Early-stage venture capital is the best (with the exception of being able to combine high profits with high growth or having a large personal fortune) way to finance ambitious technology startups. Founders can, when the company is young and unproven, raise significant amounts of capital (€1+ million) at good valuations (about 20 % ownership dilution) with limited personal liability if things don’t work out. That combination is normally not available from other financing sources.
The drawback is that venture capital funds expect startups to try to become very large in a short period of time, which brings some risks compared to slower growth. What very large is exactly can be discussed, but the lower level is somewhere around €100 million in annual sales within 10 years while still growing at least 30 % per year.
This is only one of the aspects of venture capital that founders should try and understand, as other financing venues might be better.
Julia Delin of SSE Ventures is interviewed by Tech Hustler podcast and talks about what venture capitalists are looking for. Each firm will look for something slightly different, but for anyone trying to get an initial understanding of venture capitalists it is a very good listen.
Related to what venture investors look for generally is how it is specifically described in term sheets containing an offer to invest. Pale Blue Dot has shared their term sheet with an explanation of and reason for the terms. Good read and I think it captures a lot around terms.