VC Teten’s criteria for investing in your startup idea

By Dennis Clemente

How do you know if your startup idea is worth pursuing? “If your idea can be stolen just by you speaking about it for 20 minutes, it’s not worth pursuing,” says David Teten of ff, a VC firm with $3.5 million investments. “Have an edge and be able to better execute your idea over someone else in the same space.”

Last March 25, the monthly Startup Grind hosted by Peter Crysdale featured Teten as its guest speaker. Teten said ff invests as early as the napkin stage and as late as the revenue stage. In a convivial mood, he cautions men about how “Seinfeld startups” never work. These are men who think of startups for finding beer and women. “In my time, we always found a way to meet women.” He’s in his late 40s.

Kidding aside, he said he is looking for people with an edge and proof that his or her idea is better than anyone else.

Below is a more comprehensive list of Teten’s/ff’s criteria for investing in a startup:
1. Team. What qualifies you to execute your idea successfully and better than five other companies in your space: Work history, network, and skills are key
2. Demo. Be ready with a demo or at least a mockup.
3. Market. What is the problem, why does it exist, and how big is the opportunity?
4. Solution. Your value proposition—how you solve the problem faster, cheaper, smarter.
5. Business model. How do you make money? Who pays, how much, from where?
6. Customer/user. Who are they and how many. How will you reach/acquire them
7. Competition. Know every competitor and why they aren’t addressing your market adequately. List major competitors; understand their processes, and what your competitive advantage is.
8. Financial overview. What are the expected revenues, expenses and EBITDA (earnings before interest, taxes, depreciation, and amortization) three years out? How long will this round’s cash last you?
9. Funding. How much are you raising and how are you going to use the money—to grow a team, to support overhead, to expand. How much have you raised thus far and from whom?
10. Milestones. What is your vision for the future, measured in milestones for the next 3 years? This is crucial, because ff will evaluate your progress against these milestones in board meetings.

Teten could have read this aloud while doing a handstand as he did at the end of his talk. He is a practitioner of parkour, a holistic training discipline using movement that developed from military obstacle course training.