How do venture funds assess that proof of concept phase is over and the company now needs funding to grow?

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JASON LEMKIN

I think there may be a bit of misunderstanding / fallacy here.

Most VCs, even if they invest very early, don’t really invest capital to “help you grow”.
Not really.

They invest capital to help you continue to grow.  To fuel an engine.  At least, a nascent one.

It can be a very subtle distinction in the early days.  But 95% of VCs are looking for either traction, or pre-traction, or signs of traction, or hints of traction, or tea leaves that suggest traction.  Unless it’s truly a team bet, or a very early seed bet.

So really, the $$$ are to make sure that very, very nascent growth continues to grow at an outsized rate.

But if you aren’t really growing, VCs don’t want to put $$$ in to help you jump start growth.  Not most of them.

They want to put $$$ in to fuel a fire that’s already burning.  Even if it’s just a tiny fire at the moment.

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Published on December 10, 2015
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