How Do You Decide Who to Give Money To?

Venture capitalists on their investment process

Illustration by Jay Wright

How venture capitalists choose which startups to back.

Adele Oliva
Partner, 1315 Capital
“I look for great teams, because they can create outstanding returns as well as save your bacon in tough situations, particularly in the growth stage, where I focus. In health care, we live and die by management’s experience and ability to execute. No matter how compelling the opportunity, there is no substitute for a stellar team.”

Tony Grover
Founder and managing director, RPM Ventures
“The most critical element is the relationship we build with the entrepreneur prior to funding, like the two years we spent getting to know Nathan Stoll. By the time he decided to start [social shopping site] Luvocracy, our investment was a foregone conclusion. Startups are very difficult and need to overcome multiple challenges in their evolution. We work hard to reach the point where we—and the entrepreneurs we back—feel that the business, people, and relationships are the right fit.”

David Cremin
Managing director, DFJ Frontier
“I fund a startup when I see the kind of passion from its founders that enables forward momentum. Take Larry Drebes at Janrain, a customer-profile management company in Portland [Ore.]. Larry worked for years on his software and hounded me until we seed-funded Janrain. That kind of drive is necessary to be a successful entrepreneur.”

Illustration by Jay Wright

Dan Borok
Partner, Millennium Technology Value Partners
“Research, research, research. We conduct many months of primary research to identify where value will be created and which companies are best positioned to benefit. A great example is our investment in Facebook: Although it’s hard to believe now, Facebook was a controversial investment back then—MySpace had more users. But we had done two years of work and understood Facebook’s trajectory. You can never have absolute certainty, but doing enough work to make yourself as certain as possible is a critical factor in investing.”

Alison Wagonfeld
Operating partner, Emergence Capital Partners
“I ask myself, ‘How will I feel in a year if I pass on this opportunity?’ Forcing a time gap often helps give me the necessary discipline to look beyond an in-the-moment yes or a knee-jerk no.”

Jodi Sherman Jahic
General partner, Aligned Partners
“I like to look for ecstatic customers. Many startups have passionate founders—and working with those founders is the best part of my job—but a company with passionate customers always gets my attention. Significant bonus points go to companies whose customers can quantify why they are so happy with a meaningful business metric, like SA Ignite, a health-care software company I decided to invest in after hearing customers rave about the time and money saved by using it.”

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