Startup Finance, Part 2: What VCs Look For - Team, Market, Business Model, Traction - the Raise Process, Stage Expectations, and How Much to Raise

VCs over-index on team: 0-to-1 experience, 1-to-10 or 1-to-100 scale experience, tech and commercial capability, hiring and launch network; at later stages the second layer of leaders matters more. Problem-founder fit ('sometimes more than founder-market fit') and learning rate count. Red flag: a single founder - fintech needs banking experience, D2C needs brand and marketing, tech needs a CTO.

TAM = everyone who could buy (all athleisure buyers in India); SAM = addressable at your price and channels (mass premium, tier 2/3); SOM = what you can sustainably obtain, net of competitors. VCs want a USD 1 bn-plus opportunity; segment initial and future users (working professionals 20-35, later teens and parents); unexpected organic segments signal expansion, usually Series B on. Rising LTV:CAC or ROAS shows a flywheel. B2B: bigger cheques, long cycles; B2C: many customers, low price; B2G: 9-12 months to sell plus 3 to get paid - no hockey stick. Avoid models where user and payer differ (child vs parent) - CAC paid twice. Zero competition means creating a market; heavy competition risks a price war with better-funded rivals; defensibility = 10x product, GTM, pricing. PMF = organic pull, not pushed credit. Metrics: SaaS - ACV, logo retention, dollar retention; B2C - CAC, actives, repeat frequency. Burn to grow, not to sustain; vision must reach USD 100-200 m revenue for a USD 1 bn company.

Map VCs by stage, risk appetite, portfolio, thesis; warm intros beat cold email. Flow: pitch -> conversations -> investment committee -> term sheet -> diligence (legal, financial, tech, commercial) -> shareholders' agreement -> funded; 2-6 months total, 2-3 months from IC to money. Stages: friends/family/angels (belief, pre-product); micro VC / pre-seed (MVP); seed USD 2-3 m (product plus market validation); Series A (PMF, pull sales, ~USD 4-5 m ARR); Series B (new products, geographies); Series C (category leader). Family offices and corporate VCs too. Prepare a data room (MIS, projections, GTM, references, customer data); work curated lists of 10 VCs with a close deadline (avoid a 9-12 month raise); VCs see ~6,000 companies and fund ~10; keep investors warm with newsletters; expect 8-9 reference checks. Amount: back from milestones - USD 2 m now; USD 6 m in 18 months at 20% dilution implies a USD 30 m valuation vs ~10 m today (2-3x step-up); hold 6-8 months of buffer because money lands 2-3 months after the term sheet.