Why some VCs prefer to work with first-time founders

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Repeat founders who have a proven track record, good references, and in the best cases, an exit to point to will have an easy time making inroads with venture capitalists. Earlier this week, for example, the former founders of Udemy and altMBA raised more than $4 million for a startup with no name or final product.

However, broad strokes in an environment as nuanced and dynamic as VC never make sense. As early stage evolves and more capital flows into the sector, some investors actually prefer first-time founders; it all depends on the type of venture capitalist you ask.

Last week, TMV co-founder Soraya Darabi joined the Extra Crunch Live stage to discuss her firm and investment theory.

“We look for founders who have not had a demonstrable exit before because we think that it can actually taint your perspective,” Darabi said during an Extra Crunch Live. “We look for, instead, founders [who] have had a front row seat of success, or had some product experience where you’re watching from third base but not necessarily the person that takes the whole show home.”

The preference comes directly because of TMV’s investment cadence. TMV invests between $500,000 to $1.5 million into startups that have valuations between $10 million to $15 million. Startups that have heavy market signals or hype will likely exceed that range, and thus become out of reach. For example, a Y Combinator company raised $16 million in a seed round at a $75 million valuation before Demo Day.

As a result, TMV sources founders who have not yet made the leap and want an institutional investor to help them start their first company.