These 5 things founders should definitely pay attention to, say American investors

As co-founders of the venture capital firm CIV, Jeff Rosenthal and Abhijoy Mitra have overseen the development of various technology companies. " There aren't 100 founders and companies to bet on every year ," Rosenthal said in an interview with Business Insider. "There are a dozen." CIV has invested in companies such as The Nuclear Company and Verse.

For most venture capitalists, the goal of investing in a company is to see it through to IPO and generate long-term returns. However, as exit opportunities become increasingly rare, VCs today have higher standards for assessing which companies will survive in the long run.

These are the five tips that investors have for founders who are just starting their business .

Mitra, who began his career investing in the technology sector, says that companies in the industrial sector often fail because they don't transition from equity to non-equity financing quickly enough. "You don't have an infinite amount of venture capital," says Mitra. "You have to be very efficient with the money you raise and really focus on developing a viable product within a clearly defined timeframe."

He says it's crucial to develop real solutions and not rely too heavily on equity financing. Founders who build their companies with customers in mind are likely to be more successful than those who build for investors, Mitra says. "You probably need half a billion in revenue and maybe profitability to actually go public," Mitra said. "So as venture capitalists, we're constantly thinking about that."

Rosenthal says he often sees highly talented people "choose a market that's too small." Or, Rosenthal says, their "angle of attack" on that market doesn't reach the scale needed to turn it into a large company. Essentially, scale and impact are "mutually binding," Rosenthal says.

"The game we're all trying to play is how to make a real difference in this world," the serial entrepreneur told BI. "That means taking the world where it is, not where you want it to be."

Mitra says he's often seen companies develop a perfect product for a market that isn't quite ready for it. The founders and the products may be fantastic, but the target market must have real value for them. "You actually have to build something that's bold and transformative for a large end market," Mitra says, adding that this often means building several billion dollars in market capitalization.

Rosenthal says that "the risk of a split between partners " is one of the biggest concerns institutional investors have with companies. He pays close attention to the co-founders and their interactions. "How well do you know each other? How close are you friends?" says Rosenthal.

Rosenthal, who partnered with his best friend and colleague to form CIV, says they "wrote like pen pals" to make sure they were on the same page before partnering. He says they asked each other questions about how they envisioned their company culture or what time they wanted to start and end their day. Rosenthal also suggests talking to former coworkers and friends of the potential partner to understand how the other person works. "It's worth taking that extra step," Rosenthal says. "And you don't have to do it secretly."

Rosenthal says that hiring the right talent is crucial when starting a business. If you can recruit the best talent, you have a comparative advantage that is measurable, he says.

When you hire strong talent, "they replicate themselves," says Rosenthal. This doesn't always mean the company lands in the right place, but it can point the way.

“I am constantly reminded that the success or failure of these companies often begins with the first four to six employees,” Rosenthal told BI.

Rosenthal says that many founders have a thesis but ultimately react to what happens along the way. "Building the plane while flying it—that's the approach," says Rosenthal. "We hate that approach."

Rosenthal says he thought the same way when he was 23. At 40, however, he wants to measure 20 times and cut only once. While many people may have a good idea, founders must also be able to implement that vision, says Rosenthal. "I think it's important to have a truly sustainable strategy, not just a thesis."

Mitra says that even when things are going well, companies inevitably experience downturns, whether due to geopolitical issues or other challenges. Sometimes, he says, you have to "miss the hype and ride something out" because it's not in the spotlight.