What Investors Actually Want: A Venture Partner's Playbook for Startup Funding Success

Securing venture capital in 2025 requires more than a compelling pitch deck. With AI tools making it easier than ever to launch a startup, investors have raised the bar for what they consider a fundable business.

On The Go-to-Market Podcast, Ray Smithson, Venture Partner at Frazier VC and Omni Ventures and COO of Kinect Capital, shared the exact criteria he uses to evaluate startups. Host Amy Cook pressed him on what separates companies that secure funding from those that struggle to gain traction.

Here are the actionable insights every founder needs to hear.

Prove Your Revenue Engine Before You Pitch

The most fundable startups are not the ones with the best ideas. They are the ones that have already proven they can generate revenue with minimal resources.

Bootstrap to Meaningful ARR First

Smithson has witnessed a fundamental shift in what constitutes investor readiness. Small teams leveraging AI tools are now hitting impressive revenue milestones without any outside funding.

"I've seen some startups with one to three million dollars in annual recurring revenue without taking on any venture capital, any angel investing, just doing it themselves with very small teams. It's pretty impressive to see."

This level of capital efficiency signals exactly what investors want: product-market fit, operational discipline, and a go-to-market motion that works. Understanding RevOps for startups becomes essential for founders building this operational foundation.

Traction Is Non-Negotiable

The era of funding unproven concepts is over. Smithson is direct about what investors now require.

"Especially in Utah, here they say traction is king. There was a time in the past where you didn't have to have much traction. It was just an idea, and people were throwing money at some companies. But now you really need to have traction in multiple ways for an angel investor or a venture capital firm to look at you."

According to the 2026 Benchmarks Report, top-performing organizations prioritize quality pipeline metrics over pure volume. Build the right kind of pipeline required for sustainable growth before approaching investors.

Build a Data Moat That Competitors Cannot Copy

With AI commoditizing software features, traditional competitive advantages have disappeared. Smithson argues that proprietary data is now the single most defensible asset a startup can possess.

Exclusive Data Beats Feature Innovation

"You can have all these AI tools and plug in all the different things that you can use with AI, but if you don't have sort of proprietary data or data that somebody else can't copy, then that's probably the most defensible thing that you can have as a moat right now in the era of AI."

Anyone can access the same AI models. Not everyone can access unique, valuable datasets. Building a data-driven revenue operations strategy positions startups to leverage this advantage systematically.

Secure Data Partnerships Early

Smithson shared a concrete example from his portfolio work. A manufacturing AI company secured exclusive contracts with industry organizations before competitors even thought to ask.

"They were able to have an agreement with them and were sort of the first ones to ask them and to get access to that data."

This first-mover advantage in data access became the decisive factor in the investment decision.

Adopt an Investor Mindset From Day One

Many founders fail to secure funding because they misunderstand what venture capital actually requires. VCs are not simply providing growth capital. They are investing for a significant return.

Plan Your Exit Before You Start

"Once you start taking venture capital, any kind of angel investments or anything like that, you're signing a contract to at some point either have some kind of liquidity or else the investor doesn't make money."

Founders must think about their potential exit from the very beginning. A profitable lifestyle business is not a fit for venture capital. Understanding boardroom leadership strategies helps founders communicate effectively with investors as they navigate toward an eventual exit.

Build Relationships Before You Need Capital

Smithson's most emphatic advice concerns relationship-building. Investors bet on the jockey, not the horse, because pivots happen and business models change.

"A lot of times startups will come to an investor and just think of them as sources of capital. Give me money, and just start pitching them before you even ask the person what their name is. Well, how about you connect with this person and get to know this person?"

Build genuine connections, establish trust, and create multiple touchpoints over time. Attend events, offer value, and build your network before you need to make an ask.

Your Action Plan

Stop chasing capital and start building a company that capital chases. Focus on these four priorities:

1. Prove your model by achieving meaningful, capital-efficient traction before seeking investment
2. Build a data moat by securing proprietary data that competitors cannot replicate
3. Adopt an investor mindset and understand that VC funding requires commitment to a future exit
4. Prioritize relationships by building social capital long before you ask for financial capital

The founders who secure funding are not the ones with the slickest presentations. They are the ones who have done the hard work of building a fundamentally sound business before they ever walk into an investor meeting.