Frontline Ventures conducted a survey of 206 global startup founders, revealing which factors are the most important to pre-seed and seed founders when choosing between VCs.
Over half of respondents (53%) picked the fund’s understanding of their sector and business as one of the top 3 choices in choosing between VCs.
With my Remagine Ventures hat, a specialist fund in gaming, Metaverse/Web3 and consumer tech, I was happy to see that deep sector understanding and a relevant network matter most at the earliest stage!
What’s interesting is that the importance of sector expertise remained consistent (top factor) regardless of the amount raised and previous experience in fundraising of the founders. It changes however, in North American startups, which prioritise potential customer intros, the second most important factor overall.
Poalim Hi-tech recently asked me to share a tip on fundraising with early stage founders and I emphasised the importance of Founder-Investor Fit, especially in the early stages:
“In a tougher fundraising environment, founders should think about founder-investor-fit, as that early investor is likely to be there for the long road.
At the early stage, working with sector specialists funds can be a big plus: they are industry-specialized, bring a relevant network and are already predisposed to believe in your space as they are betting their fund on it.
Other than chemistry, in order to assess whether there is founder-investor fit, always get references on the investor from other startups that have dealt with them. Even in a tough market, deals get done and doing your homework upfront is likely to make the entire process more efficient.”
Eze Vidra, Managing Partner at Remagine Ventures
Ultimately, there are a lot of reasons founders choose a partner/firm, and it’s not always possible to capture the real motivations in a survey, but I think it makes sense that sector expertise, a targeted network and a belief in the future of the market/sector play a big role in choosing a supporter and sparring partner in seed/pre-seed.