Our Investment Criteria: The 4 Things That Make Us Say Yes
Raising funding for an early stage startup can be extraordinarily time consuming. Two of the most prolonged parts are creating a target list of investors and then getting introductions.
We’re trying to make the latter more efficient with our “no intros needed” policy, so in this post we’d like to address the target list. We’ve spent the last month reviewing hundreds of pitches from entrepreneurs all over the globe. In doing so, we realized it would be helpful to clarify exactly what we look for so founders can quickly understand if they’re a fit for Jane VC.
This is consistent with our commitment to transparency and efficiency. Our hope is that this post helps founders quickly assess whether or not to pitch Jane VC.
First Screen: Basic Criteria
Our first screen determines whether a business fits our basic criteria:
- Is there at least one female founder?
- Is it a software business with a strong tech component? We don’t invest in consumer products, brands, hardware, medical devices or biotech. This is not to say these aren’t good investments — they’re just not our areas of expertise.
- Is it at the pre-seed or seed stage? We define this as raising a total round size of $500K-$3M
If a company matches these basic criteria, we dig in further, and look for four characteristics, in the following order.
In Depth Review
- A Talented, Determined and Passionate Founding Team
This is by far the most important factor for us. Why? We are investing at the early stage where there are lots of unknowns. The product (or even problem being solved) is likely to change, but the founding team is the one constant. We’re really investing in entrepreneurs and their ability to successfully navigate the early stage waters.
What specifically are we looking for in a founder (besides identifying as a woman)?
- Grit — Building a startup means creating something out of nothing, so we look for people who can roll with the ups and downs, and who thrive on ambiguity and uncertainty. The women we invest in will stick it out, even when it isn’t easy.
- Hustle — Of course every investor wants to see traction, but some of the companies we’re investing in are too early to have meaningful traction. Hustle is our proxy. We look for women who can build a product and reach customers with limited resources. We want to see them make things happen despite significant headwinds.
- Unique insight — We seek founders whose businesses stem from their unique insights about a market or distinct views of the world. These insights might include things like market dynamics, customer acquisition strategies, product and/or technology development. We’re willing to bet that a unique point of view will increase an entrepreneur’s likelihood of success.
- Passion — It’s hard to quantify passion, but this is one where when we see it, we just know. It’s the why behind what an entrepreneur is building. It’s what keeps her jumping out of bed each morning, even when things aren’t easy. It’s what makes people want to join her even when she is solving the most challenging of problems. We invest in women who embody this passion and inspire their teams to feel similarly.
2. A Problem We’re Excited About
First of all, we’re most interested in companies solving big problems, rather than small ones. That is probably obvious.
Second, and maybe less obvious — it needs to a problem that we’re interested in. When we make an investment, our commitment goes beyond the capital — we are actively engaged in helping and supporting our founders. We’re in it for the long term and need the interest to match.
We know this can be frustrating and confusing to entrepreneurs who fit our other criteria but ultimately do not get investment from Jane VC. In fact, we’ve experienced it ourselves when raising money as entrepreneurs and for our current fund. Our best advice is to try to get a sense for our interests. Read our blog, follow us on social media, look at our other portfolio companies and subscribe to our newsletter. Also, remember that if it’s not a fit for us, it isn’t personal and there will likely be other investors who are interested.
3. Customers Who Love Your Product
We are big believers in having a small number of people who love a product, rather than a large number who like it.
Because we are investing very early, many businesses don’t have many (or any) customers yet. That is okay. If the product is just an idea, what testing has the team done to determine that this is something people can’t live without? If the product is live, what would happen if the company took it away — would customers be upset and beg to get it back? This type of business gets our attention.
Let’s be real here. Early on, many startups start with people who like their product, but don’t love it yet. This scenario is okay too, as long as the team is continually getting feedback and improving it with a line of sight towards the holy grail of “love.”
4. Moving At High Velocity
We think of “velocity” as how fast the company has moved up to this point. We use this to infer how quickly it is likely to move in the future. Because we are set up as a venture capital fund with independent limited partners (LPs), we have an obligation to invest in businesses with the potential for exponential growth. The name of the game in venture is maximizing the return over the minimal amount of time. We meet many founders building businesses slowly and steadily, and while we know these can become great businesses, they aren’t well suited for venture capital.
Note: We realize there are some industries where businesses need to be built methodically (“move fast and break things” doesn’t always hold, especially in highly regulated industries). That said, the idea of momentum is universal and is not always about speed.
The Things We Don’t Care About
- Market size — While we want the vision and ambition to be huge, the market size doesn’t have to be. Many of the biggest opportunities
come from companies who are successful at creating
completely new (and enormous) markets (think Uber or
- Pedigree — We hope everyone knows where we stand on this by now! A Stanford or Harvard degree isn’t necessary to be a great founder. We also don’t need to see Facebook or Google on your resume.
- Having a co-founder — It’s easier to build a business with an amazing co-founder, but anything short of amazing? We think it’s fine to go at it alone. Some VCs will penalize you for it; we won’t as long as you can build an exceptional team around you.
- Location — We don’t believe being an entrepreneur is a geographic distinction — huge companies can be built outside of the Bay Area.
We hope this helps clarify who we’re looking for so that all of you entrepreneurs can better determine if Jane VC is likely to be a fit.
If your company fits our criteria, please pitch us directly. You can do so here. We look forward to learning more!