I typically review around 200 deals a year. I narrow that down to 20 that seem fundable. And I fund 2 of them. What separates a good idea from a fundable deal varies based on investor, but for me, the focus is not management team or patents or any of the typical criteria… For me the primary basis is TRL (Technology Readiness Level) and how it contributes to ROI (Return on Investment). For me, it isn’t so much where a technology is at but fast and how much money will it take to go from TRL 1 to TRL 8.
Company A comes to me at TRL 3 (typical) may be looking for $200,000. But that $200,000 may only get that company from TRL 3 to TRL 5. After that it will require more money to get tomTRL 7′and even more to get to TRL 8. By the time you are done you have invested $2 Million.
On the other hand, Company B might have an idea that is only at TRL 1 but can get all the way to TRL 6 or TRL 7 with only $200,000 or so. Even if it makes 50% of the total return it still MAKES more ROI.
At $20 million in sales, Company A made 10x the initial investment but did so in 3-5 years with 3 rounds of investment. Company B on the other hand made 100x the initial investment and did it in 2-3 years with only 1 round of investment. That is less risk, less dilution and 10x the normal 10x return. So, it pays to know your TRL!