Cut through the noise and understand the filters investors actually apply — from market size to timing, and why “good” businesses often get passed over.
1. What the Question Means
Every venture investor is filtering for one thing: “Could this startup return our fund?”
If the answer is no, they’ll likely pass — even if they like you, even if the business is “doing well,” even if the market is interesting.
- The question is about math, not emotion.
- This is why VCs don’t invest in solid businesses. “Good” often isn’t enough.
- They need to believe your company could one day be worth $1B+, and that they’ll own enough of it to drive returns at a fund level.
2. What Does it Take to Achieve These High Heights?
There are two main markers:
- Size
- Target ≥ $100 M ARR while still compounding at 50 %+
- For SaaS that can translate to a $1 B+ exit; hardware or deep-tech often need more revenue to hit the same mark.
- Velocity
- Roughly 7–8 years to reach that scale.
- Funds have a 10–12-year life; they need to find an exit at the end of the life of the fund.
Practical takeaway: Show a credible model that connects today’s traction to $100M ARR in < 8 years.
3. What Do VCs Need to Believe to Invest
Insider Tip: 👀 VCs don’t need to believe on day one. They are typically looking for a sparkle at the interface between team, market and product, something that is so fresh and different that it could explode in popularity and capture the zeitgeist of the market.
Over time traction, growth and continual reinvention will be the markers of success and keep a company either on OR off the venture path.
But right at the beginning it is about squinting and seeing a path to dominance in an important market.
4. Why VC Feedback Often Conflicts
Feedback from venture capital funds can be disorienting and is often conflicting. This is for two major reasons:
Fund Strategy and Investor Composition
- VC firms differ in approach: some write early cheques, others invest post-product market fit. Some diversify, others concentrate.
- Inside a firm, each partner has their own lens. You need one person to champion you internally.
- Conflicting advice from VCs often reflects these internal differences — not that your startup is wrong.
How to Decode a Fund’s Strategy
- Portfolio scan — sector, stage, geography.
- Public memos/posts — recurring themes and language.
- Ticket & role — do they lead or co-invest?
- Back-channel calls — ask founders where diligence pressure landed.
Investor Notes: Blackbird example: We've backed pre-seed to Series A across deep tech (OpenStar), infrastructure (Kwetta), B2B SaaS (Tracksuit), AI monitoring (Watchful), and consumer upskilling (NextWork). Our strategy focusses on backing the most ambitious product obsessed founders right at the beginning.
Fund Size = Fund Strategy
- VCs promise their backers ~3.5× net returns; gross that’s about 5×.
- Because power laws dominate (80 %+ of value in 1–2 holdings), each cheque must aspire to return the fund.
This dictates the scale of company an investor will back:
- For a large fund (e.g. Blackbird), a “fund returner” could mean 10% ownership in a $4B company.
- For a small fund (e.g. Outset), that could be 5% of an $800M outcome.
5. Quickfire Realities
- Do NZ-only outcomes excite VCs?
- Do VCs care about <$500M exits?
Rarely. Exceptions include fintech like Sharesies, Emerge, Debut. Most other sectors need global scale early to hit $1B+ potential.
Yes — those are great outcomes. But for top-tier fund performance, a $50M+ fund needs at least two >$500M exits to hit return targets. For a larger fund the reality is a $500M exit is great but not sufficient to generate world class returns.
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