How I “Grade” Startups When Considering an Investment

Tonight I was emailing with an angel investor friend who‘d asked me to help analyze a company they were considering an investment in. This was part of my response:

It doesn’t light my fire:) …this falls into the category of a LIKE and not a LOVE. So its not for me, but its also something you could definitely take a serious look at investing in personally.

I’d say on a scale from 1 to 100… its a 77–80?

For reference:

[redacted] is a 95

[redacted] is an 88

[redacted] is an 85–90 (if I’d met them at [a lower valuation], they’d be a 98)

[redacted] is an 85–90

100 doesnt exist.

I don’t invest under an 85.

I think other VCs won’t invest under 92 (which gives me an edge)

70–80 is solid but boring to me.

and an angel should probably skew that “OK to invest” number to 75 and higher based on their gut (which could give you an edge).

I just made this up, so take it all with a grain of salt. But its based on instincts.

I had never thought about it in this way before, but when you’re analyzing a couple dozen startups a week, any effeciency hack is worth its weight in gold. I guess I’ve been subconciously doing this for months, but I’m going to start using this scale intentionally for every pitch.

I’ll take into consideration things like: product, team, what problem the startup is solving, traction, referral, strength of the overall pitch/deck, how much of a value add I can be, how much research a founder has done about my tastes/preferences before reaching out to me, length/efficiency of pitch, TEAM, skin in the game, other investors, long-term vision, how strong the founders’ relationship with reality is, TEAM, how crazy (in a good or bad way) the pitch sounds, the grit, the integrity, etc…with each having variable weight.

These could fit under 4 major categories:

Team/story/talent/vibe — 25%

Product/problem/solution/addressable market /competition — 25%

Reality vs Dream/traction— 20%

Nuts and bolts technical stuff that I get a LOT of outside feedback about — 20%

My value add — 10%

X-factor —unlimited bonus points

So if you’ve pitched me, or plan on doing so, keep this in mind. Couple it with my post “Why Do Investors Say ‘No’ More Often Than ‘Yes’?” and you’ll have an advantage. Hopefully this will also help you not take any negative (or neutral) feedback from me or anyone else personally.

I’m the founder and managing partner of Backstage Capital, a seed investment fund that backs high-potential, underrepresented startup founders. I am also a tour manager, currently working with New Zealand Music Award winner Janine & the Mixtape.

For interviews or to set up one-on-one “office hour” sessions at your event, email ARLAN@BackstageCapital.com with the subject “interview request,” or “conference appearance request,” etc.

Venture Capitalist + Tour Manager for Janine & The Mixtape www.ArlanWasHere.com

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