The Brutal Truth: What Investors Actually Hunt For in Your Startup

Home The Brutal Truth: What Investors Actually Hunt For in Your Startup

What investors want to see in new businesses

Group of billionaire investors

Strip away the buzzwords, the pitch-deck polish, and the “TAM is $47 billion” fairy tales. At the end of the day, every investor—angel, seed fund, or Series A partner—asks one question:

“Can this team turn $1 of my money into $10+ in 5–7 years… without me losing sleep?”

Everything else—traction, market size, tech—is just evidence. Here’s the real checklist top-tier investors run through in their heads (and the landmines that make them ghost you).

1 The Team: Your 40–50% Make-or-Break

“Bet on the jockey, not the horse.” You’ve heard it. They live it. The person or people running the business is actually what investors want to know who they are. Their life experience, education, health status, their current potential etc.

💚 What They Crave

Domain wizards who’ve shipped & sold before: They need your real life experience not cvs.
Battle scars from scaling ops
Coachability + zero ego
Complementary superpowers

🟢 Green Flags

12–24 months of personal runway burned
You’ve quit your job, drained savings, or lived on ramen for a year+. Investors see this as irreversible commitment—you’re not “trying” entrepreneurship, you’re all in. No golden handcuffs, no side hustle. This proves you’ll fight to the death for the company. Paul Graham calls this “living in the future”.
Ex-customer now on advisory board
Your first paying user loved you so much they joined your cap table (even symbolically). This is social proof on steroids: they’re betting their reputation and network. VCs love it because it de-risks product-market fit—someone already voted with their wallet and their Rolodex.
Co-founders who finish each other’s… code
A playful nod to deep synergy. These aren’t “business guy + tech guy” strangers who met at a hackathon. They’ve shipped together before, argue productively, and anticipate each other’s moves. YC’s #1 request for startups: co-founders who’ve known each other ≥2 years.

Investor's meeting with founders

Instant Deal-Killers

Solo founder, no advisors
Investors know startups are a team sport. A lone wolf without any gray-hair guidance screams “I think I know everything.” Even Zuckerberg had Peter Thiel breathing down his neck early. First Round Review: 87% of unicorns had co-founders.
“I quit Google last Tuesday”
Translation: zero skin in the game. You still have RSUs vesting, a fat severance, and a cushy rehire path. VCs hear: “If this gets hard in month 4, you’ll bail back to Big Tech.” Real commitment starts when the safety net is burned—not when the calendar says “Day 1.”
Three ex-consultants calling themselves “technical”
PowerPoint ninjas in Patagonia vests ≠ builders. If your “tech” co-founder’s last code was a VBA macro in 2016, you’re toast. Investors will ask for GitHub links or live demos—then watch the deer-in-headlights panic.

2 Traction: The Only Vote That Counts

“Show me the money” isn’t bravado—it’s survival.

Metric	Pre-Seed / Seed	Series A
Revenue	$0–$100k ARR (optional but sexy)	$1M+ ARR, 100%+ YoY
User Growth	10–30% MoM for 6+ months	5–15% MoM + 40%+ M3 retention
Unit Economics	GM >50%, CAC payback <12 mo	LTV:CAC >3x, contribution margin +

No traction? You’d better have a “why now” moment (new regulation, API, dataset) and a pre-sold pilot with a logo they screenshot and send to their LP group chat. Elad Gil’s rule: traction trumps everything.

3 Market: Who’s Ready to Pay Today?

TAM slides are theater. Bottom-up proof is gold.

Bottom-Up > Top-Down

“We have 3 signed LOIs from Fortune 500s at $6M ACV each” >>>> “The global widget market is $50B.” a16z’s famous bottom-up TAM framework

Investors want a hair-on-fire problem. If the current solution is “annoying but tolerable,” you’re dead on arrival.

4 Moat: What Keeps Copycats Away for 36 Months?

Tech Moat

10x cheaper via AI, proprietary data

You’re not just “using AI”—you own the training data, the inference stack, or a breakthrough algorithm that’s 10x faster or cheaper than off-the-shelf models. Think: a 7-year dataset of sensor readings no one else has, or a custom chip that runs your model at 1/10th the cost of GPT-4. Bessemer’s Moat Map calls this a “data moat”.

Network Effects

K > 1.0, liquidity snowball

Every new user makes the product more valuable for everyone else—and harder to leave. Think Uber (more riders = faster pickups), or LinkedIn (more connections = stickier profiles). Viral coefficient (K) > 1.0 means organic growth accelerates. NFX’s Network Effects Bible.

Distribution Lock

Exclusive channel, brand halo

You’ve secured a gatekeeper no one else can touch: an exclusive API deal with Apple, a co-branded card with Amex, or a regulatory license only 3 companies hold. Or you’re the “cool kid” brand (like Supreme in streetwear) where status keeps users loyal. USV on Distribution Moats.

Hard Truth Warning

If your moat is “we’re first” or “we have better UX”, they’re already drafting the pass email in their head. “First” lasts 90 days in 2025. “Better UX” is a Tuesday afternoon for Figma + Claude.

Ask yourself in the mirror: “What stops OpenAI from cloning this in a weekend?”

If the honest answer is “nothing,” you don’t have a moat—you have a feature. Marc Andreessen: Moats are dead (or dying).

5 Capital Efficiency & Exit Visibility

Runway: 18–24 months post-raise
Use of funds: 70%+ growth, <30% R&D
Exit shortlist: Name 3–5 acquirers they’ve met at conferences (SaaStr’s 2024 acquirer list)

• The Unicorn Multiplier (2–5x Valuation Bump)

Viral coefficient > 1.0 (users bring users)
Capital-light (software, not hardware)
Global TAM from day 1
Celebrity founder or anchor whale customer (2024 celebrity founder effect)

The Investor’s 30-Second Gut Check

1. Do I believe these humans will 10x my money?

2. Is the traction (or proxy) impossible to fake?

3. Is the market timing perfect and the pain acute?

4. Is there a moat that survives 3+ years?

5. Can I sketch the exit on a napkin?

4+ yeses → due diligence. 2+ nos → “We’ll pass, but keep us posted.”

• Your Move: The 1-Page Teaser That Actually Works

[Your Logo]  |  We’re the Stripe for AI compliance

1. Traction
   ┌────────────────────────────┐
   │ $420K ARR → $3M run-rate   │
   │ 22% MoM growth x 8 months  │
   │ 3 F500 pilots live         │
   └────────────────────────────┘

2. Team
   • Jane: Ex-Plaid, scaled to $100M ARR
   • Raj: PhD NLP, 3 exits
   • Advisor: Former CCO at OpenAI

3. Market
   “$2B spent on AI audits today, 40% CAGR”

4. Ask
   $1.5M @ $6M pre → $3M ARR in 18 mo

Cold-email this to partners who’ve funded your direct comps. 80% of checks come from warm intros… but the other 20% start here. David Cummings’ perfect one-pager template.

🚀 aised $0 yet? Start with the teaser. Already fundraising? Audit yourself against the 30-second filter.

The game is brutal—but it’s knowable.

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Posted on Sunday, November 23, 2025