What do Venture Capital Funds pay attention to when analyzing an MVP?

    We share our experience from collaborating with leading Venture Capital funds operating in Poland, Western Europe, and the USA.

    For clarity – what do we consider as an MVP?

    MVP, an acronym for "minimum viable product," in practice refers to a solution that, in its minimal yet fundamental form, fulfills specific business premises of a given venture. The MVP approach means that before we launch the final version of a product, application, or service, we release its "basic" version with fundamental utility. This allows us to learn how the market reacts to it and whether it can attract customers.

    However, developing an MVP is not enough to secure Venture Capital financing, especially from professional funds that analyze investments multidimensionally, assessing various risks.

    The most common aspects they focus on are:

    • The Team
    • The Product (i.e., the MVP)
    • The Market

    The fundamental issue always being the absolute priority for VC Funds is the quality of the Team that developed the MVP. When scoring a team, they analyze:

    Leadership – the quality of leadership and soft skills in the team, which are absolutely essential for achieving success in the business. This criterion is increasingly being subjected to detailed analysis - for example, during assessment meetings, background checks, and even psychometric tests. This is because many great concepts fail, not because the MVP was weak, but due to a lack of proper communication, motivation, and teamwork skills among the organization's leaders.

    The team's experience in conducting similar ventures and projects. The greater this experience, the better, of course. It is worth remembering that fund partners ask not only about previous successes but also about the lessons learned from projects that did not succeed. This is especially important for funds from Western Europe and the USA, which value people who openly discuss what they have learned from their failures and can credibly show that this learning converts into successes.

    The team's completeness understood as the complementarity of competencies among its members. Teams where members complement each other in terms of skills, experience, and character traits are preferred. This includes combining technical, business, marketing, operational, and soft skills. Diversity within the team is increasingly highly rated and, in some cases, even desired.

    There are definitely more criteria that are examined, but in our opinion, these are the most frequently analyzed. It's worth mentioning an obvious fact that the vast majority of funds give a hard no-go for teams with members who do not pass basic KYC: various ambiguities and problems related to law, taxes, unsettled liabilities, etc.

    So, what do VC Funds pay special attention to when analyzing an MVP?

    How does the product meet the MVP premises? Is it really an MVP?

    Funds mainly examine whether the defined problem for a specific target group is being solved and, if so, to what extent? They analyze whether the solution is attractive to customers and whether they have responded positively to the presented MVP. They also check what customers are missing, what their price elasticity is for the given solution?

    At this stage, funds may give a no-go if they conclude that the solution does not meet the premises, is too expensive in relation to the scale of the problem being solved, or is fundamentally unattractive to customers (customer feedback is negative). The practice of mystery shopping by funds is becoming more common and complements the analysis of data and KPIs collected during MVP tests (e.g., user engagement rates, growth pace, CAC, market reactions, and feedback from key users).

    Is this actually a unique, minimal product, or is it a so-called feature?

    Investors are naturally reluctant to approach business concepts that essentially boil down to one unique functionality, which does not constitute a sellable product, or can be quickly (and easily) introduced by competitors already offering similar solutions in the market.

    What is the technical quality of the executed MVP? Is it scalable?

    Investors assess whether the technology or solutions underlying the MVP are future-proof, well-thought-out, do not pose a risk to customers, and can be scaled as the company grows. The technology's operational speed is also evaluated. The quality and completeness of documentation are checked to see if the specified solutions constitute a competitive advantage or rather a risk. VC funds are increasingly hiring external specialists to verify this area. This is known as a technical/software due diligence examination.

    Does the solution have the potential for monetization and making money? What value is created by the MVP?

    The times when VC funds offered substantial resources for the development of MVPs without looking at how and when the business will make money are ending. The MVP should show that money can be made on the given solution - specifically, generate positive cash flow. Funds analyze what scale of sales is necessary to "break even" - generating a positive result, especially at the operational level. In the context of the volatile market and high interest rates we

    currently have – showing credible and not too distant time frames in which the concept starts to show profitability is increasingly desired.

    What is the further development plan for the product? Does the team have a roadmap for the next functionalities?

    Investors want to understand how the team plans to develop the product after the initial MVP phase, including potential product expansions, new features, and how these translate into planned business revenues.

    In summary, VC funds evaluate MVPs multidimensionally in terms of their market potential, completeness, technical execution, business model, data, and test results. However, as always, the team responsible for developing the product is of the greatest significance.

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