What Founders REALLY Care About When They Choose Their Investors

Angel Investors

If you ask a startup CEO in the middle of raising a round what he looks for in a potential investor, you’re likely to hear a lot of high-minded, abstract talk about shared vision and inspiration. In Silicon Valley it’s bad manners to care about petty things like how much of your company you’re giving away, and for how much money.

See the survey results here →

In a confidential survey, however, founders can be a little more realistic. Dorsey & Whitney, a law firm with a Palo Alto office specializing in tech startups, recently conducted a funding survey of 350 startup CEOs, with an emphasis on early-stage, consumer Internet companies.

In reality, founders are a lot more hard-nosed than they let on. They care a lot about the basic terms of a deal: valuation, dilution, and liquidation preference. They also care a lot about their companies, so investor expertise and connections were also high on the list.

Big investor brand names, on the other hand, don’t excite startups all that much. And money can’t buy you loyalty: being a previous investor was one of the least important considerations for the startups surveyed.

For the specific results, check out the full report, or:

The study focused primarily on software companies, with a heavy slant toward Silicon Valley startups

Most of the startups in the survey were very early stage

... if they hadn't raised money yet, they wanted it

Even if they HAD just raised money, they wanted more

Yes, there is a lot of money going in to seed funding these days

Friends and family rounds and individual angels still fund most seed rounds. (None of them were invited to Bin 38.)

So, here's what they care about: money, control, and investors who bring real expertise to the table

Here's what's LESS important: brand names, location, and existing relationships

If that all sounds to cold and calculated for the Silicon Valley you know, here are a few write-in responses you might like:

So that's what they want. But who are they?

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