: Look for businesses with established market positions and strong competitive moats (e.g., high customer loyalty or economies of scale). 5. Business Model & Unit Economics • Investors analyze how the company generates revenue, cost structure, and profitability potential. • Key metrics include customer acquisition cost (CAC), lifetime value (LTV), and gross margins. 6. Risk Factors • Market risks (competition, customer demand, regulatory changes). • Operational risks (scalability, supply chain issues). • Financial risks (high burn rate, debt obligations). • PE firms often conduct deeper risk assessments since they invest larger amounts in established businesses. 7. Exit Strategy • Investors need a clear path to exit and generate returns. • Common exit options include IPOs, acquisitions, or secondary sales to other investors. • VCs typically expect exits within 5-10 years, while PE firms often look for longer-term value creation (5-7+ years).