How RDV Venture Fellows Think About Early Stage Startups

This fall, I joined Rough Draft Ventures, General Catalyst’s student-led program that backs founders at the university level. As a Venture Fellow from Tufts, I act as an ambassador for the Rough Draft Ventures’ community, supporting student founders on campus, working closely with student groups, and collaborating on events & programs.

I also work with the rest of the Venture Fellows team, a group of students from a variety of backgrounds and schools, as we listen to student founder pitches and make recommendations for backing high potential founders.

Over the past few months, I’ve met dozens of the talented entrepreneurs and student teams from across the United States. Throughout these meetings, I’ve begun to develop a framework for assessing early stage startups:

  • Why do we think this team will succeed?
  • Why does this problem need to be solved?

Here’s a detailed look at how we think about the new companies we meet:

Team

While a founding team’s previous experience is important, we’re most interested in learning why the team cares about solving the particular problem they have chosen to focus on, how they met, and why they began working together. If the team has hired employees, we’re curious to know what drew them to this particular startup and the skills they bring to round out the team.

The process of building a company can take years, and even then, statistics show that most don’t end successfully. Y Combinator founder Paul Graham sums it up well, noting that life doesn’t get any easier post-launch:

“Y Combinator has now funded several companies that can be called big successes, and in every single case the founders say the same thing. It never gets any easier. The nature of the problems change.” — Paul Graham (Before the Startup)

Since the process of starting a company is so difficult, commitment and passion are imperative. Learning how and why a team came together to solve a particular problem helps us gauge the team’s determination and passion for what they are building. Below are some of the founder responses that have resonated with me:

  • “My parents and grandparents worked in this industry, and I have grown up hearing them talk about the same problems.”
  • “After being in medical school for three years, we kept hearing from every hospital we talked with that this needed to be solved.”
  • “I was my target customer growing up, and I don’t want others to experience the pain points I had to deal with.”

Team Milestones/Accomplishments.

When backing teams at an early stage, there aren’t many data points that can be used to assess a company. However, every company that Rough Draft Ventures has backed this year has had some form of a Minimum Viable Product (MVP), enabling founders to quickly test their hypothesis quickly and iterate on their product.

We recently backed Noken, built by a team out of HBS building personalized itineraries for people traveling to new destinations. During their pitch, their team showed us the MVP they had used with their first customers. It was a PowerPoint that included all the different cars, hotels, and activities they offered. To book a trip via Noken at the time, the CEO would call the customer, walk them through the PowerPoint, and manually book their choices for them. We were very impressed by the team’s drive to get a pieced-together product out to their customers to test their initial hypotheses.

If you think about your MVP in terms of a scientific experiment, we want to know what hypothesis you tested, the way that you conducted your experiment, and the conclusions you came to. If your experiment did not end with the conclusion you hoped for, tell us what you learned and how you are going to incorporate these new insights into the next iteration of your product.

If your company is further along in its lifecycle and has conducted beta tests, information on conversion can be very helpful. This can include contracts your customers have signed with you and revenue earned.

Planning for the Future.

Your vision for the future is critical, as well as your short-term plans and goals (2–5 months) for arriving there. Even though these plans may change, we want to know how you will use your funding, your customer acquisition strategy, and what the next iteration of your product will be. In most scenarios, your MVP or beta test will provide trials for individual hypotheses of your larger vision. Share how these milestones are focused and can logically lead to the realization of your larger vision.

Competitive Landscape

Every company has competitors. It is very important to clearly articulate who your competitors are, what they are doing, and how your product is different. As tempting as it might be, do not do this:

https://steveblank.com/2013/11/08/a-new-way-to-look-at-competitors/

To illustrate your competitive landscape effectively, highlight the two most important aspects of your product and explain how your competitors stack up. Most of us will not have used your competitor’s products before, so show us how they leave customer pain points unsolved.

This is a great opportunity for your team to share your knowledge of the target user and market. Are there shifts that you are seeing in your industry that your competitors may or may not be reacting to? Are there important customer needs that your competitors do not understand or address? Make sure to back these insights up with data or surveys.

Build Your Company with Rough Draft Ventures

As you take the first steps towards building your company, I hope this post provides a helpful framework for getting started. I’m looking forward to getting to know and supporting more student founders this year on campus. If you have questions or are interested in talking with us, feel free to email me.