What do investors look for in a startup?

A great video Interview with Venture Hacker Naval Ravikant answering the age-old question:

What do you look for in a startup?

Investors look for two things that are paramount above all:

• Great team: It’s obvious. It’s a tautology. Everybody says it. You have to be working with some of the best people in the industry you’re in.
• Huge market: Niche markets just don’t work because the first idea never works. You always have to change the idea, so you need room to maneuver in a big market.

There are three more factors that investors look at:

• Difficult technology that is compounding over time.
• A proprietary distribution channel. A clever viral marketing, or partnership, or whatever strategy that gives them a leg up over competitors.
• A direct monetization model. Something more than throwing up 10 cent banner ad CPMs.