Thread by @justinkan

1/ Startup founders are often very frustrated with the process of raising money from investors, because what investors look for at an early stage can be very counter intuitive. Some founders pitch profitability or risk-free but slow growth, and are puzzled when investors pass.

2/ Early stage startups have high risk and high reward, resulting in a power law distribution of returns for investors. Investors at the top of this power law believe the way they evaluate startups is the key to their success.

3/ Potential to be be successful, or even really successful, isn’t good enough for top investors. Founders need to show that you have a truly huge opportunity.

Investors look within the following 3 buckets when evaluating a startup’s potential:

4/ Bucket 1: Market size. “Data tells us the ultimate size of market addressed is the single greatest determinant of outcome.” — @arachleff. If the market is not at least a multi billion dollar opportunity in 5-10 years, you may want to work on a bigger problem.

5/ Bucket 2: Product. “If you don’t have a winning product, it doesn’t matter how well your company is managed, you are done.” —  @bhorowitz.

As a founder, you need to show 1) any evidence of product / market fit and 2) forms of crazy (i.e. unusual) in your product approach.

6/ Bucket 3: Team. “When a great team meets a great market, something special happens.” - @arachleff.

As a founder, you need to be obsessively curious in how to serve your customers better, have bold thinking in your plans, and be authentic in the problem you are solving.

7/ My Chief of Staff @nujabrol wrote a guide to for founders on understanding investors. Read more: atrium.co/blog/startup-i…