You are an early-stage startup seeking seed investors. Not an easy endeavor, at Vibranium.VC we know that first-hand. Your solution is great, you have a clear growth strategy and strong profit potential. If you think these are the key evaluation factors for investors — you are absolutely right.
But there is something else equally important — the startup’s team. And that’s exactly what we will dive into in this article.
The 6Ts of startup screening
When evaluating a potential investment opportunity, we follow the 6T methodology, which was originally developed at Stanford University. Here are its main criteria:
TEAM — an A-team that has a vision, passion, and necessary skills
TAM — a large, growing, accessible, and strategic market
TECHNOLOGY — disruptive technology and/or a disruptive business model
TRACTION — customer, technical, market or product validation
TRENDS — why now? Micro shifts that support the thesis
TERMS — does the investment fit us? Is there any hair on this deal?
While performing due diligence, we carefully evaluate each element of the framework to understand whether we are comfortable investing in a given startup. It has to be a match!
Criteria within the 6T methodology follow a hierarchy of importance. Assessing the team itself is a priority for a number of VCs. If this element seems weak, in most cases the investor won’t even look at any other factors that follow.
By screening approximately 35 startups every month, we figured out that the majority of founders do not prioritize these criteria and focus mainly on technology, specific features, and the product itself. This misguided approach can actually result in the startup’s inability to secure the necessary funding.
Why the TEAM?
Is this an A-team? Do the employees have enough experience and a solid track record? Are they future champions? Have they ever failed? Do they run other businesses? All these questions are running through EVERY investor’s mind — trust us.
When it comes down to choosing between a strong product and a strong team, at Vibranium.VC we always go for the latter. A good team can pull off an average business model and improve the product by being resilient and experimenting.
We have witnessed many times how a great product idea never saw the light of day because the startup’s team could not take it to the next level of implementation. The ability to build a sustainable business around the product — this is what investors value most.
There aren’t many metrics that can be measured in a seed or pre-seed stage. This means we have to rely on assessments of “soft skills”: with this number of people, this kind of knowledge, and this experience — can the team make it happen?
Is motivation important?
One of the things that we often discuss with startups is the importance of the founding team’s motivation. Sometimes this factor is neglected. But in tough times of hardships and rejections that every startup goes through, the motivation of the founder and their team is key to success.
What drives you? Is it just making money, or do you have a bigger mission? Or maybe a personal attachment to the problem that you try to solve? Maybe you want to solve a global issue and help your community. Honest, self-aware answers to these questions are crucial.
If it is just about making money, then that motivation might not be enough. Investors want to see passion, adaptability, and good team dynamics. Some want a specific mix of skills. But most importantly, the reality is that the majority of investors want to see a team that has been there before (serial entrepreneurs). And no, this doesn’t mean having zero failures in the past — it means learning lessons and gaining experience from these failures in a way that later leads to success.