What Makes a Startup Idea 'VC Backable'?
What exactly makes a startup idea attractive to venture capitalists? Understanding this can be the key to unlocking the doors to VC funding.
I’m a successful investor, and you’re an aspiring startup founder. We’ve bumped into one another at your favorite coffee-shop and strike up a conversation as the barista extracts my double-espresso. The relationship dynamic becomes clear; you want my money now, I want your money later.
I ask you to, “quickly, describe your startup.”
Take a minute and imagine your “big idea.” Got it? Great. Now in as few words as possible, say it out loud!
How long did you take? Was your description muddled with clarifications and abstract examples? Did you actually answer multiple questions instead of the one asked? Questions like:
A brow-raising response to, “what’s for breakfast?” would be, “we’re reinventing the delivery of morning nutrition for people experiencing hunger by bringing together a gas-powered flame, a non-stick-skillet, and unhatched chickens.” However, in startup land, we accept — and even encourage — these verbose answers. Especially when the answer might as well be “an omelet.”
One’s ability to describe their company in only a few accurate and honest words is a rehearsed skill. To illustrate five essential tips, I’ll use my own startup, 8base, as the punching bag.
Recently, the team and I tried to describe our company in as few words as possible. This copy was needed for the front page of our website. Immediately, we had a candidate.
“A low-code platform for modern software products.”
Founders often mistake name-dropping industries for describing their startups. The strategy doesn’t work. Why? Doing so provides no differentiation; just associations.
An American diner marketed as “a quick-service restaurant for hot food” doesn’t make any concept clear. It says there’s a restaurant and reassures what’s implicit; food will be served.
Our team agreed that this first attempt didn’t cut it. We needed a description that stands out, not an abstract reference to low-code.
A tendency that most founders — and writers — suffer from is an over-reliance on adjectives. The worst manifestation of this comes in the form of buzzwords. With that in mind, let’s look at our second attempt.
“A scalable software development platform.”
Writing is hard. It takes thoughts; lots of them. After dropping low-code, merely saying “a platform for modern software products” felt empty and undifferentiated. So we tried to stitch in an adjective.
Scalable is a word; and a hot one at that! However, when used as an adjective, it’s meaningless. Adjectives do not differentiate and rarely contextualize, they emphasize. Sometimes that’s useful. In a startup description, they have no place.
Several scalable(s), futuristic(s), and intuitive(s) later, our description was still terrible. None of our words arranged in any order described us.
It’s a beautiful thing when Acronym meets Buzzword, and Insignificant-One-Liner is born 9-minutes later. Our team believed we had landed on an impenetrable and bumper-sticker quality description that, while not pretty, stood on its own.
“An IaaS backed SaaS platform for API driven applications.”
Remembering that how, why, and what are different questions with separate answers isn’t trivial. “SaaS” is, again, an industry. However, “IaaS backed” is a how, and “for API driven apps” a why.
To frame this in the ongoing restaurant analogy, we’re “a recipe enabled eatery for hungry people.”
Needless to say, while reading this description aloud, my cat killed itself.
Back at the drawing board, we decided that some juicy word or phrase was missing. Something that explained 8base without the buzzwords, adjectives, and other fluff.
“Everything for go-to-market apps in a single API.”
Every founder, at some point, tries to invent words instead of finding them. There are words that exist that, when used together, describe exactly what your company does. Taking the time as a founder to find those words is an essential step in solidifying your startup idea.
Go-to-market apps is not a real term. We made it up. Our definition goes something like:
“Go-to-market app; a software application that employs a fully designed and branded user interface, should be able to web-scale when needed, and is customer-facing — though may be internally facing — and thus would benefit from many things; like analytics, structured data, roles, and permissions, etc.”
Is that what you guessed? Probably not! Here are some a/b test results for you to chew on:
Founders are fundamentally inventive and creators. This makes the “invent my own vernacular” trap one they quickly fall into. Adding to that, it feels great! As if the big-idea weren’t big enough already, it’s now giving birth to a new language!
Restricting oneself to the building blocks of Webster is essential. Describing one’s startup is something that needs to get done for others, not ourselves. Customers will never provide you the opportunity to explain made-up words. Use language that customers know, and know well.
At early-stage startups, founders aim to make their ideas seem really big. Instead of narrowing the focus on messaging, they shy away from things that challenge anything being possible.
“Everything applications need, except a frontend, in one API endpoint.”
8base provides the backend resources developers need to build web and mobile apps. Those resources are available through a single API endpoint. This gives developers total flexibility over how they choose to develop their client apps. Why? Because we don’t do frontend.
Our thinking changed entirely when we asked ourselves, “what don’t we do.” Interestingly enough, it helped us much more clearly understand what we do — everything but that. By taking sides, we were able to clearly see where we stood in relation.
Anyone who’s ever interviewed knows the awkward dread of being asked, “tell me about yourself?” Unless you’ve taken the time to write and rehearse an insightful answer, you’re bound to kick-off on an esoteric bender. Describing one’s company is no different. It takes a lot of thought, time, and practice.
To not leave anyone’s curiosity un-extinguished, “everything, except health food, in one airstream trailer” is an excellent description of a diner!
Hopefully, some of these tips will help you avoid common pitfalls, and more quickly find your own startups truth.