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Analyzing pitches to find what gets VCs interested in a meeting

236 points by ceonyc 6y ago

JoeAltmaier 6y ago
Love it - there's a startup in analyzing startup chances.
- streetcat1 6y ago
  To iterate is human, to recurse, divine.
rognjen 6y ago
Beware of survivorship bias.
MattGaiser 6y ago
Interesting. Investors are interested in making money on their money.
mgamache 6y ago
I am not sure what value this post is besides a sales pitch for the poster. Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? Also, How do you get more (cost of acquiring customers)? Market size? I suppose that's in the "underlying economics" section, but that's such a common question it should be addressed. VCs are looking for 100x return. Can you meet in person (or Zoom these days) and present yourself well? etc...
- onion2k 6y ago
  Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? This is 100% true and 10,000% annoying. Effectively it blocks anyone who has an idea for an idea for a business that needs seed capital from competing unless they're already wealthy (directly or able to raise funds from within their own network of friends and family). 15 years ago seed capital was exactly that - money that was available to fund a startup based on little more than an idea and a persuasive team. It was massively high risk but that was kind of the point. The taste for risk that VCs once had is gone. Today what people call seed rounds are really Series A. You need to have already done the high risk proof of concept work and actually have something on the market before VCs will take your call. That's entirely up to VCs of course. If they want to do that they can. And no doubt they'll still make a lot of money. But society as a whole is faced with dull ideas thought up by middle class kids who want "innovative" ways to pay someone to do their chores because of it, and that pisses me off a lot. End Rant.
  - mgamache 6y ago
    This is correct. Big capital ideas can only be funded by wealthy people who have the ideas. Wealthy people by definition, have an interest in perpetuating the system that made them wealthy.
  - GuiA 6y ago
    Well, that's what happens when everything "standardizes" after the initial wave of disruption. 15 years ago, there weren't any "programming bootcamps" or "entrepreneurship workshops" or "become a UX ninja in 7 days crash course" to the extent that there is today, Harvard MBAs didn't give much of a crap about working in tech, computer science students were there for the nerdy stuff, not because they wanted to be the next Zuckerberg. There just isn't much risk left in tech. The path is that now you start a weird crypto startup (which aren't even that weird anymore because there's dozens of them) while you're comfy at Stanford, you hope to get a fat check before you graduate, and if not you go work to Google. Or you quit Google, start your company, get some investment because you were at Google after all, and hopefully a few years later your startup gets bought by Google. Tech startups just aren't weird and new and unknown anymore, as far as the money people are concerned. Does it fit their idea of what a company on its way to a billion dollar valuation looks like? If yes write a check, if not tell them thank you and let the next team in.
  - nwsm 6y ago
    > But society as a whole is faced with dull ideas thought up by middle class kids who want "innovative" ways to pay someone to do their chores because of it, and that pisses me off a lot. If true: 1) VCs will stop making money, or there is an endless money stream available to boring startups as long as the barrier to entry is kept up. 2) We will see stagnation in many industries but particularly tech, which will only make it easier for actual innovation to shine. The endless money stream bit could be true, but if we accept that it negates 2), we should just give up anyway (or shift all focus to politics until it's solved).
  - wpietri 6y ago
    I don't disagree, but 15 years ago it was much more expensive to do a startup. This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Now I can spend a day writing some Terraform code and have an infinitely scalable, load-balanced cluster up and running. A day later and I can have a decent-looking basic CRUD app on the cluster. Then I can spin a lot of the other work off to pay-as-you-go SaaS tools. Payments, sales support, CRM, support, marketing, analytics, feature flags, landing pages, A/B testing: all of these are things I don't have to build any more. And now thanks to the rise of things like Slack, Zoom, and Trello, remote and/or part-time work is much more tenable, meaning we don't need an office and full-time commitment to get going. So yes, VCs are going to take minimum risk for maximum return. But they always have. What's different now is that you don't need to convince some rando that you need $250k in seed money just to find out if your idea might work. If it does, you'll at least be in a better negotiating position. And maybe you won't need to seek investment at all.
quezzle 6y ago
I thought VCs were interested in companies with superstar teams with a killer idea, an established and lucrative monetization mechanism, an established defendable innovative product, in a global market with hockey stock growth and for some reason still willing to sign ridiculously unfavorable investment terms with no downside or risk for the VC at a very low price, but at a very high price to the next round of investors to drive up ponzi scheme valuations. Oh and a CEO/founder who at first they love but later can be shoved out by the board. Or have I been watching too much Silicon Valley?
- simonebrunozzi 6y ago
  > Or have I been watching too much Silicon Valley? Too much, or not enough.
- redis_mlc 6y ago
  You forgot the 3x liquidation preference.
floatingatoll 6y ago
What are the demographics of the VCs whose responses are summarized here? Were they from a wide array of cultures and histories? Were they primarily rich white men? Ethics in AI would ask us to consider the unconscious bias introduced into the algorithm's outcomes. The same interest applies to human-generated outcomes. Either way, the input is a group of humans making subjective decisions, and since unconscious bias survives summarization, it should be accounted for.
wyck 6y ago
Analyzing common sense seems to be getting more popular.
onebot 6y ago
I would say that absolute best predictor of getting a meeting is strong introductions. I hate to say this, but you'll have an easier time with a strong network. A trusted introduction can even overcome a bad deck in some cases. But there should be no reason to have a bad deck now-a-days as there is ample reference and knowledge share. First-time founders: Please don't pay for access. Services like this, in my opinion, are dubious at best. Work on building a network, blogging, open source, meeting other founders, going to VC events, tapping your alumni network, etc.
- viklove 6y ago
  Best advice is just to be born wealthy so you can use your parents "connections," and then go to a top-tier business school to make more "connections." The startup scene is so boring because there's no diversity of thought when everyone comes from the same basic background.
  - danenania 6y ago
    In tech, my experience is that founders with a business school background are a fairly small minority. The most common ways to bootstrap connections are getting into an accelerator or working at a VC-backed startup.
pge 6y ago
I wouldn’t trust these data, not because there is anything wrong with the analysis but because the inputs are inaccurate. What VCs say was the reason they were interested is not necessarily what made them interested. It may be what they tell themselves or tell you, but I think the decision criteria are rarely that objective or explicit. Decisions are made, then back justified with a plausible explanation.
- wpietri 6y ago
  100% agreed. Most VC funds are necessarily good at very specific skill: convincing people who control lots of money that the VC is smarter and better than their competitors. The easiest way to sell that is to truly believe it, and then perform that belief convincingly. That's not something one switches on and off, so their answers here are likely to be skewed in the direction of things that make them look valuable. Things like "team" and "gut check" are especially useful answers for that, because a) it lets VCs sound like intuitive geniuses who can't easily be replaced, and b) the I-know-it-when-I-see-it nature of those lets VCs smuggle in all sorts of irrational biases. As one well-known investor said, "There was a guy once who we funded who was terrible. I said: 'How could he be bad? He looks like Zuckerberg!'" Points for honesty, but you can bet that wasn't the official reason they invested.
  - racecondition 6y ago
    In general I agree with you, but I would say that alot of VCs either 1) diversify their investments amongst many areas in tech (or maybe some non tech things, not stereotyping all VCS but for this example I'll say diversity of problems being solved using technology/software etc) and thus see commonalities of problems amongst teams in their experience despite whatever the specific niche industry is. I think it is pretty important to agree the cofounders are important. Specifically I've heard from CEOs of startups I use to work for they are really good at hunting out "weaknesses" in the bonds between cofounders. Basically, they don't want a good idea to fall apart because two cofoudners fundamentally don't see eye to eye, which will make it hard for any decisions they make (whether good or bad) to come to fruition and indicates future struggles with the company, in addition to weak leadership/unified approach when hiring new people, who might be disoriented at understanding the direction the company is going in. 2) Focus on particular niches (a startup who focus specifically on funding AI startups, for example) often they will even fund competitors knowing that if one of them dies, they are almost gauranteed to reep benefits from the remaining on in the niche field. This also means they keep a close track on the variations between two or more companies approach in a specific industry and why one failed and the other didn't. Someone from Marc Andreessen's team recently published a blog post going into great depth about 5 factors amongst ten or so AI teams that indicated their levels of success in the field, and most of the tilting factors are not what I would say is common knowledge amongst AI startups. They may have their biases, but they also have unique experience in understanding or seeing repeated dynamics in what could make a relationship (between cofounders) fail (like seeing that one bad relationship where the couple can't see it but it is so obvious to you because youve either now been through it or seen it happen before, imagine this for VCs looking at cofounders over and over again for ten years...) and otherwise have lost lots of money over failed business ideas, so I would say they are incentivized to be as objective as possible with themselves, even if just selfishly for the benefit of their own bank account.
code4tee 6y ago
It’s often been said that VCs invest in people not products and there’s certainly some truth to that. That said, having a realistic plan on how your idea turns into a sustainable business is certainly key too. That’s even more important with the economy we’re heading into where startups that are not financially stable are not long for this earth.
m3kw9 6y ago
There should not be a single factor, sometimes the team make up becomes the multiplier factor. Say Jony Ives joins a team solving a not so good problem.
bosswipe 6y ago
How do they measure team quality? Is it just number of elite school and FAANG alumni?
- racecondition 6y ago
  I would imagine they know the difference between a team full of "ideas" people who answer the question of "how will you solve this problem" by saying "easy, we don't need to code, were "business people" we will higher an offshore team in India for cents on the dollar to code this for us overnight." Where software development is just an example of one of the skills you would need Vs. "We prototyped this ourselves based on our experience coding with best in class teams for scalability, performance and optimizing cost savings for scaling (lets say web platform?) web platform, and we have a working MVP with some customers onboarded and seem to be growing faster than we can handle due to demand, and even though we are all pretty good at running this platform ourselves, we know some key people we want to hire to take over the scaling our existing backend devops teams so we can focus on the UX/UI and feature development to respond to specific asks from our current customers because we know these will keep them on board with us vs our current competitors." In general, they are looking for people who are realistically engaged with the resources it needs to implement the solution to the problem where many people have the attitude of "I have the idea, I will hire minions to do it for me, I just need $5million from you to do that so I can hand out tshirts and take credit for their work at conferences while my minions do the work, duh". You may think this does not happen. It happens quite alot....
arxpoetica 6y ago
That site needs the base font to be bumped up by 400% or more.
gnicholas 6y ago
Is "team" a measure of how good the team is in general, or how well-suited they are to the area they've chosen to build a startup in?
- dclusin 6y ago
  Everyone always says team without elaborating on what that means. It seems to me it’s generally a shorthand for how many of your founders/employees went to Harvard, Stanford, Yale, etc. You can’t say pedigree these days because that doesn’t fit with the current Bay Area politics.
graycat 6y ago
After contacting many VCs and getting only meager responses, I concluded much the same things as in the OP. The VC Web sites were deceptive: They claimed interest in new, advanced, powerful, for big markets, secret sauce, barriers to entry, high margins, etc. Nope. Much as in the OP, the main thing they want is just current revenue, or at least proxies such as monthly unique users, significant and growing very rapidly. So, I switched projects to one I can do as a sole, solo founder funded with just my checkbook. Let's get a view of something VCs do not like but their Web sites implied they would like: To the users, my project is just a Web site. The project is a new search engine for Internet content. The main business idea, drawing in part from some old work at Battelle, is that quite generally keywords are good for only about 1/3rd of content search. My project is for the other 2/3rds. Keys in the work are some new data and new ways to process that data. The new ways are from narrow, advanced pure math and some original applied math I derived (users will not be aware of anything mathematical) -- this use of math is the intellectual property, trade secret, secret sauce, technological advantage and barrier to entry, etc. Status: Code for the project as envisioned, not just a minimum viable product, is ready for significant production, say, if enough users like the site, a one person company with revenue of $10 million a year, nearly all pre-tax earnings. Team? Just me, and that's enough for now. Qualifications? Plenty in computing from IBM's Watson lab and much more. For the math, I hold a Ph.D. in applied math from a world class research university -- one advisor had other students build on my research and was later President at CMU. Status: Code (.NET and SQL Server) for the project as envisioned, not just a minimum viable product, is ready for significant production, say, a one person company with revenue of $10 million a year, nearly all pre-tax earnings. Lesson: My project is of zero interest to any well known VC. They don't care about any such project. Period. Before going live, I need to add data -- doing that. Got delayed by some outside interruptions, e.g., moved. Early on, but not really now, the work could have been helped by some VC funding. Now, if the project gets even $1 million a year in revenue, then I will not want or need VCs. So, net, with VCs, when I would have wanted them, they didn't want me; if I get to where they want me, then I won't want them. There is some advice about VCs: Wait, that is, be successful enough, for them to call you. If that time comes, I will just check my old files and tell them the dates when I did contact them and they were not interested. I want to make two broad points: First, the economic shutdown for the COVID-19 pandemic has revealed that "50% of the US economy" (whatever the details on that are) is "small business". Next, as I have looked around at the families doing well, e.g., money enough for a 50' yacht, to pay full costs at Harvard, they are nearly all from running a family owned business and never got even 10 cents from a VC. Okay, start and run such a business where computing, the Internet, maybe some secret sauce (now these three can be just dirt cheap, less than some people spend in restaurants for a year) help but without VC funding. Point: To do well in the US, don't really need VCs; e.g., nearly all the US families doing well are running family owned businesses, all across the US and not just along the east and west coasts, without any VC funding. Second, there should be some big opportunities in applying what is in the research libraries in math, science, and engineering and/or doing and then applying more such research. This fact has been well known for ~70 years by the US Department of Defense, CIA, NSA, Department of Energy, NSF, NIH, CDC, NASA, ONR, etc., well known and heavily exploited with huge benefits for US national security, health, and economic prosperity. E.g., we got GPS from a project of the USAF. For some decades, there were similar contributions from Bell Labs -- information theory (e.g., upper bounds on data rates), error correcting codes, the transistor, tiny solid state lasers lighting long haul optical fibers, etc. Typically these projects are submitted and approved just on paper. The batting average is high: E.g., Keyhole (like Hubble but before Hubble and aimed at the ground instead of the stars), LIGO, the A-bomb, the H-bomb, the SR-71, navigation satellites (first from the US Navy and later from the USAF), nuclear fission power, the SSBNs, TCP/IP, NSF Net (now the Internet), DNA sequencing (the key to detection of SARS-COV-2 and now maybe to a fast vaccine), ..., all worked just as planned, essentially the first time, on or close enough to on time and on budget. Batting average! ROI! Gee, if the USAF charged a penny for each use of GPS they would have how much money? If Bell Labs got a penny for each transistor they would have how much money? Point: The VCs just will not evaluate and fund projects presented just on paper and, thus, are missing out on such developments. Final Point: VCs make some money and do at times help some projects, but their methods of working are quite narrow, and in the US the paths for making money are in principle and at times in practice much wider. There is a lot of opportunity doing projects the VCs won't fund.
owens99 6y ago
Great work by Charlie on this. As Charlie is an NYC VC, I assume most investors on this are from NYC and there may be an Easy Coast bias in the data here. It’s a stereotype of East Coast VCs to overly focus on monetization compared to West Coast.
peter_d_sherman 6y ago
Excerpt: The Problem & Market Segment - Moderate to Strong Predictor "This would have been a stronger predictor had it not been for a few outliers at the top. Aside from a few companies who got a high number of intros despite scoring relatively low here, this was overall a very good predictor of who get intros. Picking the right problem to work on seemed more important than having the right solution by more than 2x. So what was the most important factor? Which area, if a VC only knew one thing about your company, was the most predictive of enticing a VC to want to meet? Some founders might be disappointed, because its that age old question that they love to hate… “How does it make money??” Yes, the underlying economics of the business was the strongest predictor of whether a VC wanted an intro over any other aspect of the company. Founders who could clearly articulate an economic opportunity fared really well with investor interest." Hmm, reminds me of some song lyrics... "Come on, come on, listen to the money talk..." -AC/DC "Money Talks" Observation: Just as Scientists talk science, and Lawyers talk law, Venture Capitalists speak "Venture Capitalese", aka "Money", aka, "How much money could I the VC make with this? That, and give me compelling proof of what you're saying in under a minute..." Ideas, on the other hand, even great ones (to a VC point of view!) are the proverbial "dime a dozen" (or less even! An idea and fifty cents will get you a cup of coffee... Or, an idea and five dollars will get you a cup of coffee if you go to Starbucks...<g>)
lasky 6y ago
stop worrying about VC’s. trust me, it’s a rabbit hole of pain and perpetual disempowerment. better to focus on figuring out what perspective you’re currently missing to how you can better help your customers THRIVE.
yumraj 6y ago
I didn't see any pricing anywhere. Anyone knows how much do they charge?
haltingproblem 6y ago
Humans choose first, rationalize later. Humans are bad at explaining why they made their choices but they have a narrative. VCs are no different. The survey would need to be far more rigorously designed to correct for those tendencies and I dont even know if it can be done.

236 points by ceonyc 6y ago

JoeAltmaier 6y ago

Love it - there's a startup in analyzing startup chances.

streetcat1 6y ago
To iterate is human, to recurse, divine.

rognjen 6y ago

Beware of survivorship bias.

MattGaiser 6y ago

Interesting. Investors are interested in making money on their money.

mgamache 6y ago

I am not sure what value this post is besides a sales pitch for the poster. Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? Also, How do you get more (cost of acquiring customers)? Market size? I suppose that's in the "underlying economics" section, but that's such a common question it should be addressed. VCs are looking for 100x return. Can you meet in person (or Zoom these days) and present yourself well? etc...

onion2k 6y ago
Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? This is 100% true and 10,000% annoying. Effectively it blocks anyone who has an idea for an idea for a business that needs seed capital from competing unless they're already wealthy (directly or able to raise funds from within their own network of friends and family). 15 years ago seed capital was exactly that - money that was available to fund a startup based on little more than an idea and a persuasive team. It was massively high risk but that was kind of the point. The taste for risk that VCs once had is gone. Today what people call seed rounds are really Series A. You need to have already done the high risk proof of concept work and actually have something on the market before VCs will take your call. That's entirely up to VCs of course. If they want to do that they can. And no doubt they'll still make a lot of money. But society as a whole is faced with dull ideas thought up by middle class kids who want "innovative" ways to pay someone to do their chores because of it, and that pisses me off a lot. End Rant.
- mgamache 6y ago
  This is correct. Big capital ideas can only be funded by wealthy people who have the ideas. Wealthy people by definition, have an interest in perpetuating the system that made them wealthy.
- GuiA 6y ago
  Well, that's what happens when everything "standardizes" after the initial wave of disruption. 15 years ago, there weren't any "programming bootcamps" or "entrepreneurship workshops" or "become a UX ninja in 7 days crash course" to the extent that there is today, Harvard MBAs didn't give much of a crap about working in tech, computer science students were there for the nerdy stuff, not because they wanted to be the next Zuckerberg. There just isn't much risk left in tech. The path is that now you start a weird crypto startup (which aren't even that weird anymore because there's dozens of them) while you're comfy at Stanford, you hope to get a fat check before you graduate, and if not you go work to Google. Or you quit Google, start your company, get some investment because you were at Google after all, and hopefully a few years later your startup gets bought by Google. Tech startups just aren't weird and new and unknown anymore, as far as the money people are concerned. Does it fit their idea of what a company on its way to a billion dollar valuation looks like? If yes write a check, if not tell them thank you and let the next team in.
- nwsm 6y ago
  > But society as a whole is faced with dull ideas thought up by middle class kids who want "innovative" ways to pay someone to do their chores because of it, and that pisses me off a lot. If true: 1) VCs will stop making money, or there is an endless money stream available to boring startups as long as the barrier to entry is kept up. 2) We will see stagnation in many industries but particularly tech, which will only make it easier for actual innovation to shine. The endless money stream bit could be true, but if we accept that it negates 2), we should just give up anyway (or shift all focus to politics until it's solved).
- wpietri 6y ago
  I don't disagree, but 15 years ago it was much more expensive to do a startup. This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Now I can spend a day writing some Terraform code and have an infinitely scalable, load-balanced cluster up and running. A day later and I can have a decent-looking basic CRUD app on the cluster. Then I can spin a lot of the other work off to pay-as-you-go SaaS tools. Payments, sales support, CRM, support, marketing, analytics, feature flags, landing pages, A/B testing: all of these are things I don't have to build any more. And now thanks to the rise of things like Slack, Zoom, and Trello, remote and/or part-time work is much more tenable, meaning we don't need an office and full-time commitment to get going. So yes, VCs are going to take minimum risk for maximum return. But they always have. What's different now is that you don't need to convince some rando that you need $250k in seed money just to find out if your idea might work. If it does, you'll at least be in a better negotiating position. And maybe you won't need to seek investment at all.

quezzle 6y ago

I thought VCs were interested in companies with superstar teams with a killer idea, an established and lucrative monetization mechanism, an established defendable innovative product, in a global market with hockey stock growth and for some reason still willing to sign ridiculously unfavorable investment terms with no downside or risk for the VC at a very low price, but at a very high price to the next round of investors to drive up ponzi scheme valuations. Oh and a CEO/founder who at first they love but later can be shoved out by the board. Or have I been watching too much Silicon Valley?

simonebrunozzi 6y ago
> Or have I been watching too much Silicon Valley? Too much, or not enough.
redis_mlc 6y ago
You forgot the 3x liquidation preference.

floatingatoll 6y ago

What are the demographics of the VCs whose responses are summarized here? Were they from a wide array of cultures and histories? Were they primarily rich white men? Ethics in AI would ask us to consider the unconscious bias introduced into the algorithm's outcomes. The same interest applies to human-generated outcomes. Either way, the input is a group of humans making subjective decisions, and since unconscious bias survives summarization, it should be accounted for.

wyck 6y ago

Analyzing common sense seems to be getting more popular.

onebot 6y ago

I would say that absolute best predictor of getting a meeting is strong introductions. I hate to say this, but you'll have an easier time with a strong network. A trusted introduction can even overcome a bad deck in some cases. But there should be no reason to have a bad deck now-a-days as there is ample reference and knowledge share. First-time founders: Please don't pay for access. Services like this, in my opinion, are dubious at best. Work on building a network, blogging, open source, meeting other founders, going to VC events, tapping your alumni network, etc.

viklove 6y ago
Best advice is just to be born wealthy so you can use your parents "connections," and then go to a top-tier business school to make more "connections." The startup scene is so boring because there's no diversity of thought when everyone comes from the same basic background.
- danenania 6y ago
  In tech, my experience is that founders with a business school background are a fairly small minority. The most common ways to bootstrap connections are getting into an accelerator or working at a VC-backed startup.

pge 6y ago

I wouldn’t trust these data, not because there is anything wrong with the analysis but because the inputs are inaccurate. What VCs say was the reason they were interested is not necessarily what made them interested. It may be what they tell themselves or tell you, but I think the decision criteria are rarely that objective or explicit. Decisions are made, then back justified with a plausible explanation.

wpietri 6y ago
100% agreed. Most VC funds are necessarily good at very specific skill: convincing people who control lots of money that the VC is smarter and better than their competitors. The easiest way to sell that is to truly believe it, and then perform that belief convincingly. That's not something one switches on and off, so their answers here are likely to be skewed in the direction of things that make them look valuable. Things like "team" and "gut check" are especially useful answers for that, because a) it lets VCs sound like intuitive geniuses who can't easily be replaced, and b) the I-know-it-when-I-see-it nature of those lets VCs smuggle in all sorts of irrational biases. As one well-known investor said, "There was a guy once who we funded who was terrible. I said: 'How could he be bad? He looks like Zuckerberg!'" Points for honesty, but you can bet that wasn't the official reason they invested.
- racecondition 6y ago
  In general I agree with you, but I would say that alot of VCs either 1) diversify their investments amongst many areas in tech (or maybe some non tech things, not stereotyping all VCS but for this example I'll say diversity of problems being solved using technology/software etc) and thus see commonalities of problems amongst teams in their experience despite whatever the specific niche industry is. I think it is pretty important to agree the cofounders are important. Specifically I've heard from CEOs of startups I use to work for they are really good at hunting out "weaknesses" in the bonds between cofounders. Basically, they don't want a good idea to fall apart because two cofoudners fundamentally don't see eye to eye, which will make it hard for any decisions they make (whether good or bad) to come to fruition and indicates future struggles with the company, in addition to weak leadership/unified approach when hiring new people, who might be disoriented at understanding the direction the company is going in. 2) Focus on particular niches (a startup who focus specifically on funding AI startups, for example) often they will even fund competitors knowing that if one of them dies, they are almost gauranteed to reep benefits from the remaining on in the niche field. This also means they keep a close track on the variations between two or more companies approach in a specific industry and why one failed and the other didn't. Someone from Marc Andreessen's team recently published a blog post going into great depth about 5 factors amongst ten or so AI teams that indicated their levels of success in the field, and most of the tilting factors are not what I would say is common knowledge amongst AI startups. They may have their biases, but they also have unique experience in understanding or seeing repeated dynamics in what could make a relationship (between cofounders) fail (like seeing that one bad relationship where the couple can't see it but it is so obvious to you because youve either now been through it or seen it happen before, imagine this for VCs looking at cofounders over and over again for ten years...) and otherwise have lost lots of money over failed business ideas, so I would say they are incentivized to be as objective as possible with themselves, even if just selfishly for the benefit of their own bank account.

code4tee 6y ago

It’s often been said that VCs invest in people not products and there’s certainly some truth to that. That said, having a realistic plan on how your idea turns into a sustainable business is certainly key too. That’s even more important with the economy we’re heading into where startups that are not financially stable are not long for this earth.

m3kw9 6y ago

There should not be a single factor, sometimes the team make up becomes the multiplier factor. Say Jony Ives joins a team solving a not so good problem.

bosswipe 6y ago

How do they measure team quality? Is it just number of elite school and FAANG alumni?

racecondition 6y ago
I would imagine they know the difference between a team full of "ideas" people who answer the question of "how will you solve this problem" by saying "easy, we don't need to code, were "business people" we will higher an offshore team in India for cents on the dollar to code this for us overnight." Where software development is just an example of one of the skills you would need Vs. "We prototyped this ourselves based on our experience coding with best in class teams for scalability, performance and optimizing cost savings for scaling (lets say web platform?) web platform, and we have a working MVP with some customers onboarded and seem to be growing faster than we can handle due to demand, and even though we are all pretty good at running this platform ourselves, we know some key people we want to hire to take over the scaling our existing backend devops teams so we can focus on the UX/UI and feature development to respond to specific asks from our current customers because we know these will keep them on board with us vs our current competitors." In general, they are looking for people who are realistically engaged with the resources it needs to implement the solution to the problem where many people have the attitude of "I have the idea, I will hire minions to do it for me, I just need $5million from you to do that so I can hand out tshirts and take credit for their work at conferences while my minions do the work, duh". You may think this does not happen. It happens quite alot....

arxpoetica 6y ago

That site needs the base font to be bumped up by 400% or more.

gnicholas 6y ago

Is "team" a measure of how good the team is in general, or how well-suited they are to the area they've chosen to build a startup in?

dclusin 6y ago
Everyone always says team without elaborating on what that means. It seems to me it’s generally a shorthand for how many of your founders/employees went to Harvard, Stanford, Yale, etc. You can’t say pedigree these days because that doesn’t fit with the current Bay Area politics.

graycat 6y ago

After contacting many VCs and getting only meager responses, I concluded much the same things as in the OP. The VC Web sites were deceptive: They claimed interest in new, advanced, powerful, for big markets, secret sauce, barriers to entry, high margins, etc. Nope. Much as in the OP, the main thing they want is just current revenue, or at least proxies such as monthly unique users, significant and growing very rapidly. So, I switched projects to one I can do as a sole, solo founder funded with just my checkbook. Let's get a view of something VCs do not like but their Web sites implied they would like: To the users, my project is just a Web site. The project is a new search engine for Internet content. The main business idea, drawing in part from some old work at Battelle, is that quite generally keywords are good for only about 1/3rd of content search. My project is for the other 2/3rds. Keys in the work are some new data and new ways to process that data. The new ways are from narrow, advanced pure math and some original applied math I derived (users will not be aware of anything mathematical) -- this use of math is the intellectual property, trade secret, secret sauce, technological advantage and barrier to entry, etc. Status: Code for the project as envisioned, not just a minimum viable product, is ready for significant production, say, if enough users like the site, a one person company with revenue of $10 million a year, nearly all pre-tax earnings. Team? Just me, and that's enough for now. Qualifications? Plenty in computing from IBM's Watson lab and much more. For the math, I hold a Ph.D. in applied math from a world class research university -- one advisor had other students build on my research and was later President at CMU. Status: Code (.NET and SQL Server) for the project as envisioned, not just a minimum viable product, is ready for significant production, say, a one person company with revenue of $10 million a year, nearly all pre-tax earnings. Lesson: My project is of zero interest to any well known VC. They don't care about any such project. Period. Before going live, I need to add data -- doing that. Got delayed by some outside interruptions, e.g., moved. Early on, but not really now, the work could have been helped by some VC funding. Now, if the project gets even $1 million a year in revenue, then I will not want or need VCs. So, net, with VCs, when I would have wanted them, they didn't want me; if I get to where they want me, then I won't want them. There is some advice about VCs: Wait, that is, be successful enough, for them to call you. If that time comes, I will just check my old files and tell them the dates when I did contact them and they were not interested. I want to make two broad points: First, the economic shutdown for the COVID-19 pandemic has revealed that "50% of the US economy" (whatever the details on that are) is "small business". Next, as I have looked around at the families doing well, e.g., money enough for a 50' yacht, to pay full costs at Harvard, they are nearly all from running a family owned business and never got even 10 cents from a VC. Okay, start and run such a business where computing, the Internet, maybe some secret sauce (now these three can be just dirt cheap, less than some people spend in restaurants for a year) help but without VC funding. Point: To do well in the US, don't really need VCs; e.g., nearly all the US families doing well are running family owned businesses, all across the US and not just along the east and west coasts, without any VC funding. Second, there should be some big opportunities in applying what is in the research libraries in math, science, and engineering and/or doing and then applying more such research. This fact has been well known for ~70 years by the US Department of Defense, CIA, NSA, Department of Energy, NSF, NIH, CDC, NASA, ONR, etc., well known and heavily exploited with huge benefits for US national security, health, and economic prosperity. E.g., we got GPS from a project of the USAF. For some decades, there were similar contributions from Bell Labs -- information theory (e.g., upper bounds on data rates), error correcting codes, the transistor, tiny solid state lasers lighting long haul optical fibers, etc. Typically these projects are submitted and approved just on paper. The batting average is high: E.g., Keyhole (like Hubble but before Hubble and aimed at the ground instead of the stars), LIGO, the A-bomb, the H-bomb, the SR-71, navigation satellites (first from the US Navy and later from the USAF), nuclear fission power, the SSBNs, TCP/IP, NSF Net (now the Internet), DNA sequencing (the key to detection of SARS-COV-2 and now maybe to a fast vaccine), ..., all worked just as planned, essentially the first time, on or close enough to on time and on budget. Batting average! ROI! Gee, if the USAF charged a penny for each use of GPS they would have how much money? If Bell Labs got a penny for each transistor they would have how much money? Point: The VCs just will not evaluate and fund projects presented just on paper and, thus, are missing out on such developments. Final Point: VCs make some money and do at times help some projects, but their methods of working are quite narrow, and in the US the paths for making money are in principle and at times in practice much wider. There is a lot of opportunity doing projects the VCs won't fund.

owens99 6y ago

Great work by Charlie on this. As Charlie is an NYC VC, I assume most investors on this are from NYC and there may be an Easy Coast bias in the data here. It’s a stereotype of East Coast VCs to overly focus on monetization compared to West Coast.

peter_d_sherman 6y ago

Excerpt: The Problem & Market Segment - Moderate to Strong Predictor "This would have been a stronger predictor had it not been for a few outliers at the top. Aside from a few companies who got a high number of intros despite scoring relatively low here, this was overall a very good predictor of who get intros. Picking the right problem to work on seemed more important than having the right solution by more than 2x. So what was the most important factor? Which area, if a VC only knew one thing about your company, was the most predictive of enticing a VC to want to meet? Some founders might be disappointed, because its that age old question that they love to hate… “How does it make money??” Yes, the underlying economics of the business was the strongest predictor of whether a VC wanted an intro over any other aspect of the company. Founders who could clearly articulate an economic opportunity fared really well with investor interest." Hmm, reminds me of some song lyrics... "Come on, come on, listen to the money talk..." -AC/DC "Money Talks" Observation: Just as Scientists talk science, and Lawyers talk law, Venture Capitalists speak "Venture Capitalese", aka "Money", aka, "How much money could I the VC make with this? That, and give me compelling proof of what you're saying in under a minute..." Ideas, on the other hand, even great ones (to a VC point of view!) are the proverbial "dime a dozen" (or less even! An idea and fifty cents will get you a cup of coffee... Or, an idea and five dollars will get you a cup of coffee if you go to Starbucks...<g>)

lasky 6y ago

stop worrying about VC’s. trust me, it’s a rabbit hole of pain and perpetual disempowerment. better to focus on figuring out what perspective you’re currently missing to how you can better help your customers THRIVE.

yumraj 6y ago

I didn't see any pricing anywhere. Anyone knows how much do they charge?

haltingproblem 6y ago

Humans choose first, rationalize later. Humans are bad at explaining why they made their choices but they have a narrative. VCs are no different. The survey would need to be far more rigorously designed to correct for those tendencies and I dont even know if it can be done.