A few years ago, I fancied myself as a comedian. (Quiet in the back)
My university friends considered me the funny one and kept encouraging me to try an open mic. Eventually, I let it go to my head and wrote a five-minute routine. I tested it on them first. They absolutely lapped it up. By the end, I was fairly certain London was about to discover the next Dave Chappelle.
Then I took the exact same material to an open mic night. That was the night I learned what “crickets” really means.
I”ll pay good money to anyone that can find footage of those five minutes and have it deleted.
Afterwards, someone told me the audience was mostly retirees. I’d tested my routine on university friends who knew me and shared my references, then assumed it would work just as well in a very different room.
The material probably needed work too. Quite a lot, potentially. But I’d barely considered who would be listening.
I think about that when founders tell me they’ve had five investor meetings and are now rewriting their entire deck. Sometimes the pitch needs work. Sometimes the business needs stronger evidence. And sometimes they’re asking an investor to back an outcome that simply doesn’t fit how that investor invests.
An investor can understand your company, believe it could succeed, and still pass. To see why, put the same business in front of two investors looking for different things.
One company, two conversations
Take a hypothetical company that sells maintenance software to mid-sized manufacturers. The founder spent ten years running plants before starting it. It has six paying customers, around €100k in annual revenue, healthy gross margins and a short list of plants waiting for a pilot. The founder wants to raise €750k.
What does a realistic good outcome look like? In seven or eight years, a larger industrial software group buys it for around €40m. For the founder, that is life-changing. For the early team, it’s a cabin in Portugal (If you can’t surf when you want, what’s life really about)
The venture fund: can this matter to us?
The first conversation is with an €80m seed fund. Its strategy depends on a handful of companies producing a substantial share of its returns. So each new investment is judged less on “is this good?” and more on “could this be one of the few?”
Run the numbers.
At an assumed €4m post-money valuation, €750k buys just under 19%.
After subsequent rounds, suppose the fund owns 10% at exit.
A €40m equity sale returns about €4m, assuming a straightforward split by ownership.
On the original cheque, that’s more than five times the money, provided the fund hasn’t invested more along the way. On the fund, it’s 5% of its original capital.
That would be a welcome result. But this investor is looking for substantially more potential upside when it takes seed-stage risk.
For scale, returning the entire €80m fund from a 10% stake would require an €800m sale. Every investment doesn’t have to achieve that. But the comparison explains why the partner keeps asking how large this company could become.
If the founder’s credible upside points to €40m, the partner may see a good business that falls outside the fund’s strategy.
The earnings-minded investor: can we hold this?
The second conversation is with a family office whose wealth came from manufacturing. The family still owns two packaging businesses. It invests its own money, so there is no fund term and no outside investors expecting their capital back by a set date.
Its questions are different. How much capital do you need to reach profitability? Could this make money at €3m of revenue? Would you take a smaller round? And how does our money come back: a sale, dividends once you’re profitable, or a buyback later?
That last question matters more than founders expect. A venture fund only gets paid at exit. An investor who values durable earnings may be happy with a slower route, as long as there is one.
Run the same €40m outcome through their lens. If the company grows on modest capital and raises little after this round, their 19% might only fall to 15%. That’s €6m back on €750k, eight times their money, from a business they understand. The capital-efficient path that left the fund cold is the one that makes this investor’s maths work.
For this investor, the cheque is rarely the whole interest. Family offices built on operating businesses often want to be useful: to open a door, lend experience, connect the company to what they already own. A founder who can say specifically where that help would matter is pitching to the investor’s real motive, not just asking for money. “Your two plants could be our next pilots, and your peers are our buyers” lands. “We’d value your network” doesn’t.
Neither is automatically right for the founder
Each kind of money brings its own pressure. Venture money expects you to swing for the large outcome: bigger rounds, faster hiring, more risk. If the company settles into a steady €40m trajectory, it can slip down the fund’s list of priorities.
The family office has trade-offs too. Decisions may rest with one principal and take longer. Follow-on capital is less predictable. Involvement means more time and more opinions. And an investor tied to an industrial group can become a shareholder that other buyers have to work around.
The right investor is the one whose definition of success matches the company you’re actually building.
Neither label is one thing
None of this means venture funds want moonshots and family offices want steady businesses. The labels hide too much.
Fund size changes the arithmetic more than the label does. A €20m pre-seed fund writing €400k cheques might own 6% at exit and get €2.4m from the same €40m sale. That’s more than a tenth of its fund, an outcome a partner can defend. Timing matters too. A fund near the end of its investment period, saving money for its existing companies, may pass on something it would have backed two years earlier.
Family offices vary even more. One built on an operating business may invest like an owner. Another, run by former bankers, may invest only alongside a lead it trusts. Some want control. Some have a next generation keen on venture, who will ask the fund’s question rather than the owner’s.
Fit, pitch or evidence?
Back to the founder rewriting the deck after ten meetings. Before you rewrite anything, look at the pattern in the passes.
If the objections cluster around size, stage or outcome, and come from the same kind of investor, it’s probably fit. If very different investors keep raising the same weakness (churn, a long sales cycle, a missing hire), it’s the evidence or the pitch. A rewrite can fix the second. Only a different list fixes the first.
Reviewing your next ten targets
Before your next ten investors go on the list, answer two questions for each. Most of the answers are on their website, in their portfolio or with a mutual contact.
What does a successful investment look like for them, and could your company deliver it?
How do they get paid, and what else do they want?
You don’t need certainty before reaching out. You need a plausible reason for the conversation beyond “they have money”.
I could have rewritten those five minutes of comedy forever (very much like the bombing memories which have stayed with me forever) without asking who would be in the audience.
Founders can spend weeks doing the equivalent.
Before the next rewrite, check the room. And before accepting the cheque, check that you and the person writing it would both be happy with the same ending.
One Question
What would a successful investment look like for each investor on your list, and could your company deliver it?
Reply and tell me what you find. I read every answer.
Clipped
Who better than 2 YC partners sharing their experiences of raising and rookie mistakes made. My post condensed in 10 minutes and alignment explained better:
They make a great point too on choosing someone whose expectations you’ll live with.
Written from the other side of the table.