VCs evaluate a startup’s business model by assessing its scalability, recurring revenue potential, and how efficiently it can acquire and retain customers (measured by metrics like CAC, LTV, churn). They look for clear monetization strategies, strong unit economics, and whether the model can support rapid growth with healthy gross margins. Additionally, they consider how well the business model addresses a critical market need, its defensibility (e.g., IP, network effects, switching costs), and whether it can succeed in a large, growing market. The model must show a clear path to sustainable profitability or a strategic exit.

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