Australian venture capital funds use many of the same evaluation criteria as VCs worldwide, but they also pay attention to a few Australia-specific factors (market size, path to global scale, government support/grants and local research links). Below is a concise, practical breakdown of the main criteria, how they’re assessed, and common heuristics for different stages.

Core evaluation criteria

• Founders & team
  • Founder quality: domain expertise, founder-market fit, clarity of vision and coachability.
  • Team composition: complementary skills (product, tech, growth, ops), ability to hire locally or attract talent internationally.
  • Commitment and track record: prior exits or relevant operating experience.
• Market opportunity
  • Size (TAM/SAM/SOM): is the addressable market large enough to support a meaningful exit?
  • Growth and dynamics: is the market expanding or being re-shaped by new technology/regulation?
  • Local to global potential: can the business scale beyond Australia (most Australian VCs prefer or require a path to global markets)?
• Product & technology
  • Product-market fit evidence: customer feedback, repeat usage, retention.
  • Differentiation: defensible IP, proprietary data, network effects, cost advantage.
  • Technical risk: complexity of build, regulatory constraints, and ease of replication by competitors.
• Traction & metrics
  • Revenue (ARR/MRR), growth rate, cohort retention (churn), gross margins.
  • Unit economics: CAC, LTV, payback period, contribution margin.
  • Customer concentration and quality (enterprise logos vs many small users).
• Business model & go-to-market
  • Scalability of sales and distribution model.
  • Pricing strategy and margin profile.
  • Sales cycle length, channel partners, and land-and-expand potential.
• Financials & capital needs
  • Burn rate, runway, capital efficiency (how far the next raise will go).
  • Fundraising history and valuation expectations.
  • Exit potential and timeline (M&A or IPO prospects).
• Competitive landscape & moat
  • Direct and indirect competitors; barriers to entry.
  • Time-to-market advantage and defensibility.
• Legal, regulatory & compliance
  • Regulatory hurdles (healthcare, fintech, edtech), licensing needs, data/privacy requirements.
  • IP ownership and agreements with universities/partners where relevant.
• Governance & risk
  • Cap table health (founder dilution, investor rights), governance arrangements, key-person risk.
• References & diligence signals
  • Customer references, partner validation, investor references, advisor endorsements.
• ESG, impact & alignment
  • Some funds place weight on environmental, social or governance factors or on strategic national priorities (deep tech, advanced manufacturing, medtech).

Australia-specific considerations

• Government grants, tax incentives and research links: ties to CSIRO, universities, R&D tax incentives, or co-funding programs can de-risk early-stage deep-tech and medtech plays.
• Talent and hiring constraints: smaller local talent pools push VCs to evaluate founders’ ability to recruit globally or use remote teams.
• Exit market realities: fewer local corporate acquirers and smaller public market, so investors focus more on global exits or attractive M&A routes to overseas buyers.
• Currency, time zone and international expansion plan: practical assessments of how founders will enter larger markets (US/EU/APAC).

Stage-specific emphasis (common heuristics)

• Pre-seed / idea
  • Focus: founder team, vision, initial prototype and problem validation, addressable market.
  • Traction expectations: customer discovery, pilots, letter-of-intent or early users rather than revenue.
• Seed
  • Focus: product-market fit signals, early users or revenue, unit economics beginning to emerge, go-to-market plan.
  • Traction expectations: meaningful user growth, increasing retention, early revenue or paid pilots.
• Series A
  • Focus: repeatable, scalable go-to-market; strong unit economics; ARR/MRR and steady growth; capable leadership team.
  • Traction expectations: consistent revenue (commonly signals like ~$1M ARR are used as a heuristic in many markets), clear CAC/LTV story, good gross margins.
• Later stages
  • Focus: defensibility, sustained growth, predictable revenue, path to profitability or a clear acquisition/IPO route.

Common quantitative metrics VCs watch (examples, not absolute thresholds)

• Growth rate (MoM or YoY) — is growth accelerating?
• ARR/MRR — evidence of recurring revenue stability for SaaS/B2B.
• Churn/Retention — retention by cohort; net revenue retention for upsell-driven models.
• CAC vs LTV and payback period — sustainable customer economics.
• Burn multiple (dollars of net new ARR per $1 spent) — capital efficiency measure.

How VCs typically make decisions

• Staged diligence: initial screening (deck, 10–15 minute pitch) → data room review → reference checks → partner meeting → term sheet.
• Investment thesis fit: a startup that matches the fund’s thesis (sector, stage, ticket size) gets higher priority.
• Scoring & risk weighting: team, market and traction often carry most weight; technology/IP and legal issues can veto.

Practical checklist to present to Australian VCs

• Clear one-page executive summary and 10–15 slide deck.
• Founder bios and org chart.
• Problem, solution, TAM, competitors and differentiation.
• Traction metrics (users, revenue, growth, retention) and key unit economics.
• Go-to-market plan and hiring needs.
• Financial model, burn rate and runway.
• Cap table and terms summary.
• Customer references, pilot contracts or LOIs.
• Any grant or research agreements and ownership/IP documents.

If you’d like, I can:

• Turn this into a short investor-ready checklist tailored to pre-seed, seed or Series A; or
• Review a specific deck or metrics sheet and score it against these VC criteria.