Quality of customers and/or partners

Has the company signed any impressive customers and/or partners?

One thing that often get a company quickly past the screening phase of due diligence is the ability to list an impressive customer or two, or to have inked a deal with a strategically valuable partner. The venture capitalists at Oak Investment Partners state that they look for "distinctive relationships that have been formed with customers or partners that give (them) good visibility into the near future." The ability to close important deals in indicative of the ability to succeed, especially in the early stages, where one key deal can make or break a company. Closing such deals also demonstrates momentum. Companies that can sign one important deal usually have a much easier time signing the next, and the next, just as a snowball builds mass quickly once its starts rolling. Therefore, venture capitalists tend to be strongly drawn to companies that can demonstrate they are just beginning to roll.

It is certainly most impressive when such deals have been finalized, but venture capitalists also are interested in those for which companies have only received letters of intent. LOIs are usually non binding, but they lay the foundation for final deals by spelling out their principal terms. They are often an important and necessary intermediate step toward finalizing deals, and companies that obtain them offer strong evidence that the other party is seriously interested in striking a deal.