More than meets the eye: How I read between the lines when evaluating investments

Zach DeWitt
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Ever wondered about the hidden considerations seasoned investors are thinking about when they’re evaluating startups? Read on to uncover the hidden aspects that make all the difference when identifying great investment opportunities.

When I’m analyzing a prospective company and trying to decide whether or not to invest, there’s a lot more on my mental checklist than simply ticking the obvious boxes.

Each startup presents a unique blend of team strength, market appeal and product differentiation. The biggest trick of the trade in the investment world lies in discerning the more nuanced factors — the subtleties that often become the differentiators between a success story and a startup that fizzles out.

Read on to find out the inconspicuous variables I’m thinking about when making investment decisions.

My unique investment parameters

High product velocity

How quickly is a startup shipping new product updates?

In many cases, product velocity correlates closely with growth. I like to look at a company’s changelog to see the cadence and size of their releases.

Building in public

Sometimes it makes sense to stay in stealth mode until a company is ready to share an MVP publicly. This is usually the case if a startup is entering a highly competitive market. 

However, I love it when founders are building in public by sharing product updates and demo videos on Twitter and LinkedIn. Founders that do this from the earliest stages tend to build strong brand awareness and loyalty, and can stay top of mind in customer, talent and investor communities.

When Noteable, a Wing portfolio company, recently launched their plugin for ChatGPT, they posted about it on social media to spark conversation about the benefits of the new feature.

A customer-centric ethos

A lot of founders claim to be customer-centric, but in reality, there is a wide spectrum.

For seed investments, some founders have spoken to 50+ potential customers and have detailed notes on all the conversations that they are willing to share with investors. When founders have a demonstrable commitment to spending time with customers, it often enables them to build products that find a deep product-market fit.

A product built for teams

I meet 10+ new PLG companies every week, and far too many of them are focused on single-player mode. You do need a viable single-player mode to help with customer acquisition, but the best PLG companies design, price and build their product for teams.

Teams have better engagement and net dollar retention than individuals, and it’s hard to make a PLG business work if you aren’t focused on winning over teams. An example of a Wing portfolio company that does this well is Tango.

A video game mindset

I grew up playing video games with my siblings and roommates. Video games hook us because they are competitive, collaborative, highly visual, stimulating and (most importantly) fun.

Founders who have experience playing and appreciating video games often have a unique perspective on how to imbue their product with joy, learning, and ways to level up. Our portfolio company Tome does a great job of creating an engaging and fun customer experience with their generative storytelling app.

The subtleties of investment criteria

At Wing, we believe in a future that is built on data, powered by AI, and put to work through increasingly autonomous applications. My role as a partner here is to watch for these opportunities and act swiftly when I spot a PLG company with potential — and the criteria outlined in this article is my framework for action. 

Investing is both an art and a science. While the broad strokes paint a picture of the startup's potential, it's the finer details that bring a masterpiece to life.

Digging beneath the surface and identifying the inner workings of a company is what makes VC investing exciting and rewarding. When positive subtle characteristics align with a startup's broader profile, that's when I can anticipate a higher potential return.

If you've enjoyed this peek behind the scenes of my investment strategy, sign up for my Substack newsletter to get more updates like this. Each week, we do a deep dive into the world of the best P

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