At Birchmere, we typically describe ourselves as “classic seed” investors, meaning that we most often invest as part of $1M — 2M rounds. While we certainly have invested both earlier and later in a company’s lifecycle, these transitional (i.e., first institutional capital) rounds are our sweet spot.

There is a spectrum within that target. Some startups will have raised earlier rounds of various sizes. Some will have recently completed an accelerator program such as Y Combinator, Tech Stars New York, or AlphaLab. Others may have recently completed a “pre-seed” round of a few hundred thousand dollars.

To us, what ultimately matters is whether the startup has validated enough of their key assumptions to warrant our participation in that $1M — 2M round. In my experience, it’s often predictive to look specifically at how they have spent their investment dollars to date as a leading indicator for how they’ll invest investment dollars in the future.

Entrepreneurs shepherd ideas from paper to pavement. Investment fuels the experiments that make it happen. If the entrepreneur has not been a great steward of investment dollars received to date, that’s a red flag. It is especially concerning if the entrepreneur doesn’t appear to have reflected on why investments in some experiments were higher leverage than others.

Don’t confuse successful experimentation with validated learning — they aren’t the same thing. The most interesting conversations often occur around assumptions tested but not validated, and the learning and strategy adjustments spurred by that experience. It’s certain that every hypothesis an entrepreneur has going forward won’t end up being correct — discovery is the core of innovation. Successful entrepreneurs learn and adapt when they encounter obstacles. In my experience, the ability to do so is key to success and past performance pretty reliably predicts how they’ll react in the future.

This is part of a series of Medium essays I’m doing on 5 key seed investment questions.