1. Key Milestones, Metrics and Criteria for Venture Capital Investors

2. At every stage . . .
Risks goes down
Valuation goes up

3. STAGE
MILESTONE 1
Idea
We believe someone will build this product 2
Prototype
We can show you key features 3
Product
We have data from customers who have used our Minimum Viable Product and given us feedback 4
Customer Trials
We have usage metrics from customers who are using our product in production 5
Proven Product Market Fit
B2B: We have 10+ paying, referenceable customers
Consumer Paid: We have 100+ paying, referenceable customers
Consumer Free: We have 100,000+ Monthly Active Users (MAU)
"Ideally you want to make large numbers of users love you, but you can't expect to hit that right away. Initially you have to choose between satisfying all the needs of a subset of potential users, or satisfying a subset of the needs of all potential users. Take the first. It's easier to expand userwise than satisfactionwise." - Paul Graham

4. STAGE
MILESTONE 6
Proven Go To Market Model
Customer Acquisition Costs (CAC) / Gross Profit Payback < 2 Years
75%+ of salespeople are achieving quota 7
Proven Customer Success
Net Renewal Rate > 100% 8
Proven Scalability
Gross Margin > 75% 9
Proven Capital Efficiency
(Annual Gross Profit x 100)/(Capital Spent) > 100 10
Proven Market Demand
Annual Recurring Revenue (ARR) > $5 million

5. OTHER CRITERIA
MILESTONE 11
Proven Traction
Annual Recurring Revenue (ARR) Growth > 100% 12
Proven Leadership Team
All key roles in place for 12 months and successful; leadership team has proven execution expertise 13
Proven Market Size
5th Year Potential: (1) SaaS: # Customers x ARR/Customer; (2) Marketplaces: # buyers x # Transactions/buyer/year x revenue/transaction x gross margin %; target = $100 million in annual revenue (IPO potential) 14
Proven Customer, Partner & Supplier Diversification
No customer, partner or supplier accounts for more than 1% of revenue 15
Product Risk or Market Risk?
Product Risk example: Skybox Imaging. We know low cost satellites are very valuable. Question: can we build them?
Market Risk example: Pinterest. We know we can build an attractive website. Question: will millions of people use it every day?

6. OTHER CRITERIA
MILESTONE 16
Proven Timing
Why now? Example: Uber started soon after smartphones were widely used by passengers and drivers 17
Proven Founder-Product fit
How well do the founders understand the customer? Low risk: Founders are building a product for themselves. Examples: Facebook, Salesforce, Twilio. 18
Proven Technical Advantage
Company has unique technical expertise or insights. Examples: Google, Palantir. 19
Proven Competitive Advantage
Company has unique economic model or advantage. Examples: Amazon (low costs); Zenefits (free software, paid by health insurance commissions); Blue Apron (low costs through economies of scale) 20
Proven Network Effects
Value for each customer and supplier increases as more customers and suppliers join. Examples: AirBNB, Shutterstock.

7. Venture stages, by risk . . . Seed Series A Series B Series C, D, E, F
Startup to Product-Market Fit
Raise $100k - $2 million
Series A
Prove revenue model
Raise $2 – 8 million
Series B
Expand revenue
Raise $5 – 15 million
Series C, D, E, F
Grow to $100 million in revenue (more if gross margin is below 70%)
Raise $15 – 30+ million
Sale or Initial Public Offering (IPO)
Raise $75 million +

8. Venture investors specialize . . .
By risk stage
By market sector
By geography

9. The best way to reach venture investors
Recommendation from one of their portfolio company CEOs
To investor who specializes in your stage, sector and geography

10. Resources re: Startup Legal Documents
Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist 
by Brad Feld and Jason Mendelson
Startup Legal Documents, from Y Combinator