Traditionally, Venture Capital firms would look at more established companies that are looking to scale in some way, whether through market share or for example with movement to IPO. Such companies would have a significant track record and strong revenues, but perhaps without profitability yet.
The Venture Capital firm would be wanting to see strong potential for growth and that their investment would be used to achieve this growth.
Generally a VC firm looks to invest in 10-15 ventures and expects 30% of those to succeed and provide the profit base. VC firms look for a solid exit strategy for their investment and a 5-10 times return on investment.
Increasingly VC firms are looking at earlier stage investments that fit more into the Seed or Angel categories. However, the majority would not be looking for heavy involvement in the running of the business, but would nevertheless be looking to have a say in decision making (for example a position on the board).
When dealing with VC firms, it is worthwhile researching “term sheets” and having some idea of what your proposed terms are, including how many capital raises you expect to make. VC Capital raisings are divided into Series A, B etc, with some ventures even delineating further.
In general, VC firms will expect a polished presentation, including a well-developed business plan, cash flow forecasts, and investor decks. VC firms get presented with numerous offers on a regular basis and without a strong presentation you’ll stand out, but in the wrong way. VC firms tend to have little patience, and you should be prepared to hit your points home and to answer probing questions. In particular, VC firms tend to focus on the team, and want to see a driven team with a strong skill set.