Already generating revenue
Traction from users
Clear value proposition
Differentiation from competitors
Scalable revenue model
Disruptive to existing sector
Well-defined channels to market
Serial entrepreneurs with successful exits
The first one about proven revenue is the most important one; that's why it's in bold type. Sales solves everything. I will also add that VCs like to see enough granular details on the business' functionality to make them comfortable with the execution. VC firms hire partners who have a mix of startup and big business experience. The successful entrepreneurs who become VCs know how a high-functioning team should look. The former corporate VCs know how multiple systems work in mature markets and how those systems can be disrupted. They can also boil complex execution metrics down into simple templates. I'll define a few of these templates below (most specific to social media and e-commerce models):
Social graph: how people are connected to each other through relationship networks. This tool is useful in measuring the viability of a P2P strategy.
Machine learning: the way AIs transform data into knowledge. Startups building Big Data solutions adapt machine learning into their analytics.
Use case: a model of how an engineering process accomplishes a goal. Use case data demonstrates the viability and scalability of a startup's business processes.
Cost per action / Pay per action / Cost per conversion: a measurement of an Internet advertising campaign's effectiveness. VCs like startups that know their CPA and can make it pay off in driving revenue.
Computer form factor: the physical specifications of a PC motherboard. This also matters in SaaS solutions because the solution must be compatible with common server configurations.
Entrepreneurs must really know their stuff if they want to impress VCs. The next hot thing after social media will bring out a whole new slew of definitions and metrics. I'm confident that the next big thing will be physical things and not more social media or e-commerce platforms. The Internet of Things will have VCs singing the praises of Arduino and IPv6.