7 Things Venture Capitalists Look for When Analyzing European Startups

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The European market is an economic giant that you cannot overlook. Yet, it took a while to finally get on the capitalism train making big economies even bigger. Finally, Europeans caught on to the capitalism bug. Entrepreneurs and founders have come up with great ideas and life-changing innovations. Yet, launching that big idea can be expensive. Moreso, bootstrapping cannot fund some capital-intensive projects. For some of these ideas to be productive, founders need enough capital. This is why entrepreneurs need money from venture capitalists (VC).

Venture capitalists are looking to invest their capital into great businesses. Entrepreneurs need to prove that they understand the uniqueness of the European market. So here are the seven key things a venture capitalist will look for in a European business startup.

#1 Big Ideas

One of the reasons why a venture capitalist will be interested in investing in any business is the uniqueness of the idea behind the company.

  • Is the idea big enough to be relevant across European countries?
  • How different is it from competitors across the continent?
  • How far can it go in terms of reach? Is the idea just for the country? Or can the market be spread to other European countries as well?

Those are some of the questions a venture capitalist is interested in knowing.

The venture capitalist has an overwhelming impact on the growth of startups on the continent. And every VC has the ambition to profit from a startup with significant fascinating and achievable ideas.

In recent times, venture capitalists have been responsible for increasing soaring startups. And that’s because VCs do not only offer money; they help businesses attain their goals by providing advice and guiding them to utilize their full potential. In other words, money is not only at stake for VCs; their time and energy are involved. As such, the idea must be significant, unique, broad, and inclusive enough for the venture capitalist to be part of it.

#2 Market

The market is significant to the venture capitalist. The European market itself is very dynamic because of its unique cultural heritage. So what a venture capitalist considers is the target market;

  • How large is the target market?
  • Is the market across Europe? Or just in the country?
  • What group of people is the target market?
  • What are their needs?
  • What are their expectations?
  • How does the big idea completely solve their problem?

Those are some of the questions a venture capitalist wants to know. They also want to understand whether the entrepreneur has an in-depth understanding of the European market. And if an entrepreneur knows his competitors or target customers.

Relevant statistics and updated data are proof of the founder’s understanding of the market. It also proves that the entrepreneur can make a genuine value offer that beats the competition. A venture capitalist will love to see proof of market comprehension.

#3 Passion for the Business

Passion is an essential element of successful business growth. Europeans are passionate, but most people are often wary of venture capitalists. Some people believe that venture capitalists want to take over their businesses. Unfortunately, VCs are not interested in people who cannot take risks with their companies. They are looking for passionate people as well as open-minded people who have very positive energy. The venture capitalist is putting down his fund not only for some immediate gains. He is thinking about how to benefit from the continuous success and growth of the business. That’s why venture capitalists do not only look for the big idea. They also look out for a founder whose passion is beyond making money. They look for enthusiastic attitudes, positive approaches, and robust strategies that show that the CEO is out there to make a name or a change. This passion is key to the sustainability of the business.

#4 Business Plan

Without a well-defined and articulated business plan, there is no proof that the founder knows what he is doing. Without a business plan, there is no proof an entrepreneur knows why he is doing what he is doing. A venture capitalist is not looking for any business plan. He is looking for one that is meticulously drafted to include;

  • Mission and objectives
  • An understanding of the European market.
  • A realistic milestone of growth and achievement
  • Strategies for marketing your products or services
  • Fund management strategies
  • Organization’s team

Without a great-looking business plan that fully represents the continent, a venture capitalist cannot be convinced that you know what you are doing.

#5 Financial Projections

An entrepreneur’s financial presentation shows how prudent he is with funds. It also defines his attitude towards building wealth. This would show in the ratio of capital to revenue. It also shows his ability to put funds to use to the business’s highest advantage. Venture capitalists are conscious of investing with a financially responsible entrepreneur. The interest of the VC is in an entrepreneur who wants to exploit and take advantage of the EU market. Venture capitalists are always looking forward to being blown away. So, entrepreneurs with a clear and comprehensive financial projection for their local environment and the EU market stand the best chance. Such a projection must present an understanding of the European business and legal environment. Financial forecasts should also include the allocation of funds—most of all, revenue generation.

To stand a chance with a venture capitalist, you must present an achievable and mind-blowing profit to the VC.

#6 Societal and Legal Compliance

For the European market, venture capitalists are looking for starters who fully understand their environment and are willing to comply with all the laws and regulations regarding the business startup. And with the clamor for going green now widespread in Europe, investors would instead channel their funds to eco-friendly innovations. Also, no investor would put their money in a company that does not understand European business law. And since ignorance is no excuse, an entrepreneur should get a lawyer’s help interpreting environmental and business law.

#7 Management Team

The venture capitalist seeks credibility, experience, passion, and good antecedents. However, the most important on the list is the team’s composition. A team composed of people from across the continent has a positive outlook for the VC. The VC is looking to help the entrepreneur spread his business across the continent for mutual benefit. The venture capitalist will be willing to invest his funds in the business of great team players. A team of intelligent, committed, resilient people from different parts of the continent stand the best chance.

Conclusion

When analyzing European startups, a venture capitalist will take his time to ask all the questions. He needs to do a thorough investigation before making his decision. Venture capitalists take a calculated risk. So, don’t expect them to take a half-baked idea. So, it would help if you had more than a big idea or a great-looking business plan. You need to have an in-depth knowledge of the European environment and market. Most of all, you must have achievable milestone growth.

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