
Analyzing pitches to find what gets VCs interested in a meeting - ceonyc
https://www.feedback.vc/venture-capital-advice/this-is-what-gets-a-vc-interested-in-a-meeting
======
pge
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
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
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.

~~~
wpietri
If your point is, "Some VCs can be good at their jobs," I definitely agree. My
point is more that all VCs have a strong incentive to _appear_ to be good at
their jobs, especially in ways that sound impressive and are hard to verify.

~~~
racecondition
I think you could say that about anyone.

~~~
wpietri
I really couldn't. E.g., I've hired a number of programmers who are terrible
at self-promotion. And even many of the ones who are good at it talk about
specific, verifiable, repeatable skills.

~~~
racecondition
yeh I guess nerds are an exception to the rule, but honestly relative to all
of the industries out there outside of engineering alot of business,
marketing, etc etc is fluff. VCs are in business and finance.

At the end of the day, they have money. Assume they are selfish and want to
not lose money, so they probably have some rationale on which they give out
money in hopes for a return on investment. That being said, I've seen way too
many tech bros with bad blockchain ideas get way too much money which usually
goes straight to their heads before they lose it all, and I assume the V.C.s
have a really good strike price and know exactly when to liquidate.

For others, it was my general understanding VCs lose money on most
investments, hoping that a few end up going really big and canceling out the
losses on the rest, but I don't really know anything about VC stuff. I'm not
sadomasochistic enough to try to start a company, I just try to work on my
skills and people are willing to pay me to invest in myself because I tend to
discover interesting things while I tinker about and also keep things from
failing often in a raging dumpster fire but I don't know if thats a good way
to market my skills.

~~~
wpietri
Nerds are not the only exception by far. Quite a lot of people making an
honest living are reasonably honest. The people at my corner store are not
going to BS me about what's in stock. The person cutting my hair has always
been frank about what she's good at and what she's not. I've worked in a
library, a restaurant, and a few factories; all were populated by people who
were generally straightforward.

It's a relatively small percentage of jobs that require people to be good at
manipulating the opinions of others. As you say, marketing is an exception to
that, but their business is manipulation, so that's not surprising.

~~~
racecondition
marketing, finance, ad tech. My point is most fields propogated by modern
technology is propped up by VC and finance...

I have friends in healthcare as well, and I don't hear things are much better
too, in regards to the business ethics of the healthcare system.

My overarching point is that anything that involves finance is likely to be
corrupt, and VCs are just one segment of them, but there are a lot of more
corrupt financial entities with way less transparency and as a result, way
less criticism.

It's not really a fair comparison to match factory work, cutting hair, and
being a cashier to being a hero of honesty in relation to finance related
jobs. Take cashiers for example, their job is to accurately ring up listed
prices decided by a much more complex decision making system, leaving very
little decisions for them to mess up at that point, and anything they do
unhonestly, is likely to be relatively black and white in comparison to the
unethical lobbying behaviors multi billion dollar corporations that bankrupt
farmers that farm the seeds they make to monopolize food markets, that the
cashiers are ringing up.

Yes, VCs are able to lose alot of money and not really be accountable for it,
but so are many other industries related to finance...

Not sure why you are so convinced VCs are the one evil entity in the thousands
of permutations of finance, but if I had to call out evil entities in finance
it would be the credit market, corrupt government, wallstreet investors, but
atleast somewhere at some point VCs gave value to some entity you can track
other than transiently through a stock from an algorithm to maximise their
profits, but I get it, you hate VCs.

------
quezzle
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
> Or have I been watching too much Silicon Valley?

Too much, or not enough.

------
onebot
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
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
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.

------
mgamache
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
_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.

~~~
wpietri
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.

~~~
est31
> This was before AWS and Rails was just getting started, so just getting
> something up and visible was a major technological effort.

Before rails there was LAMP. That's what Facebook used. Java servlets existed
as well. And rented clouds existed before AWS as well. Despite the hype for
them on pages like this, neither AWS nor Rails were really big disrupting
inventions. The market for both existed before them, and will exist after
they've fallen out of favour.

Where innovation happened is in the scaling domain. Terraform, kubernetes,
etc, as well as in the SaaS tools you mentioned. But most of those things
aren't needed for earliest stage startups. You don't need to be super scalable
from day one. You can just run everything from one very powerful box for a
while.

Of course this all depends on what your application is. If your product is a
cloud based tool to post process movies, it will be a different setting from a
CRUD app to plan events.

~~~
wpietri
In some sense, nothing has been really disruptive since the web browser. But
that doesn't matter because what I'm talking about is reduced cost, reduced
accidental complexity, reduced systemic latency.

Having lived through it, it's just loads easier to get something up and going
these days. I ended up back in some Java code again recently, and servlets are
a) a pain, and b) a general-purpose abstraction. They're adequate for a lot of
things, but not particularly great at anything. Whereas these days people have
had 15 years to come up with special-purpose code to accelerate all sorts of
common activities. My point wasn't that AWS and Rails were the only good
things that happened in 15 years. It's that those, which now seem old and
boring, were near beginning of a whole wave of innovation aimed at making it
easy to have a consumer-grade user experience up and running.

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

------
gnicholas
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
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.

------
peter_d_sherman
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>)

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

------
owens99
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.

------
lasky
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.

------
floatingatoll
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.

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

~~~
streetcat1
To iterate is human, to recurse, divine.

------
code4tee
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.

------
haltingproblem
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.

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

~~~
racecondition
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....

------
m3kw9
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.

------
wyck
Analyzing common sense seems to be getting more popular.

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

------
rognjen
Beware of survivorship bias.

------
graycat
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.

