Knowledge Exchange

10 lessons learnt from evaluating 500+ global early-stage startups

Mahesh Dumbre (Class of 2011)

Useful and relevant insights for founders and investors 

Over the past 5 years, I’ve had the opportunity to evaluate more than 500 startups around the world as part of one of the best global angel investor networks, Keiretsu Forum (as identified by the Pitchbook rankings), and also as a part of one of the largest corporate houses in India and globally.

While I had a great time working with high-energy and ambitious founders, I learnt a lot from my fellow angel investors and their experiences as well.

My hope is that the lessons from evaluating startups can be helpful to founders working to onboard investors across all stages (pre-seed, seed, series A, B and beyond), as well as current and future investors (angels and early-stage VCs). The following blog highlights lessons I find most memorable.

  1. You have to kiss many frogs before you find your prince.

“You have to kiss a lot of frogs before you find your prince,” said a highly seasoned, serial R&D tech entrepreneur in his 70s, who was at the centre of many mega exits (hundreds of millions of US dollars) throughout his life.

“I work hard at things for 10 to 15 years with a lot of failure on a daily basis. But then something works out after all that effort.” He then mentioned candidly, “Be careful about the kind of people you work with. Even if the start is great, a lot of things change over time.”

The same is true for fundraising as well. I have seen so many high-quality startups and entrepreneurs knock on the doors of hundreds of angels and early-stage VCs in order to raise growth capital. Even if you are a great startup, rejection is something that happens all the time. In fact, Google founders were rejected so many times in the initial days that they seriously considered returning to research work and selling the company.

  1. Some prefer not to put their money and time in the same place, and it works for them.

An angel investor asked the following question to a founder (who is also a serial entrepreneur and active investor): “You have had so many mega exits in the past with significant value creation. Why would you want to raise a relatively small amount of money from angels for your current early-stage venture?”. The founder replied, “We are not only looking for capital. We are also looking for smart people (investors) with great networks who can not only challenge us but also give us access to their high-quality networks. For example, one of my other angel investors can help me get time with some of the largest potential clients in the political and corporate worlds, which would be impossible for my customer success team”.

  1. It is very important to keep your pitch deck, investment documents and online presence consistent.

I have come across many startups with significant information and data inconsistencies across multiple platforms. Interested people (investors/potential employees/partners) do check and verify facts, data, and people. For example, one startup founder we recently looked at has listed herself on LinkedIn as a Chief Financial Officer but has other titles on company documents. Even the target consumer segment was inconsistent across the different formats.

With another startup, a gentleman who was listed as a potential Chief Technology Officer was missing from the revised pitch document and the valuations differed from document to document. One founder explained how she made significant gains in stock market investments while claiming that nobody lost money in the stock market.

However, nothing beats the following though. A founder posed for a photo opportunity with a company in a media release for technology while simultaneously approaching investors for the same technology through another company. We live in a small world where people check for data and can talk to each other. It should be possible to avoid the above-mentioned scenarios but most startups fail because of suicide (their own mistakes) rather than murder (by the competition) according to Sam Altman, ex Y Combinator and one of the best early-stage investors.

  1. Persistence, courage and boldness is infectious.

Only 7 percent of startups survive longer than five years according to FJ Labs founder. That means 93 percent usually fail. That is why VCs create portfolios of hundreds of startups so that the 7 percent that survives (and thrive) can cover the losses from the failed ones while providing significant returns. That is just the nature of the game.

Over the years, I’ve had the opportunity to interact and support many gritty and persistent founders who don’t like to take no for an answer. If a door is closed they look for a window. If one investor network is not supportive then they find many more. The courage, optimism, drive, and boldness of this special tribe called founders and entrepreneurs are highly infectious. Being a founder or an entrepreneur is possibly one of the best jobs in the world.

  1. Negotiate, negotiate, negotiate from the position of power.

Founders and early-stage investors are some of the best negotiators. One example is of a serial entrepreneur who had multiple past exits and was confident in achieving £5 million in annual revenue in a year. He had already received commitments from VCs and so made an offer to angel investors without any negotiation around valuation. Similarly, another founder approached angels with a bridge round offer who wanted to share the immediate valuation upside and also improve his negotiation power with the VCs. I’ve seen that angel investors do think seriously about such proposals when compared to founders who are at a disadvantage as they lack many negotiation levers.

  1. Show, don’t tell as much as possible!

Some founders endlessly ramble on about their own vision of the world and how they want to change it.  Many of them are excellent communicators and storytellers, and investors do buy these stories depending on how bullish or bearish they are feeling. Other smart founders prefer to show what they have built, either through a tech demo or a customer testimonial rather than telling stories. While there is no one-size-fits-all solution you can surely guess which approach works better, depending on the overall picture most of the time.

  1. Storytelling works better than spreadsheets.

Good stories always beat good spreadsheets. I have seen many startups with issues in their business models. The founders were excellent storytellers who could appeal to the right emotions so we’re able to raise funds. I’m not saying that spreadsheets are not important but stories must create interest in order for investors to go deep into the spreadsheets.

We are emotionally driven human beings and we tend to follow our beliefs. We get behind leaders who stir our feelings, not always thinking much about the practical realities of the world. Of course, both poets and quants have their space in this amazing world however it helps to be good at telling stories in addition to having a good grasp of spreadsheets.

  1. There are different investors with different investment styles.

Dr. Geoff Smart, in his research paper “Management Assessment Methods in Venture Capital: Towards a Theory of Human Capital Valuation”, talks about different VC typographies. They are the airline captain, art critic, sponge, infiltrator, prosecutor, suitor, and terminator (more details are explained in this video).

Having closely worked with and observed hundreds of founders and investors it is critical to understand the investor types you are dealing with and plan accordingly. As far as investor returns are concerned, “airline captains” with systematic and process-oriented approaches seem to perform much better than the others.

  1. “Co-founder Fit” can make or break (even fail) the startup.

A few weeks back I had a good discussion with an entrepreneur who was struggling with his co-founder. He felt cheated and that he was not being properly supported by his partner.  Research says more than 30 to 40 percent of startups (some reports say even 60 percent) fail due to co-founder conflict.

There is a scientific way to find the right co-founder using a scorecard around the following criteria:

  1. Personality traits
  2. Time horizon – perception and reality
  3. Commitment level
  4. Value system
  5. Skill compatibility
  6. Chemistry
  7. Risk tolerance

There is an exhaustive checklist and scorecard to make this easier. Founders definitely need co-founders and partners to run with to achieve their visions and dreams. You do not want to drag each other in different directions, I have experienced this first-hand on multiple occasions and it is not worth it.

  1. The role of a founder: You win or lose with your team!

According to Ravi Shastri, the Indian Cricket Team Coach, “The role of the Captain is not to promote himself as a hero. The role of the Captain is to make others heroes.” Very few investors are interested in lone-wolf-type founders and their startups as these types of startups are risky because sometimes one person exerts influence for the wrong reasons. While many solopreneurs do well, building a strong institution by partnering with investors, and with great technologies, is a more dependable approach.


About the author: Mahesh Dumbre MBA 2011 closely works with entrepreneurs and executives helping them achieve growth potential.  He is an ex-Tata Group executive who enjoyed building businesses around the world (17 years in 8 countries across 11 industries, 80+ million USD value addition) as well as teaching and writing. He can be reached at