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The majority of early-stage VC deals fall apart in due diligence



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Here’s what investors are looking for when writing the first check into a fledgling startup

Haje Jan Kamps

17 hours

Covering Five Flute’s fundraising and tearing down the deck the company used to raise its $1.2 million seed round had me wondering: How the hell do investors decide whether to invest in a company at the earliest stages?
VC firm Baukunst led the Five Flute investment, and I sat down with Axel Bichara and Tyler Mincey to learn how they evaluate a potential early-stage deal. They told me that the vast majority of the deals they look at fall apart at the due diligence stage and helped me get a deeper understanding of what that process looks like from the inside.

“Common wisdom tends to generate mediocrity. That’s not helpful. In VC, we are looking for the outliers.” Axel Bichara, co-founder and general partner, Baukunst

“The decision to take a second meeting is one of the biggest decisions in venture capital because, from that [moment] onward, you are committing significant time,” Bichara said, explaining that, in his experience, they only invest in one out of every 250 deals or so that they see. Only about 1 in 40 first meetings result in a second meeting. “Everything you do after the first meeting, I consider due diligence. You’re evaluating the founders. At the stage we invest, most …

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