what early-stage investors really look for in At TechCrunch Disrupt 2025, early-stage investors Charles Hudson and Wesley Chan shared valuable insights into the qualities they seek in founders, emphasizing the importance of narrative, resilience, and awareness of potential pitfalls.
what early-stage investors really look for in
Understanding the Investor’s Perspective
Investing in early-stage startups is a high-risk endeavor, and understanding what drives investor decisions can significantly impact a founder’s ability to secure funding. At the recent TechCrunch Disrupt 2025 event, Charles Hudson, managing partner at Precursor Ventures, and Wesley Chan, co-founder of FPV Ventures, engaged in a candid discussion about the essential traits they look for in founders. Their insights are particularly relevant for entrepreneurs seeking pre-seed and seed capital, as these stages are crucial for establishing a startup’s foundation.
The Importance of Narrative
One of the primary factors that Hudson and Chan highlighted is the significance of a compelling narrative. Founders must be able to articulate their vision clearly and persuasively. A strong narrative not only captures the attention of investors but also helps to convey the startup’s mission and potential impact.
Hudson pointed out that a well-crafted story can differentiate a startup in a crowded market. “Investors are inundated with pitches,” he explained. “A compelling narrative can make your startup memorable.” He emphasized that founders should focus on the ‘why’ behind their business, explaining the problem they aim to solve and why they are uniquely positioned to address it.
Chan echoed this sentiment, noting that a founder’s passion and commitment to their vision can be contagious. “When a founder speaks with conviction about their mission, it resonates with investors,” he said. “It shows that they are not just in it for the money but genuinely care about making a difference.” This emotional connection can be a powerful motivator for investors, who often seek to align their portfolios with meaningful ventures.
Resilience: A Key Trait for Success
Another critical quality that Hudson and Chan discussed is resilience. The journey of building a startup is fraught with challenges, and the ability to navigate setbacks is essential for long-term success. Investors want to see that founders can adapt, learn from failures, and persevere in the face of adversity.
Hudson shared a personal anecdote about a startup he invested in that faced significant hurdles early on. “The founder encountered multiple roadblocks, but instead of giving up, they pivoted and found a new path forward,” he recalled. “That resilience ultimately led to their success.” This story underscores the importance of grit and determination in the startup world.
Chan added that resilience is often tested during the fundraising process itself. “It’s not uncommon for founders to face rejection from multiple investors before finding the right fit,” he noted. “Those who can maintain their focus and continue refining their pitch are often the ones who succeed.” This ability to bounce back from setbacks can be a strong indicator of a founder’s potential for success.
Identifying Red Flags
While understanding what investors look for is crucial, recognizing potential red flags is equally important. Hudson and Chan discussed several common pitfalls that can raise concerns for early-stage investors.
Lack of Market Understanding
One major red flag is a founder’s lack of understanding of their target market. Investors expect founders to have a deep knowledge of the industry landscape, including competitors, customer needs, and market trends. “If a founder can’t articulate who their customers are and why they would choose their product over others, that’s a significant concern,” Hudson stated.
Chan emphasized the importance of conducting thorough market research. “Founders should be able to demonstrate that they’ve done their homework,” he said. “This includes understanding the market size, potential growth, and any barriers to entry.” A well-informed founder is more likely to inspire confidence in investors.
Poor Team Dynamics
Another red flag that investors watch for is poor team dynamics. Hudson and Chan both stressed the importance of having a cohesive and capable team. “Investors are not just betting on the idea; they are betting on the team behind it,” Hudson explained. “If there are signs of conflict or a lack of collaboration, it can raise concerns about the startup’s future.”
Chan added that a founder’s ability to build and lead a strong team is a critical factor in their success. “Investors want to see that founders can attract top talent and create a positive work culture,” he said. “A strong team can make all the difference in navigating challenges and achieving growth.”
Common Mistakes Founders Make
In addition to identifying red flags, Hudson and Chan discussed common mistakes that founders often make during the fundraising process. Recognizing these pitfalls can help entrepreneurs avoid costly missteps.
Overvaluing Their Startup
One prevalent mistake is overvaluing the startup. Hudson noted that founders sometimes have inflated expectations regarding their company’s worth, which can deter potential investors. “It’s essential to have a realistic understanding of your valuation based on market conditions and comparable companies,” he advised. “Overvaluation can lead to difficulties down the line, especially during future funding rounds.”
Neglecting Financial Projections
Another common error is neglecting to provide solid financial projections. Investors want to see a clear path to profitability, and founders should be prepared to present detailed financial models. “Founders should be able to explain how they plan to use the funds and what milestones they aim to achieve,” Chan emphasized. “Without this clarity, it can be challenging for investors to feel confident in their investment.”
Ignoring Feedback
Finally, Hudson and Chan highlighted the importance of being open to feedback. Founders who dismiss constructive criticism or fail to adapt their approach may struggle to gain investor support. “Listening to feedback is crucial for growth,” Hudson stated. “Investors appreciate founders who are willing to learn and evolve.”
Preparing for Investor Conversations
As founders prepare to engage with investors, Hudson and Chan offered several practical tips to enhance their chances of success.
Practice Your Pitch
One of the most critical steps is to practice the pitch. Founders should be able to deliver their narrative confidently and concisely. “Rehearsing your pitch can help you refine your message and anticipate questions from investors,” Chan advised. “The more comfortable you are with your presentation, the more likely you are to make a positive impression.”
Know Your Numbers
Additionally, founders should have a firm grasp of their financials. Investors will likely ask detailed questions about revenue projections, expenses, and funding needs. “Being able to speak confidently about your numbers can instill trust in investors,” Hudson noted. “It shows that you are prepared and serious about your business.”
Build Relationships
Finally, Hudson and Chan emphasized the importance of building relationships with potential investors before seeking funding. Networking and establishing rapport can create a more favorable environment for discussions. “Investors prefer to work with founders they know and trust,” Chan explained. “Building these relationships early on can pay dividends when it’s time to raise capital.”
Conclusion
The insights shared by Charles Hudson and Wesley Chan at TechCrunch Disrupt 2025 provide valuable guidance for founders navigating the early stages of their entrepreneurial journey. By focusing on crafting a compelling narrative, demonstrating resilience, and avoiding common pitfalls, entrepreneurs can enhance their chances of securing the funding they need to bring their visions to life. As the startup landscape continues to evolve, understanding the investor’s perspective will remain a crucial component of success.
Source: Original report
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Last Modified: September 23, 2025 at 12:41 am
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