Fundraising, Resources

Flowchart: How a Seed VC Makes Investment Decisions

Ed. note: In 2013, Rob Go published a flowchart articulating his VC decision making process. Below, we’ve updated that graphic with new information in order to stay current and provide more context and transparency around each node.

At NextView, we hold regular team offsites to step back and think about how we do everything from invest in seed-stage companies to create better platform initiatives in support of the Boston and New York startup ecosystems. Along those lines, we’ve created the below flowchart as an update of my original. As with that version, this is the internal dialog I tend to have with myself when evaluating companies. And just like our offsite helps us articulate how we make investment decisions as a firm to each other, this flowchart helps me remember the attributes I’m looking for and how my opinion about different attributes feeds into an ultimate decision.

While some of this process remains internal to my/our process, I’m again sharing a high-level idea of how I make decisions, particularly around whether or not to invest more time in meeting with a founder again.

Five of the first questions I ask are:

  1. Is this an awesome founder?
  2. Is this a market I want to have an investment in? This incorporates both the total size potential of the opportunity and the attractiveness of the market itself.
  3. Is there strong founder-market fit?
  4. Is this an authentic idea to the founding team? Did they have some experience that led them to want to solve this problem? This can mean all the difference between actually running through walls to succeed or just trying to make a quick, easy buck but without the conviction needed to fight towards traction and growth.
  5. Does the capability of the founding team map well to what’s needed to succeed in the early stages of the business?

Here is the decision tree with some commentary on the different processes and nodes. (Click to view the larger version.)

nextview seed stage vc decision tree

Rob Go

Thanks for reading! Here’s a quick background on who I am: 1. My name is Rob, I live in Lexington, MA 2. I’m married and have two young daughters. My wife and I met in college at Duke University - Go Blue Devils! 3. We really love our church in Arlington, MA. It’s called Highrock and it’s a wonderful and vibrant community.  Email me if you want to visit! 4. I grew up in the Philippines (ages 0-9) and Hong Kong (ages 9-17). 5. I am a cofounder of NextView Ventures, a seed stage investment firm focused on internet enabled innovation. I try to spend as much time as possible working with entrepreneurs and investing in businesses that are trying to solve important problems for everyday people.   6. The best way to reach me is by email: rob at nextviewventures dot com

    • It’s interesting how your questions can’t be answered by a pitch deck.

      Business is about people, and less about product.

      People build. People break. People keep going or quit.

    • LisaLaMagna

      If “awesomeness” is the first screening process, how does one overcome implicit bias?

      • Thanks for reading, Lisa! To answer your question–

        First, there will always be some bias especially at the seed stage (where there’s less concrete proof of a startup’s trajectory and long term success and more promise and hypotheses — one reason why NextView parter Lee Hower likes to say you’re out to find the “true believers” during your seed fundraise as a founder – http://venturefizz.com/blog/search-true-believers )

        That said, “awesomeness” isn’t telling the whole story because it’s too purely subjective. The starting node above — exceptional founder — does have some of the softer skills/traits, but it also extends to more objective aspects like history of success building companies or value at companies, alignment of skills with their current venture, track record hiring top talent, demonstrated knowledge of target customer base, etc. So if done right, seed investing involves both subjective (where some biases may indeed inform investment decisions like sectors or types of founders) and objective (which helps keep those biases in check or better informed).

    • Very Interesting. Thanks for the information!

    • Kelli Cook

      Great info!

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