“Will it work?”, “Can I win?” and “Is it worth it?” are the three questions have stayed with me over the years and have become a core part of my investment decision process. Venture capitalists are always trying to make sense from the chaos of rapidly changing technologies, innovations, marketplaces, competitive landscapes, business models, management teams, and more. Teasing out that coveted signal to invest from all the noise is challenging and as much an art as it is a science.

1. 3 Questions Every VC
Must Ask In the Investment
Decision Process
by Brady Bohrmann,
Partner at Avalon Ventures

2. About Brady Bohrmann
Brady has over 20 years of experience as a venture capitalist and
operating executive in both information technology and biotech. His
focus is on early-stage investments and backing talented entrepreneurs.
Throughout his venture capital career, he has worked with over 75
companies. He currently is a director or observer of many Avalon
portfolio companies, including Backupify, Chart.io, Cloudant, Inc., Conjur,
Indix, Juliet Marine Systems, Kaltura, Kinvey, Memrise, Nanigans, Pingup,
Redbooth, Selectable Media, Simulmedia, The Happy Cloud, Twinstrata
and Vook.

3. The 3 Core Questions:
• Will it work?
• Can I win?
• Is it worth it?

4. I first heard these three questions from Dick Hale, a
former colleague and mentor of mine. Long time COO of
M/A-Com, Dick has a way of making complicated things
very simple and my favorite expressions of his was “Will
it work?, Can I win?, Is it worth it?”
These questions have stayed with me and have become
a core part of my investment decision process.

5. When Due Diligence Isn’t
Enough
Venture Capitalists are always trying to make sense
from the chaos of rapidly changing technologies,
innovations, marketplaces, competitive landscapes,
business models, management teams and more.
For early stage investing, classic due diligence is of
marginal value because most big ideas are trying to
either create or transform a market.

6. What you believe is more important than what you
discover in diligence.

7. Signal vs. Noise
Teasing out that coveted signal to invest from all the noise
is challenging and as much an art as it is a science.

8. Simple Truths
After all the research, analysis and due diligence is
done, it’s often helpful to fall back on a few simple
truths, and in my case, Dicks’ words of advice.

9. This is how I put into practice these 3 questions:

10. 1. Will It Work?
However we get there, there must
be an underlying conviction that
the product or service can be
built and will work.

11. Will it Work?
Is there evidence to support that the product, service, etc. will
work?
As early stage investors:
• We often invest in companies where the product may still be
a work in progress.
• We need to suspend our disbelief.
• We need to rely on our judgment, or that of others we trust.
• We need a simple act of faith in the founding team.

12. 2. Can I Win?
Does your product, service, idea
have an edge from which you can
separate yourself from the pack
and extend your lead?

13. Can I Win?
There is a good chance that whatever product or
service it is that you are building, there are dozens of
others thinking along similar lines.

14. Can I Win?
The hard truth is that your idea is far less important
than your ability to execute on it. This is the essence
of competition, and competition is the engine of
innovation.
The best entrepreneurs are the ones that out-
execute the competition.

15. Can I Win?
At Avalon Ventures, for example, we look for that something
special — an edge from which you can separate yourself
from the pack and extend your lead.
This can be anything from:
• A uniquely differentiated product.
• An early stage market advantage.
• The first to achieve scale.
• A network effect.

16. 3. Is It Worth It?
There is no common definition of
worth among VCs, but it is often
tied to the stage of investment.

17. Is It Worth It?
Venture capital is a truthful business, and
that truth is measured in the returns we
provide our investors.

18. Is It Worth It?
We say “No” to many great ideas and teams because
we may not see the value of the ideas as big enough
or we just can’t clearly see our way to an exit.
The challenge for you is to understand how the VCs
you are talking to define a worthwhile exit.

19. Is It Worth It?
There is no common definition of “worth” among VC
funds, and it is often tied to the stage of investment.
Typically it ranges from the aspirational “billion dollar
idea” to some target multiple of invested capital.

20. In Practice

21. an example:
Take for example Avalon’s investment in Simulmedia,
a company that brings online and data
methodologies to traditional TV advertising.
Founded by serial entrepreneur Dave Morgan, a
pioneer of online behavioral marketing and digital
advertising, the company makes TV ads more
relevant for viewers, more efficient for advertisers and
more profitable for media owners.

22. an example:
Answering the 3 Questions on Simulmedia:
Will it work? Dave and his team are seasoned pros and
have the chops to build the platform. Check!
Can I win? Great team and unique technology
combined with wide open playing field. Check!
Is it worth it? Cracking the nut of TV advertising is a
billion dollar idea. Check!

23. The Takeaway
• These 3 simple questions have
proven their value over and over.
• They simplify what otherwise can be
a complicated investment decision.
• They help test our conviction and
provide comfort to continue investing
when a company hits tough times
yet is deserving of continued
support.

24. Learn more!
Visit http://avalon-ventures.com/blog for more actionable advice
on early stage startups, VC funding and other entrepreneurial tips.