Why does everyone say "fundraising is hard?" The image below shows that a VC can source 1000-2000 deals annually, and 10-21 make it to a term sheet, which equals a 1% acceptance rate. Let's intersect that with a Pitchbook investor search we ran for a client raising a seed round from B2B software investors. Search Criteria: AUM under $1bn Enough dry powder to invest in the round Last investment size < startup's seed round amount This surfaced 200 investors that would be considered qualified targets. Conclusion: Founders are dealing with a 1% conversion rate in a target market with around 200 participants, which will be the smallest target market they have ever pursued. Let's intersect all of that with the traditional fundraising workflow: 1️⃣ Prepare a deck and data room using varying quality levels of content cobbled together from different sources and procure investor lists for cold/warm outreach 2️⃣ Talk to a handful of investors and get objections with limited or generic feedback 3️⃣ Adjust pitch materials and continue pitching and hope that a few investors will say "yes" When these data points and workflows are combined, you can see why there is so much uncertainty, frustration, and anxiety around fundraising. Over the last year, we have enabled a new fundraising workflow that has been proven multiple times to decrease investor rejections by 70%+ and reduce fundraising time to under 2.5 months. 🚀 Here's the new fundraising workflow: 1️⃣ Maximize your startup's invest-ability before speaking with investors according to insider VC information 2️⃣ Start or continue speaking with highly targeted investors 3️⃣ Start racking up commitments Working inside 15 venture funds to help select investments, we've come to a solid realization about two things: ➡ Investors have concrete first principles regarding the ideal investment at all fundraising stages. Investment decisions are more of a science than previously thought. ➡ When founders receive investment, 99% of the time, their business just happens to match the investor's internal investment criteria. They were in the right place at the right time. Officially launching today, we have decided to break down the information barrier and provide you with exactly what investors want to see, down to every nuance, so you can fit your startup into that mold before pitching them. This isn't just "content"—it's interactive tools that will help you gain investment through fixing blindspots. Given we are venture capital consultants, we know how 15+ funds think about investing from the inside—not 1 or 2 VC funds. We also aren't founders who have raised a VC round and weren't working inside the VC firm: they don't know exactly why the VC invested. If you're planning to raise a round at some point or are facing investor rejections now, these are the only tools you will need to prepare for, accelerate, and close your fundraising round. ❇ Click the link in the bio for course access! ❇

Early-stage venture capital investing (pre-seed/seed) heavily weighs the team quality as credible business data and metrics are unavailable for rigorous analysis. Vetting a startup's executive team is a process conventionally dictated by the investor's gut feeling and pattern matching over years of making investments. Gut feeling is somewhat abstract, but a significant contributing factor is pattern matching over years of witnessing which founders are successful and which aren't. To reverse engineer what a VC looks for in a team, we broke down the patterns of characteristics that a team must have to be considered for venture capital investment. Given our experience vetting 1000s of deals for 15+ venture funds, we have collected what partners of these firms look for in the executive team. Here are three ways to conduct due diligence on your executive team: emphasize the positive attributes, mitigate the gaps, and close a fundraising round as efficiently as possible. #1 - Are You An Outlier Founder? Using our internal knowledge of working with partners at VC funds and our research team's investigation of characteristics of outlier founders according to Gokul Rajaram, Sanjay Reddy (Unlock Venture Partners), Ashu Garg (Foundation Capital), (Outlier Ventures), Gaby Goldberg (The Chernin Group), Marc Andreessen (a16z), Vinod Khosla (Khosla Ventures), Fred Wilson (Union Square Ventures) and Alfred Lin (Sequoia), we compiled and found a through-line that essentially defines what it means to be an outlier founder: 1. Contrarian thinking: Outlier founders pursue ideas that break the mold and identify concepts that resonate with people by filling a gap in the market or addressing a latent need, often through contrarian and counterintuitive thinking. 2. Unique insights and experiences: Outlier founders have special characteristics, novel and unique insights, a compelling founding story, and lived experiences that create empathy for the customers they will serve. They often have unique individual experiences that mold them. 3. Conviction and perseverance: Outlier founders have unwavering conviction in their vision and mission, believing in it as part of their soul. They persevere through challenging moments when the numbers don't look good, driven by sheer belief. 4. Openness and creativity: Outlier founders tend to have high levels of openness as a personality trait, making them more inclined to embrace new ideas, experiences, and perspectives. This openness fosters creative thinking and innovation. 5. Founder velocity: Successful outlier founders strike a balance between industriousness and orderliness, a combination called "founder velocity." This equilibrium ensures the entrepreneurial venture remains steady. 6.Extreme outliers: Venture capitalists believe their business is "100 percent a game of outliers; it is extreme outliers." They look to fund "imperial, will-to-power people" - founders with extreme strength who can definitively shape the tech industry, even if they have serious flaws. 7. People and culture focus: Outlier founders put people and culture first, recognizing that strong leadership that prioritizes people is critical for success. They do 1-2 things exceptionally well and have deep market and industry knowledge from firsthand experience with the problem they are solving. ACTIONABLE PROTOCOL - Ask yourself the following questions and then write 1 or 2 reasons why you embody or don't embody these characteristics. If you don't, reason what can be done to improve that. 1. Do I pursue ideas that challenge the status quo and address unmet needs in the market, even if they seem unconventional or counterintuitive? 2. Do I have novel insights, a compelling personal story, and lived experiences that give me a deep understanding of the customers I aim to serve? 3. Do I have an unwavering belief in my vision and mission, and am I prepared to persevere through difficult times when faced with challenges and setbacks? 4. Am I open to new ideas, experiences, and perspectives, and do I actively seek opportunities to think creatively and innovate? 5. Do I strike a balance between hard work and strategic direction, ensuring that my venture remains steady and focused on its goals? 6. Do I have the extreme strength, drive, and determination to shape my industry, even if it means acknowledging and addressing my own flaws and weaknesses? 7. Do I prioritize building a strong team and company culture, recognizing that exceptional leadership and a people-first approach are critical to success? #2 - Examples Of Grit, Resilience & Persistence Startups are inevitably full of the highest highs and the lowest of lows. VCs are looking for those who have persevered through the lowest of lows, not once or twice but repeatedly. Conviction and perseverance are a specified characteristic of outlier founders that VCs look for. @bhorowitz 's experience of IPO'ing Loudcloud through the dot-com crash and spinning out Opsware is a prime example. Another one is @t_blom's experience at Monzo of receiving death threats for shutting down illegal accounts, which was only 7th in the stack rank of problems Monzo was experiencing. So, how do you illustrate these examples of grit, perseverance, and resilience to investors? ACTIONABLE PROTOCOL - When telling the company's story, ensure you quickly review the company's timeline up until the present day. What pivots did you make? Did you almost run out of money? How much have you personally sacrificed? How many years have you gone without pay or steady income? What were the lowest of lows that you experienced, and how did you push through them? Upon answering these questions, if you can craft a narrative around them and include why you continued to push through, it is even better when presenting to investors. #3 - Resume Matching Despite the investor's "gut feeling" and soft skills evaluation mentioned above, VCs always pattern match on the more concrete team attributes, too. Namely, your resume. In order of prioritization, they tend to value the following (from most to least) on the resume: 1. Successful serial entrepreneur 2. Second-time founder (medium or low previous success) 3. Big tech experience 4. High-growth startup experience 5. Stanford/Harvard/MIT & Ivy League graduation All of this must intersect with founder-market fit (how well you know the nuances and intricacies of your industry and their problems, whether through direct or indirect experience in that industry) and job experience and skills applicable to early-stage and later-stage growth playbooks and environments. ACTIONABLE PROTOCOL - First, vet yourself against the resume checklist. If you are #1, you likely only have to emphasize founder-market fit to gain investment. Outlier founder characteristics, such as grit, resilience, and persistence, are already assumed to give success in previous endeavors. Suppose you are #2 or #3. In that case, you will have to explain why lessons learned or unique insights from previous companies apply to the success of this company while emphasizing founder-market fit and how your experience and skills cover early-stage and later-stage growth playbooks. Emphasizing outlier founder characteristics and examples of grit, resilience, and persistence become even more important than the #1 scenario. Suppose you are #4 or #5. In that case, you will mostly have to rely on founder-market fit, relevant job skills and experience, and, even more, convincing VCs you are an outlier founder and provide examples of grit, resilience, and persistence. How do you stack up in terms of an outlier founder? Comment below! TL;DR Early-stage venture capital investors heavily weigh the quality of a startup's executive team when making investment decisions. To be considered for investment, founders should possess characteristics such as contrarian thinking, unique insights and experiences, conviction and perseverance, openness and creativity, founder velocity, and a focus on people and culture. Founders should also demonstrate grit, resilience, and persistence by sharing examples of how they overcame challenges and pivots in their company's timeline. Additionally, investors pattern match based on the founders' resumes, prioritizing successful serial entrepreneurs, second-time founders, those with big tech or high-growth startup experience, and graduates from top universities. Founders should emphasize their founder-market fit and relevant job skills and experiences to increase their chances of securing investment. Thanks for reading! If you enjoyed this post, follow us at @acopiaventures for more proven, actionable tactics and tools that you can use to reverse engineer the venture capital investment decision and build healthier companies, or DM us for 1:1 advice.

Throughout completing due diligence for 15+ VC funds over the last 12 years, we commonly hear from the VC partners that they are looking for that startup's "X factor." To make it even more ambiguous, it is also sometimes known as the "wow" factor, "special sauce," or "cracking the code." Read on to discern, in more concrete terms, what the X factor is and how to frame yours to gain funding more effectively and efficiently. What Is An X Factor? An X factor is typically located among the team, technology, or business model. A strong X factor allows startups to stand out, disrupt the status quo, and achieve rapid growth in their target market. To give some more concrete general examples: 1. It provides a 10x advantage over competitors in the industry, allowing the startup to be significantly more productive or profitable. 2. It could be an innovative technology, business model, way of solving a problem, or exceptional customer experience that is hard for others to replicate. 3. Passion, perseverance, and a strong founder team are often cited as the X factor investors look for, even more than the business idea itself. 4. Having an X factor helps startups attract investors, customers, and talent. It generates buzz and gets people excited about the company. X Factor Examples Here are some examples of actual companies X factors: 1. Zappos allowed free returns on shoes purchased online and enabled exceptional customer service, which was unheard of then and gave them an edge. 2. Tesla's X factor was developing premium, high-performance electric vehicles when no other significant automakers were pursuing that market. Their innovative technology was a key differentiator. 3. Uber recognized an unmet need for on-demand transportation and leveraged mobile technology to disrupt the taxi industry. Their convenient app-based business model set them apart. 4. Google had a unique search algorithm and minimalist interface that provided highly relevant results at a time when other search engines were cluttered and less useful. 5. Tesla focused on developing premium, high-performance electric vehicles when no other major automakers were pursuing that market. Their innovative technology was a key differentiator. 6. A lawn care startup called Happy Lawn used aerial photography to provide instant quotes to potential customers online. This reduced their sales cycle from 3 weeks to just 3 minutes compared to traditional lawn care companies. 7. FreshSurety developed sensors to track the freshness of produce and meat through the supply chain. This "certified freshness" technology had the potential to be a game-changer for grocery retailers and food service companies. As you can see, X factors are typically a combination of innovation in the team, business model, and technology intersecting with market landscape and dynamics. When all of these are intersected in a unique, singular way, it makes it hard for others to replicate easily and catch up. ACTIONABLE PROTOCOL Based on the examples, what is your X factor? 1. Do you have a proprietary technology? 2. Innovative business model? 3. A unique solution to a problem that enables a startup to provide much more value than incumbents in their industry? 4. Unparalleled customer service? How do these intersect with the market landscape and dynamics among: 1. An unmet need or gap in the market? 2. Existing competition? How does this produce a unique edge that makes it hard for others to replicate easily and catch up? Here is a visual depiction of the X-factor formula for visual learners. What is your "X factor" or "Special Sauce"? Comment below! Thanks for reading! If you enjoyed this post, follow us at @acopiaventures for more proven, actionable tactics and tools that you can use to reverse engineer the venture capital investment decision and build healthier companies, or DM us for 1:1 advice.

Founders - how often have you heard that "the traction goal posts" have moved since 2022 for raising early-stage venture capital? How often have you received exact data on what those goal posts have moved to or been notified of their movement before your fundraising campaign? This isn't fair to you as someone who has been putting in 70+ hour weeks, growing, and then being unable to raise because the instructions weren't clear. Given our experience as due diligence consultants for 15+ VC funds, we have the luxury of calculating the median of these traction goal posts among a larger sample of funds. This is what we found as the median point under the bell curve (there are always long tails, but it is safer to aim for the center and beyond) Seed Round Investment Benchmarks in 2024 Summary 1. Seed round fundraising benchmarks have increased significantly post-2022 compared to pre-2022, with higher ARR and growth rate expectations across the board. 2. The "sweet spot" and "outlier" categories have shifted up, indicating that startups likely need to demonstrate stronger traction and growth to be competitive in raising seed funding compared to the past. 3. While specific metrics like ARR and growth rate are important, seed-stage diligence focuses heavily on qualitative factors like team, vision, customer satisfaction, overall momentum, market dynamics, opportunity, and potential for sustainable competitive advantage. 4. Detailed analysis of metrics like PMF, CAC, and CLTV is not necessarily achievable or worthwhile to examine in great depth at the seed stage despite the bar being raised on ARR and growth benchmarks. Series A Round Investment Benchmarks in 2024 Summary 1. Series A benchmarks have increased significantly post-2022, with higher expectations for ARR, growth, net dollar retention, and capital efficiency. 2. The "sweet spot" shifted from $500K-$1.5M ARR pre-2022 to $2M-$3M post-2022. Outlier ARR moved from $2M+ to $3M+. 3. YoY growth expectations rose, with the sweet spot moving from 2-3x to 6-10x+. 4. Net dollar retention standards also increased, with the sweet spot shifting from 100-110% to 120-130%. 5. Pressure on burn multiple and capital efficiency increased, with shorter payback periods and sales cycles expected post-2022. Overall, Series A has become more competitive, requiring stronger revenue, growth, retention, and efficiency to secure funding compared to pre-2022 levels. Diligence at Series A is primarily around PMF quality derived from deep traction analysis and, if achieved, confidence in systems that are ready to be scaled. Team, vision, customer satisfaction, overall momentum, market dynamics, opportunity, and potential for sustainable competitive advantage are also essential factors. To further corroborate our data, here is data from Kruze Consulting that provides accurate data on what it took to raise a Series A round in 2023. Notice how growth rates, unit economics, and burn multiples thresholds have significantly risen. ACTIONABLE PROTOCOL 1. Incorporate these benchmarks into your budget and make the necessary tweaks to your business strategy as soon as possible if you are attempting to raise a seed or Series A 2. If runway is wearing thin and you are multiple standard deviations short of these metrics, ensure you can paint a grandiose vision and upside case. Consider what could limit your upside (competitive pressure, regulatory events, future technologies, etc.) and mitigate those before speaking with investors. 3. Consider raising a bridge round that will enable high confidence in investors that the additional capital will hit these metrics. How have investors reacted to your metrics? Comment below! Thanks for reading! If you enjoyed this post, follow us at @acopiaventures for more proven, actionable tactics and tools that you can use to reverse engineer the venture capital investment decision and build healthier companies, or DM us for 1:1 advice.

Name a single person who would find this useful.

As former venture-backed founders, investor rejections were rampant during fundraising. Feedback from VCs was either surface-level or not wholly honest. However, once we started working for multiple VCs, we began to understand why these rejections occurred. We needed to see our companies through the eyes of a VC. Here's a tool to minimize investor rejections, gleaned from our knowledge of working due diligence for 15+ venture funds. Seeing your company through the eyes of a VC is not simple for two reasons: 1. It is an outsider's view that founders are not used to, given their time spent in the weeds 2. The view is composite, so it needs to be broken down into easily digestible pieces We'll be focusing on the second bullet point. According to all the questions we were getting about our moat, value-added over the status quo, competitive landscape, and strategy, it was clear that VCs were viewing competition in a way that was different from ours. 99% of founders analyze their competition using the following lenses: 1. How do we beat them on features? 2. Where do we exist upon a two-dimensional market map (is always predictably in the upper right quadrant), with the dimensions typically being subjective and potentially biased VCs take this breakdown with a grain of salt for two reasons: 1. Most features can be replicated with sufficient development talent and power. 2. The market map dimensions are typically characterized through the eyes of the founder, making the analysis less unbiased, and most of the time, the dimensions selected don't give a reason for a potential moat. Here are 3 steps to complete a competitive analysis like VCs complete during diligence, get inside a VCs head when speaking about your competition, and minimize investment objections: Step #1 - Non-Feature Led Direct Vs. Indirect Competitor Analysis Let's pretend we are a CRM startup selling to SMBs. We could list all features available across our company and competition, add green checkmarks under our column and a few checkmarks and red X's under our competition. This is still useful but does not give a holistic, short-term, and long-term view of the competitive landscape. VCs typically do competitive analysis this way. ACTIONABLE PROTOCOL - One spreadsheet tab should be "indirect competition." This is the status quo and typically the incumbent in a market. For our make-believe CRM startup selling to SMBs, this would be someone like Microsoft Excel. With "indirect competition," we are more concerned about their product and strategy roadmap and its direction to deliver a better value add than our product. If they can build our product without buying it, status quo incumbents already have an established distribution network (customer base). They can push the product out via bundling with their existing product suite, essentially dropping our price competition to $0. This is where moats become especially important, which conventionally start as capabilities of scale, network effects, and organizational design that can translate into iron-clad moats (this will be explained in greater detail in another post - follow for that post!) Another spreadsheet tab should be "direct competition." For our imaginary CRM startup, this would be companies like Hubspot, Zoho, etc. These companies compete directly more closely on product value add today and could have established distribution networks. Moat, exclusive team relationships, and unique insight into the market are significant here. Both spreadsheet tabs should have the following columns, which will dictate your competitive research: 1. Name of Company 2. Year started 3. Degree of current product similarity 4. Degree of value proposition similarity 5. Who is their customer, and who are they targeting? 6. How easily can they move into our segment if they are not focused on our target customer? 7. How much money have they raised? 8. What is their pricing model, and how does it relate to their customer segment? 9. What is their estimated ballparked revenue? 10. What is their headcount? 11. Additional notes (where is the product heading, what is their special sauce, and do you know their NPS)? There are two primary ways to surface this research: 1. You can access public information online and private databases through your network (accelerator, networks, etc.) 2. Downloading a free trial of your competitor's product or inquiring about the competitor's product as a potential customer We encourage both methods as long as they don't turn illegal or unethical. Once you have researched and filled this out for ALL of your competition, you will begin to see how defensible your company is and where it places in the horse race for market penetration within your target segment. Ultimately, the utopian competitive landscape VCs seek is fragmented markets where your competition has low NPS and can only move or replicate you slowly. Step #2 - Corroborating Your Analysis With The Customer's View On Competition Now that you have created an outsider holistic view of the competition that doesn't only dive into the feature details, it's time to enrich that data with the only view on competition that truly matters at the end of the day - your customers and market. ACTIONABLE PROTOCOL - If you have customers, you should be talking to them every week. If you are heavily in sales mode and speaking to a lot of potential customers, you need to be asking them these questions. These questions should be crucial to your product development if you are in customer discovery. 1. What other competitive/substitute products have they tried? 2. How were they approached? 3. What were the positives and negatives of the sales, product, and customer success experience? 4. What features are they working on and offering in the near and long term? Answers to this question can be used to enrich the competitive analysis data in step #1 as it pertains to your competition's product and customer targeting similarity. You might also find other places to fix the problems your competition has created. #3 - Setting Up Real-Time Information Feeds A lot can change between completing this competitive analysis and closing a fundraising round. Setting up a real-time competitive information feed is crucial when investors find something recent on your competition and ask about it. It also ensures that you stay one step ahead of whatever your competition is working on. ACTIONABLE PROTOCOL - 1. Set up Google alerts for your main indirect and direct competition. This way, you will always see a press release, revealing interview, etc. 2. Set up LinkedIn company alerts to track the movement of people and headcount within departments. Finally, you can access private databases (such as Crunchbase, CB Insights, Pitchbook, PrivCo, etc.). In that case, you can set up alerts to track competitive movement. If you can cumulate all of this in bi-weekly reports (use an LLM for summarization - we suggest @AnthropicAI 's Claude 3 as of now), you will both impress investors with your up-to-date knowledge and be able to stay one step ahead or at least not get left behind in the fast-moving world of technology. TL;DR To minimize investor rejections, founders should analyze their competition through the eyes of a VC. This involves conducting a non-feature-led direct vs. indirect competitor analysis, corroborating the analysis with customer insights, and setting up real-time information feeds to stay updated on competitive movements. By following this three-step process, founders can provide a holistic view of their competitive landscape, demonstrate their defensibility, and impress investors with their up-to-date knowledge, ultimately increasing their chances of securing funding. What additions are helpful to a VC competitive analysis? Comment below! Thanks for reading! If you enjoyed this post, follow us at @claud for more proven, actionable tactics and tools that you can use to reverse engineer the venture capital investment decision and build healthier companies, or DM us for 1:1 advice.