As an investor in startups, what do you look for when prospecting for new portfolio companies?
At the end of the day, if the start-up is post revenue, you’re looking for startups that are having an easier time of it. Compared to all their other peers:
- They are growing faster with the same amount of sales + marketing energy.
- They are growing faster than the competition even without always knowing exactly why.
- Customers are buying more and more products from them, even at a fairly early stage.
- Customers use the product far more than almost any other product in their tech stack.
The bottom line is this stuff is tough. It’s hard enough to build a startup that can get to $2m in revenues, let alone $10m. And it’s hard enough to then take one all the way to $100m.
And even $100m in ARR isn’t enough for most VCs. That isn’t even an IPO these days. VCs have to bet on SaaS startups they hope can get to $150m-$200m to IPO, and still grow 40%+ after that, year over year!
This is so hard.
So VCs really are looking for startups that for structural or other reasons, have it “easier” than 99% of the rest.
And that won’t feel all that fair to the 99% of us that aren’t having an “easier” time despite working just as hard, with just as strong of a team, as others. Not at all.