Founders who have successfully launched companies before, possess strong recommendations, and ideally have experienced a previous exit are generally well-positioned to attract funding from venture capitalists. A recent example illustrates this point: the individuals who previously founded Udemy and altMBA secured over $4 million in investment for a new venture, even before finalizing the product or company name.

However, generalizations are rarely accurate within the complex and evolving landscape of venture capital. As the early-stage investment environment matures and capital becomes more readily available, some investors actively seek out first-time founders; the specific preferences vary depending on the venture capitalist in question.

Last week, Soraya Darabi, a co-founder of TMV, participated in an Extra Crunch Live discussion to share insights into her firm’s investment philosophy.

“We prioritize founders who haven't yet achieved a significant exit, as we believe prior success can sometimes limit one’s perspective,” Darabi explained during the Extra Crunch Live session. “Instead, we look for founders who have closely observed successful ventures or gained valuable product experience, acting as keen observers but not necessarily leading the entire operation.”

This preference is directly linked to TMV’s investment strategy. TMV typically invests between $500,000 and $1.5 million in startups with valuations under $10 million, and occasionally up to $15 million. Startups generating substantial market interest or hype often exceed this valuation range, making them inaccessible. For instance, a company affiliated with Y Combinator secured $16 million in seed funding at a $75 million valuation prior to its Demo Day.

Consequently, TMV focuses on identifying founders who are embarking on their initial venture and seeking guidance from an institutional investor to establish their company.

“These are the founders we most enjoy working with, and they are abundant,” Darabi stated. “While some attend conferences to find established entrepreneurs, I previously dedicated more time to attending tech meetups in New York to identify talented Ruby on Rails developers.”

Claire Diaz-Ortiz, a partner at Magma Partners and author, notes that early-stage fund managers often assume greater risk with founders initially.

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“New or smaller funds require higher-risk, lower-valuation opportunities to achieve significant returns,” she said. “In contrast, firms like a16z can invest $10 million in a founder who has already demonstrated success on platforms like Clubhouse.”

The key point is that a VC’s preference for first-time founders may be driven by valuation and accessibility. McKeever Conwell, founder of Rarebreed Ventures, suggests that while a prior exit might lead a repeat founder to become “complacent,” it could also foster an approach that resonates with investors. He believes there are advantages and disadvantages to both, and that framing it as a simple “preference” is inaccurate.

“I believe it’s more about the founder’s learning agility and their approach to business,” he said. “The entrepreneurial mindset is the most crucial factor, rather than whether they are a repeat founder or not.”

To access the full conversation with Darabi and gain further insights into early-stage startups, please follow the link provided below for notes and a more comprehensive discussion: