Support info for Anatomy of a Pass

I’ve recently written an analysis of pitches I’ve taken in the last several quarters and what drove whether I invested or passed.

Below is a more detailed description of the scoring rubric I built and used.  Happy to take questions and receive sugestions on how this could be improved in the future.  Also, on Scribd, I’ll post the raw data anonymized and this scale, so that people can dig in.

Again, hope this is useful.

 

 

 

 

 

Score

Team Market Traction Product Likelihood of Term Sheet

5

Founder(s) are known entities, prior CEO startup experience.  E.g., Max Levchin, Mike McCue, etc.  No questions on character, work ethic, etc. Firebreather.  If achieved, opportunity would change the world, change an industry, etc. Breakout market traction.  Most likely shown not just through Unique Users or Downloads, but also through engagement (time on site, repeat visits) and user growth. Market leading product in market. Agree to invest & offer term sheet

4

Founder has strong technical chops, startup experience, and unfairly specific subject matter expertise on the business and customer s/he’s chasing.  Core foundation of team is in place.  Highest calibre of work ethic, character, etc. Exciting.  Opportunity to build a significant business, and potentially very interesting independent company. Early indications of strong market traction.  May be on a short time horizon, or after a short burst (e.g., getting featured on iTunes App Store), making telemetry a bit early. Product in market, getting traction, vision towards market leadership Pass, but with close monitor

3

Founders have strong tech backgroudn, may or may not have startup experience.  Team may be incomplete.  No quesiton on work ethic, character, etc. Medium.  Some opportunity to build an interesting business.  Some question about the size and scope of the opportunity. Early indications of product/market fit, though too early to tell.  Usually very shortly after launch. Product in market, getting traction, vision towards market leadership Pass, passive monitor

2

Founding team has some specific background shortcoming, which they are prepared to address.  (E.g., too few technical people, overabundance of MBAs and/or Advisors.)  May have an open question on work ethic, capacity, character. Weak.  Difficult to see how achieving business success with the opportunity yields large scale disruption, impact, or opportunity. Zero or very early market traction, with founders showcasing compelling model and approach towards how they plan to address and adjust. Product in demo / alpha/non-public form. Pass, cold

1

Founding team has significant credibility isuses in terms of core skill set and requirements, may also have core issues on work ethic, basic organization skills, character, etc. Missing totally. No or weak market traction and weak understanding of how important focus on market traction and product/market fit is. No demoable product. Pass, avoid

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  • http://whoat.net Lee Blaylock

    great post. thx.

    3 interesting data points on the term sheets you offered would be:

    1. sources of the intro -e.g. who referred you the deal and that person’s relationship and interaction history with the firm.
    2. did you or anyone associated with your firm know anyone on the founding team already
    3 how many people you know in common with the founding team and CEO.

    when a dispassionate observer looks at deals like Cherry (mobile based car washes that Shasta lead a $4.5mm round…ex yammer folks, but really…????), there are often times when the investor is way too focused on the team. Color is another example and there are scores more.

    love the analysis and thought framework. Keep up the great work!

    Lee

    • jjamison101

      These are great questions–social proof and connection. Great idea! Subject for future post and analysis, Many thanks!

      • http://whoat.net Lee Blaylock

        My questions are really about relationships and connections. You may mean social proof to be the same or similar, but when I think of social proof, it pertains more to multiple people or entities liking something. Venture investors often times chase deals and do things in waves (hard drives, online pet stores, online grocery stores, photo sharing, etc) b/c they want to be in the “space” and not be left out. When in fact, that strong social proof has nothing to do with the real social proof which is customer demand and an advantaged offering that adds value and drives growth, margins and an unfair CaC to LTV ratio. Relationships often drive a VC decision (albeit mostly in seed and Series A) b/c, as there’s no product yet, they need to be confident in team’s ability both execute and listen.

        • jjamison101

          Good input. Depends on how you define “social proof,” i suppose. I generally tend to think of Social Proof as the quality of the introduction, who is actually on the team, and what partners or customers are committed to actually using the service. More being better on all fronts.

  • http://www.libertyjanepatterns.com Jason Miles

    Thanks Jay, this is really really helpful. Much appreciated…and the article in TC was great too.

    • jjamison101

      thanks much!

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  • Pat513

    Are these qualifiers for A-round investments?