Is your team capable of achieving the impossible?

In the previous lesson we learnt how to convince VCs that your team has the skills it needs to build and sell your product. In this one, we’re going to cover the second and most important aspect of how VCs judge teams – whether or not they think you can achieve the impossible. You’ll leave this lesson understanding why VCs try so hard to back people who can do ‘impossible’ things as well as how to get them to believe that your team is full of these types of people.

Why are VCs so obsessed with impossible teams?

Once investors are satisfied that you can build and sell, their attention turns to how likely you are to succeed. To figure this out, they ask themselves whether your team is capable of achieving the impossible.

If you think this is absurd, take a second to think about what you’re asking for when you pitch a VC. You’re asking for hundreds of thousands or even millions so that you can build a billion dollar business. The only evidence you have that your idea will work is a teeny bit of traction and some customer calls you’ve done. Maybe you’re the mad one!

What founders say they’re going to do sounds crazy. VCs recognise this, so they try really hard to invest in people who have a track record of making crazy happen. This is why they constantly talk about ‘pattern matching’, pay double the money to invest in founders who’ve previously had an exit, and have armies of junior staff that harass ex Klarna employees on LinkedIn the minute they change their job title to founder.

To invest in you, VCs need to believe that you’re the best team in the world to build your business – and the best teams have people who make miracles happen. This means that it’s your job as a founder to position your team so investors feel like it’s full of people capable of achieving impossible things.

What does impossible look like to VCs

To successfully position your team as capable of the impossible, you first need to know how VCs judge whether people are exceptional. In general, they look at two things:

1. How impressive the organisations they’ve been part of are (by organisations I mean companies, academic institutions, and even charities)
2. How impressive the things they’ve done are

Let’s break down how you can use each of these to your advantage.

How to associate yourself with impressive organisations

VCs are absolutely obsessed with pedigree. Since they don't know your team members personally, they can't accurately assess how impressive you are. However, if they respect the organisations you've been part of, that respect transfers to you by default.

The consequence is that, if you or your co-founders have worked for well-respected companies, it’s extremely effective to name drop them when talking to investors. In general, founders with backgrounds from successful tech companies – hot startups, unicorns and FAANG – excite VCs the most. However, experience from industries or organisations that have reputations for being very selective or rigorous – e.g. management consulting, investment banking or elite law – helps also. If your parents would brag about it at a dinner party, then it’s the ‘right’ type of industry.

However, if the organisations you or your colleague were part of aren’t obviously impressive – i.e. the average person wouldn’t understand their significance – this doesn’t necessarily mean that you’re screwed. If there is something interesting about the places where you used to work, you can ‘educate’ VCs by explicitly telling them why your former employer is a big deal. The key to doing this is to not just mention the organisation, but to describe it in a way that highlights how awesome it is.

Your description should position the place you’re talking about as the biggest, most successful, or most innovative in its industry in a couple of words. To do this convincingly, it’s helpful to provide some evidence that the org you’re talking about rocks. For businesses, talking about things like revenue, market share, and valuation works well. Meanwhile, if you’re talking about an academic organisation like a university or lab, it makes sense to highlight the breakthroughs the institution has been responsible for or the areas of research it’s pioneered.

Making what you’ve done sound impressive

Aside from simply talking about where you’ve worked before. VCs will also take into account what you’ve actually done when judging you. They are impressed by

1. People who have done jobs which were difficult or involved significant responsibilities
2. People who have achieved impressive things

Let’s break down how to use each of these in your fundraise.