Money, Conviction, and Pressure: My Perspective on Venture Capital Fundable Startups
This post breaks down how venture capital really works—from where the money comes from and what VCs expect, to why their growth demands are so intense and which startups they’re actually hunting for.
If you’ve ever wondered how money actually moves through the private markets, what makes VCs tick, and why those quarterly “milestone” meetings feel like a pressure cooker, you’re in good company.
As an investment banker specializing in startup fundraises, I have a front-row seat to what investors expect, how they analyze company performance, and why their growth targets are so relentless. My vantage point means I see first-hand both the reasoning behind aggressive benchmarks and how those expectations shape startups at every stage.
Where do Early Stage investors actually get the cash they invest?
Private markets can seem mysterious, but the capital flow is pretty straightforward. The institutional investors in private markets are either Family Offices or Venture Capitalists & Private Equity firms (VC/PEs).
When you peel back the layers on who’s actually writing the checks in the Indian startup ecosystem, it’s a mix of familiar heavyweights and strategic capital. The usual suspects are:
Family Offices (FOs): You can think of them as industrialists, old-money business houses, and even startup legends themselves (Binny Bansal of Flipkart, Ritesh Agarwal of OYO, Tata & Sons, and so on). They are often first in line, deploying their personal or family wealth with both network and operator insight.
Venture Capitalists (VCs) build their funds by tapping into Family Offices, large corporates, and ultra-high-net-worth individuals (UHNI), leveraging these relationships to pool serious capital before turning up at a founder’s table.
Private Equity funds play at a bigger scale, raising their war chests from the same set of FOs and UHNIs, but also adding pension funds and sovereign wealth money into the mix.
Essentially, everyone’s chasing access to capital that isn’t just patient, but wants growth, control, and a seat at the next unicorn’s cap table.
Venture Capitalists are the most spoken about investors at the early stages of a company, so they will be the focus of this piece.
The value VCs bring to the table
A good VC isn’t just a source of capital, they’re a strategic advantage. They are your credibility badge in a crowded field; when a top-tier fund backs you, doors open that would’ve stayed firmly shut, whether it’s landing marquee customers, hiring senior talent, or raising your next round.
The best VCs push you on all fronts: they’ll sharpen your go-to-market, challenge your growth assumptions, spot blind spots before they become disasters, and make high-impact intros that can change the trajectory of your business overnight. They hold you to high standards - on reporting, compliance, team structure - so you scale with discipline, not chaos. And because they’ve got both local smarts and (at times) a global playbook, they help you avoid “rookie” mistakes while giving you an edge at the world stage.
So, if you’re chasing serious growth, the right VC brings way more than money - they bring network, know-how, and the kind of tough love that sets real winners apart.
The risk taken by VCs when they place a bet on any startup
Sure, VCs invest other people’s money - but the idea that they’re “riskless” is dead wrong.
First, there’s skin in the game. General Partners typically commit 1-5% of their own personal wealth to the fund, and their compensation (carried interest) depends entirely on outsize performance. No performance, no upside (sometimes not even basic salary) if things go wrong enough. In the worst scenarios, clawbacks mean they might even have to pay back distributed profits if the fund tanks.
But the bigger sword of Damocles is reputation. Mess up? Underperform, back some bad actors, or lose your investors’ trust, and doors slam shut. You won’t get into the best deals. Raising the next fund becomes “mission impossible.” Founders will run the other way because the world of startups is surprisingly small and memories are long. For VCs, reputation is currency.
Why do VCs have aggressive expectations?
As there is a lot at stake for VCs when they raise funds from any LP (Limited Partner), they are also aggressive with the expected milestones that the investee companies should achieve. The real reason they “push” so hard is… math.
In a 20-startup portfolio, maybe 2 will be huge wins, a couple might get acquired for a modest return, and the rest will limp along or fail. Those two outliers have to make up for everything else and deliver a 20-30% annualized return, or the model breaks. That means every company must, in theory, have a “10x” or better potential, or else the fund’s economics simply won’t work.
That’s why the bar is so high. You’ll have to hit revenue numbers in months, not years; you’ll be pushed to dominate a market quickly, raise follow-on capital, or hit product and customer goals on a tight clock. Miss consecutive milestones? Your next check may be delayed. VCs are under their own pressure from their LPs, which means the pressure flows straight through to you.
Add in board oversight, preferred shares, information rights, and you get the full picture: VCs have to be aggressive, or the portfolio won’t return.
Building Conviction: How Do VCs Actually Decide?
VC conviction isn’t gut feel, at least not for good ones. It starts with team (if the founder isn’t obsessed, smart, and coachable, nothing else matters), followed by total addressable market size (realistically, is there a billion-dollar outcome possible?), and then hardcore diligence: customer calls, financials, technology validation, even third-party references. The process is structured - funnel in a few hundred pitches, narrow to a handful of deep dives, and actually invest in one or two.
VC Principals have run every shortlisted startup to their Investment Committees (IC), who are the final boss (if you may), when it comes to deploying funds. ICs love a strong memo - one that clearly spells out
the Business Model,
the upside,
the major risks involved,
honest comparisons with winners and losers, and
identifies the gaps in the founder’s plan.
Most VC funds run on a 7-10 year clock, so they’re laser-focused on startups that can hit escape velocity fast and don’t need heavy upfront investment to get there. If your business can scale with capital-light models—think SaaS, tech-enabled platforms, anything with high gross margins and rapid repeatability—you’re right in the VC sweet spot. On the flip side, capital-intensive plays (factories, infra-heavy, deeptech with long R&D cycles) usually get skipped by generalist funds, unless you find a specialist with a longer horizon and risk appetite. Bottom line: VCs are optimizing for speed, scalability, and capital efficiency because their fund returns—and careers—depend on seeing those outcomes inside a tight 7-10 year window.
So, is a VC the right partner for you?
Absolutely nothing wrong with building a solid, profitable business growing at 10-15% a year and aiming for a big exit or an IPO after years of disciplined, consistent growth. But let’s be clear: the VC game just isn’t set up for these kinds of ventures. VCs need hyper-growth, want a say in every major decision, and often push corporate governance standards that don’t fit all business models. Sometimes, partnering with a VC can actually slow you down—or worse, derail what makes your company unique.
If this sounds like you, you’re much better off finding a strategic investor with patient capital instead of chasing VC funding:
You’re planning on steady, moderate growth, not chasing breakneck expansion.
Your sector or business model is capital-intensive - factories, heavy infra, manufacturing, etc.
You care more about staying in control and staying true to your mission than engineering a big-bang exit for investors.
You play in a niche or small market - there’s upside, but it’s not a billion-dollar race.
You have little-to-no interest in blitzscaling or burning through cash just for the sake of top-line growth.
In these situations, patient, strategic capital will do more for your business than VC money ever could. Build the company you want, on your terms.
Closing Thoughts
VCs play a crucial role in spotting and backing game-changing startups - but let’s not kid ourselves: not every business is built for the VC playbook, and chasing that kind of capital when your model isn’t a fit can be frustrating at best, demoralizing at worst. Before hitting the fundraising circuit, you’ve got to get brutally honest with yourself about your business model, your peer set, the actual market you’re targeting, and what your cost structure looks like. Scrutinize the fundamentals: is what you’re building genuinely VC-backable, or are you trying to force a square peg into a round hole? Sometimes, the best move is choosing the right funding for the business you actually have, not the one the VC ecosystem wants you to build.