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VC's expectations for startup timelines?

What kind of timelines do VCs expect a startup to bring in money? I'm in the semiconductor space and the way chip design works is that it takes ~5 years before the first chip is available to customers, for a high-end chip.

It seems the (admittedly few) VCs I've talked to about are looking at a max ~3 years before revenue. Is that usually the case? My background is in ASIC engineering consulting, although I've helped startups hit their goals and some of my chips have made billions.

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Best Answer

VCs are just money managers. Think in their shoes. Their funds have 3 years cycles. If you catch them in one early fund cycle, then they have 3 years to spin you off to the "next round". Either your story is very good that can get someone to buy this current VC folks off, in that case you don't need revenue. Or you show revenue and enhance your story. In anycase, revenue or no revenue, it is the story and the validation that matters. But VC just work for someone rich - they are not rich themselves.

Never "get VC money and do stuff". Always "do stuff and then get VC money".

Other points

Many VC’s will say 3 years to revenue, but the reality is not a single one will touch you unless you have multiple $50mm exits or have revenue that is increasing rapidly. SAAS ate the world and now VCs have ridiculous expectations that if you aren’t producing revenue now even has a hardware company you aren’t VC investable.

Investor here. This is wrong. There are VCs who specialize in hardware and they are used to waiting years before they see any revenue. They need to see an alternative list of milestones and know that you are hitting them. OP should check out which firms funded other semiconductor startups and start by reaching out to them. Having angels with experience in semiconductors will also help a ton.

As for previous exits — it certainly helps but if you have a strong relevant academic background and an appropriate advisory team you should be OK.

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May 18, 2020 at 5:29:26 PM

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