Deal Evaluation Scorecard
As an early-stage founder, understanding investor evaluation is key. This involves assessing not just the strength of your team, but also your business's current progress and growth. The innovation in your technology or service, and your strategy for market penetration are equally critical. Finally, the investment terms themselves play a significant role. Grasping these aspects is essential for aligning your company with market and investor expectations. Remember, while this table provides a high-level framework, every investment opportunity is unique and requires a tailored approach.
Criteria | Weight | Key Evaluation Points |
Team | 30-50% | Experience and track record of founders; team dynamics and balance; market knowledge, funding, and exit strategy; coachability and commitment. |
Traction | 15-30% | Revenue growth and customer acquisition; sales process and CRM use; market strategy and churn rates; customer feedback and retention strategies. |
Technology | 10-25% | Level of innovation and problem-solving; product development stage and market fit; customer feedback on product/service; IP protection and competitive advantage. |
Total Addressable Market (TAM) | 10-20% | Realistic market sizing and target sectors; sales cycle understanding and market penetration; decision-maker identification and strategy alignment. |
Terms of the Deal | 15-25% | Investment type and pricing; fundraising amount and capital allocation; cap table details and investor rights; board representation and non-financial terms. |
High Level Thesis
In our deal evaluation criteria, we emphasize the importance of having a lead investor, preferably an institutional one, who has already established the terms for the investment round. This approach allows us to follow on these set terms. We seek opportunities with strong quarter-over-quarter growth, preferably a minimum of 25% growth averaged over the last year. Ideal opportunities have an Annual Recurring Revenue (ARR) between $100,000 and $500,000, a valuation under $8 million, and are seeking investment rounds not exceeding $1.5 million. High profitability is crucial, with a preference for businesses maintaining margins above 80%. Our industry focus is broad, but we have a geographical preference for companies based in the USA.