The Evaluation Criteria Used by Venture Capitalists

Abstract

Venture capital investments are very common sources of funding today. The rise of many well-known companies attributes to the bet from venture capitalists. There are successful investment examples and unsuccessful ones as well. This paper explores four venture capitalists’ criteria on their investments based on the common theories of different literature review and analyzes them by exemplifications of real cases from Mobileye, Genentech, Cerent, Alibaba, Meitu, JD.com, and Ele.me. All of the cases chosen happened in the last 25 years from different countries in the world. After analyzing these cases, four general evaluation criteria used by venture capitalists are reached: technology, attractiveness of the market, customer adoption, and product or service. Technology and market attractiveness often determine the potential of a product. Customer adoption and product or service can prove whether the company has a clear judgement on its potential customer. Providing examples and data, the paper discovers that venture capitalists often use these four criteria to determine whether a company worth investing or not.