Mark Suster is one of those unique venture capitalists in that he has experience as an entrepreneur prior to joining the VC world (or the “dark side” as he calls it). Twice, in fact. That’s why he calls his blog “Both Sides of the Table,” because he has literally sat at both sides of the negotiating table. It’s this experience as both an entrepreneur and a VC that provides him a fresh perspective on startups and the investment market, so what does Suster think are the most important factors to securing investment? Apparently, it comes down to four M’s.
The first M Suster suggests is “momentum,” which is almost synonymous with “traction.” Investors want to see early growth – either in terms of users, deals or any number of metrics – that will likely continue or accelerate after an investment. This is why developing an early relationship with an investor is key, so they can see your growth over time, and not be forced to make a decision based on a snapshot in time.
“Almost all VCs care about investing in big markets with ambitious teams. So NEVER talk about early exits, quick flips, tuck-in acquisitions, previous interest shown by acquirers, etc., during your meeting.”
– Mark Suster
“If you want to raise money from VCs you should see them early,” he says. “If I see your alpha product then I can judge how it develops over time. If you have 2 developers and the next time I see you it’s a team of 6 with a new head of products I can see momentum.”
Second comes “management,” which Suster says accounts for 70% of his decision to invest (just 30% goes to the actual product or idea). He suggests that entrepreneurs place their biographical information early in their pitch so that investors may be “leaning forward for the rest of the presentation.”
The third M? Market size.
“Whether you’re talking with micro VCs, seed stage investors or series A,B investors they all want to believe that your company CAN be big one day,” he says. “Almost all VCs care about investing in big markets with ambitious teams. So NEVER talk about early exits, quick flips, tuck-in acquisitions, previous interest shown by acquirers, etc., during your meeting.”
And finally, the last M that Suster believes is critical to attracting investors is “money,” which he says is “often misunderstood.” In the end, money is the most important thing to investors. Most, he says, want to own a significant chunk of your company, but may be willing to go smaller with other investors. It’s best, he adds, to be open and honest about how much ownership an investor is looking to achieve.
Are any other M’s missing from Suster’s summation? Or are other things more important that don’t start with M? Let us know how you feel about attracting investors and what they look for in startups by leaving a comment below!
