Which of the following is NOT a reason that Sigma Ventures was interested in Isolimit?

Question

BlackTom AI · Accepted Answer

Question restatement: Which of the following is NOT a reason that Sigma Ventures was interested in Isolimit?

Option 1: 'It has the ability to provide high-quality product at a low price' — This would typically be a compelling reason for an investor to be attracted to a startup: a defensible value proposition with cost efficiency. The claim emphasizes value delivery and operational efficiency, which are common factors investors look for when assessing potential ROI.

Option 2: 'There was a high level of trust in the founder' — A founder with established trust can reduce perceived execution risk. Investors often cite founder credibility, track record, and integrity as important soft signals that increase confidence in the team’s ability to execute.

Option 3: 'It had demonstrated consistent revenue growth.' — This statement indicates past financial performance and growth trajectory. While revenue growth is valuable, this option is labeled as NOT a reason in the provided answer, suggesting a possible scenario where Sigma Ventures was more drawn to non-financial signals (e.g., product/tech, team, market fit) rather than past revenue growth, which might be less predictive for an early-stage investment.

Option 4: 'The team had over a decade of experience in the industry' — Deep domain experience is frequently cited as a reason for investment, since it can correlate with better market insight, networks, and execution capability. This would generally be considered a positive signal for attracting capital.

Option 5: 'Initial tests on the product quality were promising' — Early technical validation and promising product quality are classic indicators of potential product-market fit, often fueling investor interest by reducing technical risk early on.

Analysis of each option: 
- Option 1 presents a clear value proposition and cost-quality efficiency; that is a plausible reason for interest. 
- Option 2 highlights founder credibility, a well-known driver of investor confidence; this is a typical reason. 
- Option 3 focuses on observed revenue growth. While revenue growth is valuable, some investors—especially in seed or early rounds—prioritize team, product, and market signals over current revenue, making this a less certain or even non-essential reason in certain contexts. In this question’s key, it is designated as the NOT-a-reason, so we treat it as the exception here. 
- Option 4 emphasizes long industry experience, which many investors view as reducing risk and increasing the likelihood of strategic execution. 
- Option 5 points to promising early product quality, addressing technical feasibility and potential product-market fit, another common driver of investor interest.

To summarize the reasoning: options 1, 2, 4, and 5 describe typical, valid reasons an investor might be drawn to a startup, aligning with common due-diligence criteria such as value proposition, founder credibility, team experience, and early product validation. Option 3, while potentially positive, is the one framed as NOT a reason in the given answer, possibly reflecting a context where revenue history was less indicative for the investor’s thesis or where the focus was on non-financial factors at an early stage. Nevertheless, it’s important to recognize that in many investment contexts, demonstrated revenue growth would indeed be a favorable signal, which is why this item stands out as the exception in this particular question.

INNO 209 LEC A: IE:MGR... Midterm Exam

Which of the following is NOT a reason that Sigma Ventures was interested in Isolimit?

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