Why Founders Often Misread VC Thinking
To most startup founders, venture capital firms seem open and approachable: pitch decks are invited, demo days are public, and term sheets occasionally make the news. But when it comes to how decisions are really made, the process is often opaque, coded, and misunderstood — especially in emerging markets like Vietnam.
Founders tend to assume that a strong product or traction will naturally lead to funding. In reality, many deals fall apart not because the idea is bad — but because the founder misreads what the VC firm actually values, or fails to recognize how VCs manage risk, internal alignment, and long-term returns.
This misalignment is even sharper in ecosystems where the culture of venture capital is still forming. In Vietnam, many first-time founders approach VC firms like they’re banks, or corporate sponsors — expecting to “apply” for funding by filling out a pitch deck template. But VC firms aren’t transactional funders; they’re pattern seekers — looking for specific signals that match their internal thesis, fund structure, and conviction cycle.
What’s more, many VC firms operate on unspoken logic: a warm intro matters more than a cold email; a founder’s presence in the room can outweigh the numbers; a partner’s “gut feel” may override the analyst’s spreadsheet. These dynamics are rarely shared publicly, yet they shape the flow of millions of dollars and the fate of early-stage startups.
To navigate this black box, founders need more than a good pitch — they need contextual insight into how VC firms actually think.
What VC Firms Actually Look For — Beyond the Deck and Into the Decision Filters
Behind the glossy pitch events and polite investor feedback lies a consistent reality: VC firms don’t invest in ideas — they invest in calculated bets. And to place those bets, they apply a structured set of filters that go far beyond the product or business model itself.
1. The Team Comes First — Always
In early-stage investments, the team is everything. VC partners often say, “A great team can fix a bad model, but a great model can’t fix a bad team.” What does that mean in practice? Founders with grit, clarity, and execution bias stand out. Solo founders raise eyebrows. Founders who can attract talent, explain problems crisply, or admit what they don’t know often score higher than those who overpromise.
2. Market Size and Momentum
VCs need to see a market that is either already large or growing fast. But more importantly, they want evidence that the founders deeply understand their market’s dynamics — not just Total Addressable Market (TAM) numbers from a Google search. In Vietnam, this could mean knowing how informal logistics works in tier-2 cities or how SME customers actually pay.
3. Timing and Macro Tailwinds
Even a great product can fail if it’s too early. VC firms often look for alignment with macro trends: digital payments, AI, edtech post-COVID, green infrastructure. A startup’s traction is more convincing when it clearly rides — or accelerates — one of these currents.
4. Moat and Scalability
In emerging markets, execution matters more than invention. VCs ask: Can this team scale fast and defensibly? Do they have access others don’t — partnerships, local networks, IP, or cost advantages?
Ultimately, most VC firms filter deals not with a “yes/no” lens, but through layers of conviction — where data, story, and founder presence must align.
Gut Feel and Subtext — The Soft Signals That Shape VC Decisions
In theory, venture capital is about rational risk-taking — spreadsheets, market analysis, and return projections. But in practice, especially in early-stage or emerging-market investing, VC decisions are shaped as much by intuition and subtext as by numbers. The further away a deal is from hard data, the more soft signals matter.
1. Founder Energy and Storytelling
VCs pay close attention to how a founder tells their story. Can they clearly explain what they’re building and why now? Do they focus on the problem more than the product? An over-polished pitch with no real founder conviction often signals a gap in depth. On the flip side, raw but grounded energy — even with imperfect English — can trigger belief.
2. Coachability and Humility
VC firms often test founders subtly: How do they respond to tough questions? Do they defend every line item or show flexibility? Arrogance or defensiveness — even in small moments — are red flags. Most investors aren’t looking for know-it-alls; they’re looking for learn-it-fasters.
3. Founder Dynamics
For multi-founder teams, subtle interpersonal cues can make or break a deal. Who speaks more? Does the tech co-founder seem sidelined? Are decisions centralized or shared? These dynamics hint at how the team handles pressure, disagreement, or scale.
4. Red Flags That Kill Deals Quietly
There are red flags that VCs rarely say out loud:
– Too many pivots in a short time
– Lack of market insight despite traction
– Overuse of buzzwords without depth
– No clear use-of-funds plan
– Investor shopping: pitching too many VCs without customizing the approach
In emerging markets, where formal data is scarce, VCs lean heavily on human judgment. Founders often don’t realize they’re being evaluated before and after the pitch — in emails, small talk, follow-ups, even body language. These soft signals often speak louder than the deck.
The Inside Room — How VC Firms Actually Decide What to Fund
Even when a startup nails the pitch and impresses the partner, that’s only the beginning. Most VC firms operate within a structured decision-making process, often hidden from founders. Knowing how this machinery works can help founders tailor not just what they pitch — but when and to whom.
1. Analysts and Associates: The First Gatekeepers
Most VC deals start with junior team members — analysts or associates — who filter incoming pitches, do early calls, and run initial research. These team members rarely make the final call, but they control deal flow. If they don’t believe in your story or can’t clearly explain it to partners, your deal won’t move forward.
2. Partners and Sponsors: The Internal Champions
To get serious traction, your deal needs a partner-level sponsor inside the firm. This person believes in your startup enough to put their name on it — to fight for it inside what’s often a tough room: the Investment Committee (IC).
3. The Investment Committee (IC): The Real Decision-Makers
The IC — typically made up of partners or managing directors — reviews every potential deal. Here, even promising startups can get blocked if:
– The timing doesn’t align with the fund’s strategy
– The deal feels too risky or unproven
– There’s already a similar investment in the portfolio
– There’s LP pressure to prioritize other sectors
Importantly, many decisions aren’t binary. Deals often get “not now” or “revisit in 6 months” — but few firms say this clearly.
4. Invisible Influences: LPs, Co-Investors, and Reputation Risk
Some deals die because a lead VC couldn’t find a co-investor. Others get slowed down by LP restrictions or firm-wide risk aversion. Most founders never see these forces — but they shape everything.
The takeaway: even if the pitch goes well, internal alignment is its own battle — one founders need to prepare for by building trust and momentum across the firm, not just one partner.
From Pitch to Partnership — How Founders Can Align with VC Realities
Founders don’t need to game the system — but they do need to understand the system. Once you realize how VC firms make decisions — across layers of filters, internal politics, and soft signals — you can shape your approach accordingly. It’s not about performing. It’s about strategic clarity and founder maturity.
1. Start Conversations Early — Before You Fundraise
VCs rarely invest after one meeting. They track startups for months, watching how founders evolve. If you’re not raising now, that’s the best time to meet them. Share progress casually. Ask for feedback. Let them see your trajectory. By the time you’re fundraising, they’re already warmed up.
2. Equip Your Internal Champion
If someone at the VC firm likes you, make their job easier. Send them concise updates. Help them pitch you internally. Understand what their IC or LPs care about — and address those points clearly. You’re not just pitching one person; you’re giving them ammunition to fight for you.
3. Play the Long Game
Most “no” decisions aren’t rejections — they’re not yets. Ask for honest feedback. Stay in touch. Re-pitch when the timing makes more sense (e.g. after hitting a milestone or market shift). A “pass” now can become a lead check later — if you stay visible and open.
4. Understand Their Context
VCs have constraints too — fund size, stage focus, geography, LP pressure. The more you understand their world, the more empathy and strategy you bring to the conversation. It’s not personal. It’s pattern-matching under pressure.
Ultimately, founders who raise well aren’t always the flashiest — they’re the ones who know how VC firms actually work and align their momentum accordingly.
