The one thing all venture capitalists (VCs) have in common?

Patagonia vests! 😬😜😆

But after that, there’s huge variety.

If you’re new to the wild world of venture capital and startup investing, here’s a primer on the many ways VCs are different!

1. Stage

Many investors focus on companies of a certain size.

Typical categories are:

• Pre-seed, Angel, Friends & Family

• Seed

• Series A

• Series B (anything Series B or later is often called “Growth Stage” or “Growth Equity”)

• Series C + beyond

How each firm defines a stage can vary. Some may say “Series A” is $1M ARR. Others may say Series B is $1M-$5M ARR.

“Size” is often revenue-based but number of customers, how much money you’ve raised, and how quickly you’re growing can all be a factor.

Why do investors specialize by stage?

You can’t be an expert at everything. (No, not even investors. 😜) Assessing and advising Pre-Seed companies is totally different than Series B.

It requires different people and systems.

Most investment firms pick a lane and are pretty careful to stay there.

Just like with startups, being focused and knowing your strengths is a key for success!

2. Industry

So many types of businesses out there!

• Developing software

• Building robots

• Making food

• Constructing buildings

…to name a few. All great businesses. All with wildly different skills, needs, and financial models.

It’s hard to be an expert in all of those things.

(Except for you. O’Daily readers are unprecedented geniuses, of course. 😁)

Most firms will hone in on business types where they have experience, connections, and competitive advantages.

A few examples:

• Business Model: B2B SaaS, marketplaces, consumer apps, consumer packaged goods (CPG)

• Industry: robotics, supply chain, agriculture, fintech, real estate

• Customer, Mission, or Founder: maternal healthcare, underrepresented founders

I love this one — Laerdal Million Lives Fund is measured on lives saved!

3. Location

Another common differentiation is geography.

Where is the firm located? Where do they invest?

Atlanta Ventures focuses on the southeastern United States.

If you have a business based in Europe, no matter how amazing it is, it’s very unlikely we invest.

Other firms have a HUGE presence internationally. They specialize in Latin American startups or focus on global expansion.

Geographic presence, focus, and expertise can vary wildly among investors!

4. Deal Terms & Check Size

Another way investors are different is how they invest.

• How much money do they usually put in?

• Do they lead (set the terms) or follow (come in with other investors)?

• How do they think about valuation or deal terms?

Here’s some examples:

• Some firms only co-invest.

• Some firms (like Atlanta Ventures) prefers to lead and will often fill the whole round.

• Some firms write smaller checks but have certain expertise or relationships to offer (e.g. development resources or enterprise relationships).

Usually there’s a balancing act on valuation too. Higher valuation but more caveats and protections. Lower valuation but cleaner terms.

Typically, the later the stage, the bigger the check. 💰

There’s no right or wrong, but it’s important to understand what an investor typically does so you know alignment and tradeoffs!

5. Post-Investment Playbook

What happens after investment?

Investors and firms will vary in their philosophy and approach.

(And will usually tell you ahead of time how they work. They don’t want surprises or misalignment either!)

There’s pros and cons either way.

• How much control and decision making does the founder have?

• What kind of support and value do investors bring?

• Are they hands on or hands off?

• Do they bring in their favorite execs?

• Do they have certain strategies they recommend or implement?

• What are typical outcomes for their companies?

More involvement can be a big accelerant — unless it’s intrusive or distracting.

Less involvement can provide lots of autonomy — unless you don’t get enough guidance.

Understand what you want and how that aligns with an investor’s typical M.O.

6. Personality

ICYMI - not every investor is a hard-charging, in-your-face tech bro!

Lots of personality types among successful investors. There’s no “right” way to do it.

• Do you want someone who will really push you?

• Do you want someone who is calm and supportive?

• Do you want someone extremely analytical or more of a people person?

Most founders appreciate a variety of styles and input from investors. It’s good to have a balance of personality types — while also being aware if something really doesn’t work for you.

Finding an investor whose personality meshes well with yours is important. It’s (hopefully!) a 10 year relationship!

How Do You Know What Kind of VC They Are?

They will tell you!

It’s on their website.

They don’t want to waste your time or theirs.

If it’s not specifically on their website, look at what else they invested in.

As far as their personality and playbook, ask questions during the courting process.

Pay attention to their responsiveness, what they help with, what they’ve done with other companies, how they act when hard topics come up.

People tell (and show) you who they are.

Investors and founders both want a great match!

What other ways are investors different? What surprised you about VCs? What’s the biggest difference you’ve noticed among VCs?