Why does one startup raise millions and another raise nothing? Let’s go through 4 deals I looked at this morning so you can see how an investor thinks.
I scrambled up the details of these deals a little so you won’t be able to identify the companies. But there’s enough real info here to show why some startups get funded and others don’t.
Let’s get started!
1) The Gamers. The first startup I looked at this morning is a video game startup. It was an interesting concept, but I passed on it.
I avoid investing in videogames.
Don’t get me wrong, they can be a great business. But I don’t play games and don’t have an interest in them. So what are the odds I’m going to identify the next Angry Birds?
What’s more, the company is based in Eastern Europe, a market I’m not familiar with. It’s also pre-revenue, which is usually too early for me.
This is something you’ll see pitching investors — each person has his own interests and areas of focus. Find someone who invests in startups like yours, not just any old investor.
On to the next…
2) The Musicians. The next startup is a tool to learn to play instruments with friends.
I stay away from music as a category for much the same reason I avoid videogames. I’ve never played an instrument and rarely listen to music. I’m more of a podcast guy.
So what are the odds I’m going to identify the great startups in this area?
The company has some great early user numbers. But it’s also pre-revenue, which is too early for me.
3) The G-Men. The next startup is an interesting govtech SaaS tool.
Unlike videogames and music, SaaS is right up my alley. What’s more, these guys have some real traction: $50,000 ARR.
The product is impressive and the founders have strong technical backgrounds. But $50,000 ARR is early for me.
I like to see $200,000 to $500,000 ARR in most cases. I’ve had better luck investing in startups with a little more traction.
So, I passed on this company for now. Maybe next round!
4) The Scientists. This was the most interesting startup I saw today. They’re making a new drug for appendicitis, a common condition.
The founders did research at top universities. What’s more, the company had some great early mouse data. The lead investor is top tier.
Lately, I’m getting more and more interested in biotech. But for now, I’m just carefully reading through a lot of deals.
I want to get a sense for what a great deal looks like in bio. That comes from seeing a lot of startups.
I expect to start making some biotech investments this year. But I don’t want to be in a rush.
So, I passed on this for now, as intriguing as it was. Who knows — I might be kicking myself in a few years!
Wrap-Up
I passed on all 4 of these deals.
That’s a typical day for an angel or VC. Most of the time, you’re saying no. A typical investor will invest in 1 out of every 100-200 deals they see.
Notice how I ruled a lot of these out right away? Most of these startups were not in the categories I focus on.
If you want to raise more money, contact investors that invest in companies like yours. For example, if you’re a pre-seed SaaS company, look for investors who have done lots of pre-seed SaaS deals.
Carefully targeting investors will get you raising more cash in less time.
More on tech:
Is Biotech Having its ChatGPT Moment?
The Coolest Startups from YC W25: Part 2
Using Grok 3 to Manage My Stock Portfolio
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