How Investors Really Decide Which Startups Get Funded

If you’ve ever wondered why your startup didn’t get funded — or how to craft a pitch investors actually say yes to — this page is for you.

This is your founder-first guide to understanding how venture capital really works behind the scenes. No jargon, no vague advice — just clear insights into how investors make decisions and what it takes to get a “yes.”

What You’ll Get from Reading This Page

• A clear understanding of how venture capital really works — and whether it’s the right path for your startup
• A practical, inside look at how investors assess startups, make decisions, and what signals they’re actually looking for during fundraising

Whether you're a first-time founder or seasoned operator prepping for your next round, this resource is built to sharpen your fundraising approach and help you see your startup the way a VC would.

Before you pitch, What VCs Want helps you get clear on what investors actually need to believe.

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Section I: Is VC Even Right for You?

Venture capital isn’t designed to build “just” good businesses — it’s designed to fund rare outliers that can reach billion-dollar outcomes. That means most startups, even strong and profitable ones, are not a fit for the VC model.

Most startups don’t meet those conditions. And that’s okay. Venture capital is a tool for a very specific kind of company. It’s not a marker of value, legitimacy, or ambition.

If your growth is steady but not explosive, or your market caps out below $200M, VC probably isn’t the right capital for you. If your product requires hands-on sales or manual onboarding, you may not be able to scale fast enough to meet VC expectations. If your product is easily replicable or your brand doesn’t have a moat, investors may see you as replaceable.

These aren’t personal criticisms. They’re structural filters. VC firms are accountable to their own investors. Their business model depends on outsized outcomes. You can still build a successful company without fitting that mold — and in many cases, you’ll own more of it and take on less risk by not raising venture capital.

Section II: The One Question Every VC Asks

Every venture investor is filtering for one thing: “Could this startup return our fund?”

If the answer is no, they will pass — even if they like you, even if the business is “doing well,” even if the market is interesting. That question is about math, not emotion.

This is why VCs walk away from startups that look solid. “Good” isn’t enough. They need to believe your company could one day be worth $500M–$1B+, and that they’ll own enough of it to make a meaningful return.

To return the fund, your startup needs to do all of the following:

• Operate in a large and growing market
• Scale quickly to significant revenue milestones
• Outperform competitors or incumbents
• Build momentum without relying entirely on human effort
• Have a founder and team that can attract capital, hire talent, and execute under pressure

You don’t need to be there yet. But you do need to paint a believable path — backed by traction, market insight, and execution.

Section III: How VCs Evaluate Startups

Why VC Feedback Often Conflicts

Feedback from venture capital funds can be disorienting and is often conflicting. This is for two major reasons:

1. 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:
• Review their portfolio—this is the best indicator.
• Read their public investment notes for language, themes, and founder preferences.
• Identify their typical check stage and role (lead vs. follow-on).
• Ask founders who’ve raised from them—what they diligence, where they push back.

Blackbird example: They've backed pre-seed to Series A across deep tech (OpenStar), infrastructure (Kwetta), B2B SaaS (Tracksuit), AI monitoring (Watchful), and consumer upskilling (NextWork). Their strategy spans early-stage, ambitious, tech-powered startups.

2. Fund Size = Fund Strategy

• Venture funds must return 3.5x net to their LPs—around 5x gross on invested capital.
• Power law governs VC: most value comes from 1 or 2 companies per fund.
• Example: In Blackbird’s first fund, Canva was >50x more valuable than its next most valuable holding.
• This affects what investors need to believe:
• 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.
• Result: Different fund sizes lead to different definitions of “venture-scale.”

Quickfire Realities

• Do NZ-only outcomes excite VCs?

Rarely. Exceptions include fintech like Sharesies, Emerge, Debut. Most other sectors need global scale early to hit $1B+ potential.

• Do VCs care about <$500M exits?

Yes—those are great outcomes. But for top-tier fund performance, a $50M+ fund needs at least one >$500M exit to hit return targets.

VCs apply six filters to evaluate whether your startup is fundable. These aren’t questions they ask out loud — they’re internal scorecards that shape whether they proceed or pass.

1. Market Size and Urgency

VCs are only interested in startups with massive upside. If your total addressable market (TAM) is too small or too slow-moving, they can’t get the returns they need.

Investors are looking for:

• A TAM of at least $1B
• Evidence that customers are actively searching for solutions
• Market trends that suggest accelerating adoption or disruption

If your customers don’t feel urgency, VCs won’t either.

2. Team

Investors fund people more than products. They want to see founders who know the space deeply, move fast, and attract other high performers.

The strongest signals are:

• Insider knowledge of the market or problem
• Evidence of execution speed (builds shipped, revenue earned, pilots closed)
• The ability to recruit and retain top talent

Having a great resume helps. But being scrappy, self-aware, and fast is better.

3. Problem–Solution Fit

VCs don’t invest in “nice to have” tools. They invest in painkillers — solutions to painful, high-frequency problems.

They’re looking for:

• A specific, urgent problem backed by evidence (customer quotes, retention, usage)
• A solution that is clearly better than existing alternatives
• A reason customers must have this now, not eventually

If your product could be postponed indefinitely, it won’t get funded.

4. Traction

Traction is not just revenue. It’s measurable evidence that real people or companies want what you’ve built — and come back for more.

Traction should be tailored to your business type:

• B2B SaaS: recurring revenue, low churn, paid pilots or signed contracts
• D2C: LTV > CAC, retention curves, organic or referral-based growth
• Deep Tech: lab-scale validation, LOIs, strategic interest from partners
• EdTech: usage in classrooms, decision-maker buy-in, sales cycles de-risked

What VCs avoid is vanity traction: future plans, big logos without usage, or one-off wins that don’t repeat.

5. Timing

VCs need a “why now” — a reason your startup makes more sense today than it would have five years ago.

This could be:

• A new regulatory shift
• A recent technology unlock
• A change in customer behavior or urgency

Without timing, your pitch feels generic — and easier to say “no” to.

6. Business Model Fit

Investors want to see how your business will generate meaningful revenue, with margins that grow as you scale.

They expect:

• Pricing that supports high gross margins
• Customer acquisition that becomes cheaper over time
• A clear path to profitability, even if it’s years out

If you’re still figuring out how to charge or you rely entirely on paid acquisition, expect pushback.

Section IV: What Traction Really Means — By Sector

Many founders think VCs want a polished roadmap or a viral launch. What they actually want is traction that de-risks the investment.

Here’s what that looks like across different sectors:

Section V: Inside the VC Funnel

Most startups don’t get funded—not because their ideas are bad, but because they don't navigate the funnel well. Here's how the process actually works and how Blackbird, a leading VC, runs a tight and founder-friendly version.

Treat these stages as a checklist — especially for timing follow-up and expectations.

Section VI: What a VC-Fundable Deck Covers (With Case Studies)

A fundable deck isn’t about beauty or hype. It’s a tool to prove — quickly and clearly — that your company has venture-scale potential. Every slide should exist to reduce investor doubt and increase investor confidence.

Here’s what your deck needs, and how top founders build each slide. Below each point, you’ll see examples from three fictional but highly realistic startups:

• QuantumLink (Deep Tech)
• SaaSify (B2B SaaS)
• FitSync (D2C)

1. Title Slide

One sentence on what you do, for whom, and why it matters. No buzzwords.

• QuantumLink: “QuantumLink secures global data transmission through photonic quantum encryption — for telecom and defense infrastructure facing quantum-era cyber threats.”
• SaaSify: “SaaSify automates manufacturing workflows to cut errors by 40% and unlock 25% cost savings for industrial producers.”
• FitSync: “FitSync is the first AI fitness app personalized by real trainers — driving higher engagement, repeat purchases, and 6:1 LTV:CAC.”

2. Problem

What pain exists, who feels it, and why existing solutions fail.

• QuantumLink: “Current networks can’t survive the arrival of quantum computers. Encryption as we know it expires by 2030, exposing trillions in assets.”
• SaaSify: “Manufacturers lose $50B+ annually to avoidable delays and errors from disconnected tools and manual work.”
• FitSync: “60% of fitness app users quit in 3 months — generic workouts, no accountability, and no personalization.”

3. Solution

What your product does and how it uniquely solves the problem.

• QuantumLink: “We use entanglement-based key distribution to achieve 99.9% secure transmission with 10x energy efficiency — already validated in lab testing.”
• SaaSify: “Drag-and-drop workflows, real-time analytics, and 50+ integrations built specifically for industrial teams.”
• FitSync: “Trainer-led onboarding, AI routines matched to goals, and built-in incentives increase retention by 35% vs competitors.”

4. Market

Size the opportunity credibly. Use TAM/SAM/SOM. Show trends.

• QuantumLink:
• TAM: $50B+ in quantum-safe communication
• SAM: $15B defense + enterprise secure data markets
• SOM: $5B telecom rollout market
• Trend: 22% CAGR driven by quantum threat timelines
• SaaSify:
• TAM: $25B globally in workflow automation
• SAM: $5B in North American + EU mid-to-large manufacturers
• Trend: Supply chain visibility and digitization mandates are accelerating adoption.
• FitSync:
• TAM: $100B global fitness app market
• SAM: $25B in personalized fitness for wearables
• SOM: $6B in North American app users 25–40
• Trend: 10% annual growth and 75% mobile-first health seekers

5. GTM Strategy

How you get users, what it costs, and how that scales.

• QuantumLink: Start with strategic pilots via university + defense labs; expand through hardware licensing and direct OEM deals.
• SaaSify: PLG with upsell to enterprise via account-based sales; 20% inbound demo-to-paid conversion.
• FitSync: Influencer-driven top of funnel, trainer referral loop (1.5 referrals per user), CAC efficiency from embedded virality.

6. Traction

What real-world signals prove this is working.

• QuantumLink:
• Working lab prototype
• 10km data transmission success
• $1M in LOIs from defense buyers
• Academic + industry collaboration underway
• SaaSify:
• $1M ARR in 18 months
• 20% MoM revenue growth
• 5,000 active users
• 25% attach rate on paid analytics add-ons
• FitSync:
• $2.5M ARR in 18 months
• 150K users with 30% MoM growth
• 35% higher retention than category average
• 6:1 LTV:CAC ratio

7. Product

Make it real. Show what you’ve built. Focus on usability and defensibility.

• QuantumLink: Photonic chip architecture diagrams, quantum encryption demo footage, IP defensibility via two approved patents.
• SaaSify: Screenshots of the drag-and-drop interface, analytics dashboard, and API marketplace.
• FitSync: Mobile app demo with trainer flow, AI-driven daily plan, and personalization engine.

8. Business Model

How you make money, how margins improve over time, and why this scales.

• QuantumLink:
• Licensing photonic chips to OEMs
• Hardware + analytics bundle
• 30% gross margin at scale
• SaaSify:
• $99/month SaaS per user
• Tiered plans + premium integrations
• Low churn, predictable expansion revenue
• FitSync:
• $35/month subscriptions
• Add-ons for 1:1 coaching and analytics
• 25% of revenue from B2B wellness programs

9. Competition

Show who else exists — and why your startup is truly unique. This is not optional.

A better UX is not enough of a competitive advantage in a competitive market.

• QuantumLink:
• Competes with Post-Quantum, ID Quantique
• Wins on 10x energy efficiency + patented key distribution
• Barrier: scientific IP and production-ready architecture
• SaaSify:
• General tools like Airtable + Zapier
• No one focuses on industrial operations
• Unique: purpose-built for manufacturing + predictive analytics
• FitSync:
• Most apps = one-size-fits-all workouts
• FitSync differentiates via real trainer involvement + high personalization
• Retention and referral loop drive organic moat

10. Team

Why these people are the ones to win — and why investors should trust them.

• QuantumLink:
• Alex Carter (PhD, ex-DARPA)
• Jamie Lee (15 years in chip design, Intel alum)
• Sarah Khan (closed $200M in enterprise deals at Cisco)
• SaaSify:
• Alex Doe (Founder: previous SaaS exit at $20M ARR)
• Jamie Smith (CTO: ex-CTO TechCorp, scaled to $50M ARR)
• Taylor Green (Sales: closed 8-figure deals at ScaleIt)
• FitSync:
• Jane Doe (CEO: built 2 D2C startups to $12M ARR)
• John Smith (CTO: AI/ML expert, ex-Fitbit)
• Emily Green (CMO: drove $20M in campaigns for a global wellness brand)

11. The Ask

Be direct. What are you raising, what for, and what will it achieve?

• QuantumLink:
• Raising $5M Seed
• Use: 50% R&D, 25% manufacturing, 15% BD, 10% hiring
• Goal: Pilot-ready deployments and regulatory clearance
• SaaSify:
• Raising $3M to hit $5M ARR in 12 months
• Use: Scale sales team, expand integrations, launch mid-market push
• FitSync:
• Raising $4M to double ARR and expand to B2B wellness channel
• Use: Trainer onboarding engine, paid acquisition scale, app enhancement

Final Note

If you can’t fit your story into this format, it’s not because your story is too “complex” — it’s likely because your story is too unclear. This structure forces clarity. If it’s not ready for this level of sharpness, go back and refine.

What Blackbird Wants to See in a Pitch Deck

1. Samantha Wong | Insights After Reviewing 1,000+ Decks

https://medium.com/blackbird-ventures/a-pitch-deck-masterclass-d6b682857a1

• Start with your top 3 takeaways — then build your narrative around them. Your deck should revolve around what you want investors to remember. Simplicity = memorability.
• Most important slides:
1. Market Opportunity – Ambition, urgency, and a clear target customer
2. Team – Prove this is your life’s work and that you’re a magnet for top talent
3. Traction – Use metrics, not adjectives. Show momentum, not fluff.
• Avoid the common traps:

– Overloaded decks with too much info

– Competitive matrix slides (they confuse more than clarify)

– Customer testimonials instead of real usage stories

– Exit slides — VCs invest in companies, not exits

• Make it beautiful (especially for B2C). Your design is a reflection of your customer understanding.
• Final slide = your strongest point — not your contact details or a generic “thanks.”

Mindset shift: You’re not pitching to get a term sheet — you’re pitching to get to the next conversation. Stay focused, practice relentlessly, and eliminate anything that doesn’t help you stand out.

2. Nick Crocker | Pitch Deck Evaluation

https://www.youtube.com/watch?v=o685C47gEh8

Overview of Nick Crocker’s Evaluation Approach

• Ultra-fast judgment: Nick reviews decks in 10–15 seconds per slide, scanning for clarity, credibility, and compelling data.
• Founders-first lens: Core focus: “Is this a founder I’d want to work with for the next 10 years?”
• Data over fluff: Seeing a $‑sign early (team → traction) is crucial—revenue trumps any qualitative claims.
• Visual & narrative impact: Visual design acts as a proxy for attention to detail; poor aesthetics signal carelessness.
• Mobile matters: Investors often skim on phones—deck readability across devices is critical.

Teardown Takeaways

Key Actionable Lessons

1. Opening matters: Start strong with team credibility and traction ($ signs early).
2. Keep decks lean: Aim for 8–12 slides—fewer distractions, more clarity.
3. Numbers > words: Revenue, growth, NPS, churn—quantify your claims.
4. Visual polish = credibility: A sleek deck signals rigor and care.
5. Highlight your story: If your journey ties directly to the problem, lead with it.

Final Takeaway

A winning pitch deck is:

• Concise and cohesive—designed for fast scanning
• Data-driven—packed with evidence of momentum
• Authentically yours—narratively and visually aligned with your story and category

The Most Common Slide Mistakes (100+ Decks Analyzed)

Why Traction Slides Matter (and Why Founders Get Them Wrong)

Traction is the most misused slide in a pitch deck. Nearly 3 in 4 decks get it wrong. But it’s also the one slide where investors spend the most time.

Industry Breakdown: Where Founders Fall Short

HealthTech, AI/ML, and ClimateTech have the highest miss rates. These founders often lead with vision but forget: traction = what’s already working.

Most Common Blind Spots by Industry:

Comparing NZ VCs

https://www.moneyhub.co.nz/blackbird-vs-movac.html