In my time working at Oxford Seed Fund, we saw around ~350 deals across sectors. We’re a generalist fund — so we see everything from quantum lasers to fish food; from pet diagnostics to satellites; the list goes on — sperm tests, bubbly ships, and novel sweet proteins. AI for corporates, AI for therapists, AI for [insert thing here]. We’ve seen it. GTMs in North America, Europe, South East Asia, Africa, Latin America, (and Space!)

In that time I worked with the (brilliant) student team evaluating which ventures we should invest in — no easy task. That meant talking with the founders (at length), speaking with their customers, their investors, academic and industry advisors, contrarians, supporters — you name it, the team did it.

In deciding which of these startups (and founders) to back, we were evaluating deals in different industries with very different commercial, regulatory, and technical risk landscapes. In the spirit of paying it forward, I’ve tried to synthesize (in the aggregate) the red flags/risks as well as the things we liked across the deals we saw.

Risks

✋ Technological Adoption and Market Resistance: A common thread across many sectors, from shipping to decentralized cloud solutions, is the market’s hesitancy (or even resistance) to adopt new technologies. This often requires pretty extensive validation and proof of efficacy to overcome skepticism. Proving efficacy means trials — which lengthens the runway needed to execute (with implications for funding rounds). To build conviction in the venture, we’d normally like to see partnerships to prove effectiveness of a technology ‘in the field’ (or existing results showing this has already been done), a strong go-to-market case, strong founder connections to industry, or novel approaches to hack customer acquisition.

📈 Commercialization and Market Validation: Beyond conviction that the tech is feasible, the team looked for market fit, or a commercial pathway. Just because science is possible, doesn’t mean someone will pay for it. In some cases, the market itself is partially synthetic or nascent (e.g., carbon credits) or a customer is not yet fully defined (e.g., MRV for types of biodiversity, pollution, environmental concerns). The tech has to fit to a market need; tech alone is research — not venture. Finding both can be more art than science.

Dependency Risks: Often ventures face supply chain vulnerabilities that put execution and scale up at risk. This can be because of reliance on intricate supply chains or more simply a dependency on one partner. In many cases, startups base their growth projections on partner-driven models. Our own maths is based on that growth projection — so we’re probably going to discount revenue on those dependency risks (i.e., mark down). The dependency on strategic partners for scaling operations and reaching market penetration is particularly pronounced in startups where internal capabilities are still developing or where suppliers themselves are nascent or providing novel materials. Furthermore, dependency on a specific type of customer, for example the government in Country A, (e.g., health, UK) provided pause for consideration when that customer in Country B operated very differently (e.g., moving to US, health).

⚖️ Regulatory and Competitive Pressures: There are (always) regulatory uncertainties with new technologies. Startups in sectors like finance and healthcare face significant risks from potential changes in regulations which could affect market dynamics and operational scopes for the venture they’re pitching. Often at pitch competitions in particular I’ve seen this type of thing waved aside — we need to see the founder acknowledge these — not present as if the venture operates in a vacuum.

There are also always competitive threats — I’m not sure I believe in blue ocean (and even if conceptually there is such a thing, there’s still competitive pressures in the form of substitutes or incumbents or shifting customer behavior). As a result this risk of competition, either from well-established players or other innovative entrants, is a recurring concern.

What is often the case, especially with novel technologies — deep tech, climate tech, biotech — is that the problem space can be approached from different angles and as such founders can define competition using very different groupings of companies. This may also be the case because a venture has not yet found product market fit — they’re not sure ‘what they are’ or ‘what their product is’ yet. In these cases, their competition slide may be less relevant to whether or not to invest — but at least provides context for how the founder sees their positioning and customer today.

🛫 Operational and Execution Challenges: One of the main reasons we invest is the founding team. Similarly, one of the main reasons we don’t invest can be issues around the founding team. Issues such as potential founder burnout from handling multiple roles and the need for significant team expansions to support growth are notable. Cap table issues happen also — one founder may feel like too few; four founders like too many. We want to see that the founders will all be suitably incentivized through the rounds of funding they’ll have to secure in order to get to market and scale. Are the founders the right mix of what’s needed to get this off the ground and/or have humility about the gaps they have? Moreover, there are nearly always execution complexities that put pressure (or scrutiny) on the founding team. This exacerbates skill gaps and founder fall-outs. Are we investing in a team that’ll last?

Things We Liked

There are also common themes in how we were able to build conviction in founders and startups through our diligence process. This is definitely not an exhaustive list of things that excited us about startups we saw over the last few years, but rather a first swing at tying together what those startups had in common that was lacking in other pitch decks and founding teams.

📈 Market Leadership and Expansion Potential:

• Looking for a first mover advantage — several investments were driven by the companies’ early entries into their respective markets, such as real-time space insights and decentralized cloud services, positioning them for significant market share capture as those markets grew.

• Scalable business models — validating a venture’s ability to rapidly scale without proportional increases in cost or capital expenditure is a recurring theme. This could also include a route to international expansion with minimal barriers — looking for broad market reach and adaptability.

⚙️ Technological Superiority and Innovation:

• Innovating on integration — especially with respect to B2B software, looking for companies simplifying complex processes while maintaining functionality, highlighting our focus on innovative solutions that bridge current market gaps. These integrative plays could potentially open up new markets, making them attractive.

• Defensible technology — it’s so cliche’ to look for a ‘moat’, but the tream tried to build conviction around investments in companies with highly defensible IP or — more often than IP — a proven, advanced technology that (through being super difficult to develop) opened up a development gap behind it that gives the team a competitive edge. We need to understand it would be really (really) hard for a competitor to develop your edge; and/or see some IP for hardware.

• Software-defined and configurable technologies — though we saw a lot of hardware-stack companies (and backed them), having configurability or a software element in the deck that opens up a potential systems integration role for the venture was something I personally liked.

🧑‍🤝‍🧑 Strong Founder and Team Dynamics

• Exceptional founder — yeah, it’s about the founder. Looking for anecdotes and personal references that can speak to how this person just has the juice. Strong, dynamic, well-connected — a track record building successful companies, or experience in the industry they’re selling to. But more than that, looking for evidence that this founder is a supernova.

• Technical capacity — can this team actually build the thing? That seems like an easy win, but actually this was a differentiating factor in many cases between companies we did and did not invest in. Having a very clear scope that matched well to the technical builders on the team. Our investments frequently highlight the importance of having a technical team capable of rapid development, execution, and pivoting/innovation.

💸 Revenue Diversification and Economic Viability

• Multiple revenue streams — this wasn’t actually something we went out of our way to look for, but looking back (when hindsight is 20:20) I noticed that many of the deals we built conviction around offered diverse revenue models.

• Profitability — admittedly, as was in vogue in 2023 but may be on the out amongst other VCs — again, retrospectively many of the ventures we backed looked for a route to profitability in the unit economics.

🏄 Regulatory & Market Tailwinds

• Regulatory tailwinds — investments are often positioned to benefit from regulatory changes, such as increased environmental compliance regulations or improved subsidy commitments which drive market demand. I’m looking for a surfer who has done the paddling (development, integration, etc.) at the right time to catch the (government regulation & subsidy) wave coming in behind them.

• Market demand — we focused on sectors characterized by burgeoning market demand. This paired with established customer relationships (and a defensible position) made food a compelling case.

For posterity, this is definitely not an exhaustive list of characteristics — or a prescriptive thesis — or a checklist for founders to build pitch decks to. This is more of a retrospective, pulling out the emergent themes that were thread through where the team could build conviction over the year so far. Hope it is useful for budding entrepreneurs!

Remember, if you’re an Oxford-affiliated founder (either a current student, a staff member, or an alumni) and raising capital — apply to the Oxford Seed Fund. We invest up to £100k in seed-stage startups founded by Oxonians.