It’s fascinating to learn how venture capitalists decide which startups to back. Madrona Managing Director Matt McIlwain recently shed light on his mental model for evaluating pitches during a recent fireside chat with OneSixOne Ventures.
McIlwain said he uses three points of a “triangle,” and something in the middle, to help assess founders and their big ideas.
The three points represent three questions:
- Why does this problem exist? “I don’t particularly want you to tell me about AI, or tell me about cloud computing or something like that. We’ll get to that,” he said. First, he wants to know about the problem and why the founders are obsessed to solve that problem better than it could ever be solved before.
- Why now? Timing is crucial for startups — technologies change, expectations change, business models change. So what makes this the right moment for this idea? “We want to have some sense of, you get that and you understand that,” McIlwain said.
- Why this? This is about the actual product. And most founders are actually “directionally correct and specifically wrong about this,” McIlwain said. He pointed to Uber as an example. The company’s first product was a black car service — but the killer business (people using their personal vehicles to drive other people around town) ended up looking different. “They were directionally correct and specifically wrong on this point of the triangle,” he said.
But the most important part of the triangle is the middle, McIlwain said. That’s all about founder-market-fit.
In other words, is this the right team to tackle this problem? Do they care more than anybody about this problem? Do they understand the “why now” element?
And it’s about their attitude, too — “an attitude of a continuous learning loop,” McIlwain said, that allows founders to change direction as needed to help solve problems and build a business.
McIlwain, a longtime managing director at the Seattle-based firm, also wrote about the triangle approach in a blog post in 2022.
Watch the full interview with OneSixOne Ventures here.
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