I would be curious to see more detail about these factors:<p>"...the attractiveness of the market, strategy, technology, product/service, customer adoption, competition, deal terms and the quality and experience of the management team."<p>I feel that there is another layer of analysis that is being missed which is the interaction.<p>Q: Would you invest in AirBnb at 31B?<p>Hypothetical response: No, there is so much competition from the hotels, and competing sites. I think they have liability risk.<p>Q: How about at $1B value?<p>Hypothetical: Are you kidding me? Of course!<p>The valuation interacts with the other criteria.<p>Q: Would you invest in my personal device company at $100 million?<p>Hypothetical answer: No way. I think the market is saturated.<p>Q: Will you do it now that Steve Jobs is back from the dead and has agreed to be the CEO?<p>Hypothetical answer: duh! Of course!<p>Again, the "team" has now changed things around.<p>I can't think of any situation where these factors don't interact with each other.
Is it a perfect team, with a complete working product, massive user base and sales and no risk and lots of other investors wanting in? We're in!<p>Else, "Your company is not a fit for us right now but keep us in the loop."
As a founder, my observation of seed stage fundraising is that there's a high degree of randomness, or at least most of the factors involved are outside of your immediate or near-term control. Decisions are mostly based on the excitement investors have for the team and idea. Since excitement is emotional, this can really vary. Decisions can be made based on how the investor's day has gone so far.<p>You would think that success is mostly about your pitch, and if you have great slides, meaningful graphs, and nail the delivery then you get money. It's not like this at all. VC fundraising is not Shark Tank. It's market timing, it's people, it's emotions.<p>There's a saying that seed funding is easy and the money grows on trees, and things don't get hard until the Series A. I think the more nuanced explanation is that when seed funding is successful it is usually easy (the stars aligned!), otherwise it's impossible. This leads to successful founders telling stories about easy seed rounds, but there are probably fifty times as many founders who have failed to raise that just don't talk about it.<p>Here's what Aaron Harris of YC said this year:<p>"Unfortunately, fundraising takes up a lot more time and thought than it should, because it seems like something that should be systematic but is actually chaos, which really confuses people, especially people who are logically brained." (source: <a href="https://www.youtube.com/watch?v=5ZXU84_sGXo" rel="nofollow">https://www.youtube.com/watch?v=5ZXU84_sGXo</a> )<p>Not terribly actionable information, but good for founders to know.
So they report the factors they weigh, then self-report the factors they think contributed to success?<p>That feels like fertile ground for confirmation bias.
Yikes. Look institutionalized. The big money is made during the troughs when hand shacks work: 70s, early 90s, early 00s.<p>At the end of the day, most VC valuations are pulled out of a hat. There's a reason why $1B has become a sexy handle: people ascribed some type of value to this valuation.
The first table, which shows where deals are sourced from, was most interesting. I was surprised that VCs reported that 22% of leads were proactively sourced.<p>Beyond that, I don't think the trust VCs to self report. In particular all VCs say "team" is really important. But in my experience they don't really probe the team very much, or get to know them and their background well.<p>Possibly what they mean is "has previously been CEO of successful startup" or something similar.<p>Overall, I think VCs build up a qualatitive feeling of how comfortable they are with a play. And critically, how well it can be justified as being a reasonable decision if things don't go well.
This write-up is wrong and incorrect.<p>At the seed stage, VC's actually do not make decisions this way.<p>I am going to give you a simple example: if a VC were presented with an opportunity and they knew for a fact that this was proprietary dealflow and if they did not invest, the company certainly would die, i.e. had precisely zero viability <i>but for</i> their (and only their) investment, are there conditions under which they would invest?<p>The actual demonstrable answer at the seed stage is "no."<p>This proves that the write-up is incorrect. Not how VC's make decisions.
I was cofused. In the one chart, 0% of VCs reported that their own controbution contributed to success, then father down 27% of VCs reported that value add was an important factor in value creation. Anyone have additional insight?
this was an awesome read. archived for future ref: <a href="http://archive.is/XM2BO" rel="nofollow">http://archive.is/XM2BO</a>