What founders need to know about Venture capital funding process? Part 3
In this part, we will look into 3 questions: Have you proven product-market fit, What is your go-to-market strategy and Who's the team?
  1. Have you proven product-market fit?
Product-market fit is one of the terms that venture capitalists love! But what does it mean exactly?
For us at Hustle Fund, it means you have successfully built an MVP with customers who love your products. More specifically, you have gotten enough data to demonstrate that the market pull/demand for your product is more than you can satisfy and all you need is capital to serve more customers.
This can be demonstrated via a few different KPIs:
  • Strong organic pull: You only opened up the product for the first 1,000 customers but you have a waitlist of 5,000 customers waiting to be onboarded
  • Strong engagement: Your customers are using the app everyday and on average they spend 30 minutes in your app (compared to the average 3 hours an average consumer spends on their phone - meaning you occupy 17% of consumer’s headspace)
  • Strong competitive advantage: 20% of your customers comes from the largest competitor in the space
  1. What’s your go-to market strategy?
This is my favorite topic to ask founders, as I think most first-time entrepreneurs tend to overlook this important aspect of their business. More often than not, I’ll get a very generic answer to this question, such as “We’ll run Facebook ads”, or “We’ll pay influencers to talk about our products.”
I have written about this topic in depth on Hustle Fund’s blog, focusing on unit economics of marketing and sales.
For consumer apps in recent years, it has become increasingly challenging for startups to win consumer’s head space and engagements. 
With more companies bidding up the value of consumers on Google Ads and Facebook Ads, it’s crucial that startups have experimented on the small scale to understand how their ads are doing across multiple advertising channels and how to best direct their capital for marketing purposes. 
I always like to see that startups could demonstrate these testing efforts as well as a detailed plan on how to scale up.
For B2B business, I care most about the sales cycle. The questions I often ask are:
  • How long does it take to close a deal?
  • What’s the win-rate of your average sales person?
  • Do you have any competitive advantage edge in winning contracts? (e.g. previous working experience in F&B helps you close more cafe owners, an upcoming legal mandate that pushes your business forward like the e-invoice mandate, etc.)
At the end of our conversation, investors need to have a clear picture of what your customer LTV & CAC are (and how you’ve arrived at those numbers), what go-to-market strategy has worked well for you at the small scale, how much money will be directed towards marketing, and what the expected ROI% of your spend is (customer adds, revenue increase, etc.)
  1. Who’s the team?
Last but not least, investors will want to learn about the founding team. Some investment funds might have a reference for graduates from certain universities or founders with certain backgrounds (educated abroad, worked at big-named companies like Grab, Google, Facebook, etc.) Each investor will have their own biases about founders’ qualities that indicate most likely successes, based on their own backgrounds and experiences.
Since you cannot control these biases, all founders can do, especially if you don’t fit a certain mold, is to demonstrate your strength, ability to learn, and resilience. 
The easiest way to do this is through relevant past experiences. For example, it will be a big plus if you founded a healthcare tech startup (a relatively hard industry to break in) after working and healthcare sales for 5 years, have won major contracts, and can tap into existing networks. Essentially, you need to show that your past experiences and successes can be translated into your current startups. 
However, if you’re a first time founder, don’t be discouraged. There are ways to demonstrate your ability to succeed as a founder. Use specific examples to showcase how you’ve studied the market (surveys and talks with potential customers or even competitors), how you’ve been lean and scrappy in building your MVP and tested product-market fit, how you’ve persevered through tough times, etc.
Most importantly, if you have co-founders, investors will want to know how you met. Co-founder fallout is one of the most common causes for startups to fail. Therefore, investors will look more favorably on long-term relationships (friends, classmates, colleagues). If you don’t know your co-founders well and have not worked with them, the chance of fallout will be higher, making investors cautious if you do not know your co-founders for a period of time. 

Here is the 1st and 2nd part of this article:
Part 1:  http://startup.gov.vn/Pages/chi-tiet-tin-tuc.aspx?l=Tintucsukien&ItemID=300
Part 2: http://startup.gov.vn/Pages/chi-tiet-tin-tuc.aspx?l=Tintucsukien&ItemID=303
Tác giả: Phan Thị Hồng Vân