Why We Say No

I get asked often about our criteria for evaluating startups for investment. We launched our investment process about two years ago, and it took us about six months to really refine our criteria. We think about our criteria as an ever-evolving process that will change as our group and the markets develop.

For us, and I would guess for many VC groups, the first reason we reject companies is if they are outside our sector focus. We only invest in sports, media, and consumer startups, so anything outside that is a quick “no”. We also focus on companies that are consumer facing and not B2B. We do that because we want our network of athletes to be able to drive customers for the companies we invest in. 

The next big reason we say “no” to a company is if we feel the market they are attacking is too small. We like big market opportunities with large dollars at play. We are generally OK with crowded big markets with established leaders if we think the company has or can develop a well differentiated offering and the market leaders are vulnerable.

We tend to like founders with strong insights on the markets they are operating in. I like to say we don’t really go for the Mark Zuckerberg in a bathrobe type founders. We like a founder that has lived deep in their markets for several years. We also like it when the founder has strong connections that can drive business or partnerships in their sector. This doesn’t mean the founder needs to be older, they just have to really have strong founder market fit.

The last big reason we say “no” is over lack of traction. We don’t typically invest in pre-revenue or light revenue companies. We will do this in a few sectors if the company has raised significant money and built something hard to build already, but generally we want to see paying customers.

These are the criteria we use, but there are thousands of venture capital groups out there. If you don’t fit our criteria, don’t despair, just look around for another VC group that is a better fit for you. Try to find companies that are like yours and then figure out who invested when they were at the stage that are at today.

Thanks for reading today's post, I hope this helps you understand the investment process from VCs better so you can find the right investors for your company. To see more Founder Coach posts, please check out our blog on Substack here.