We get asked regularly by founders and by other investors how Plakario evaluates companies at the seed stage. The honest answer is that our process is less formulaic than most people expect, and more focused on a small number of high-signal questions than on a comprehensive checklist. What follows is a description of what we actually spend our time on when we are evaluating a potential investment, and why.
The First Meeting Is About the Founder, Not the Company
In our first meeting with a founding team, we are not primarily evaluating the business. We are evaluating the person. Specifically, we are trying to understand three things: whether the founder has genuine insight into the problem they are solving, whether they have the intellectual honesty to see their company and its situation clearly, and whether they have the resilience and resourcefulness that early-stage company building requires in abundance.
The way we probe for insight is by asking the founder to explain, in their own words and without the polish of a prepared pitch, why they believe the problem they are solving is important and why now is the right time to solve it. We look for specificity, for nuance, and for the kind of non-obvious observations that suggest the founder has spent meaningful time in close proximity to the problem. Generic market size arguments and trend lists do not qualify as insight. Personal experience with the problem, or deep domain knowledge that has produced an original view, does.
Intellectual honesty is harder to assess but often visible in how founders discuss the challenges they face. A founder who presents their company as having no real risks or limitations is signaling, intentionally or not, that they either cannot see those risks or do not trust us enough to discuss them. A founder who can articulate the genuine risks and limitations of their approach, while explaining why they believe those risks are manageable, is demonstrating the kind of clear-eyed self-awareness that we find almost universally present in the best early-stage founders we have backed.
What We Do in the Week After the First Meeting
If we are interested after a first meeting, we typically do three things before we meet again. We talk to customers or potential customers, we do deep background research on the founding team, and we consult with domain experts we trust. Each of these serves a distinct purpose.
Customer conversations are the most valuable diligence activity available at the seed stage. We try to speak with at least three people who are either using the product or have been through a sales process with the company. We ask them about the problem they were trying to solve, what alternatives they considered, how the company's product compared to those alternatives, and whether they would recommend it. The candor of customer feedback, unfiltered by the founder's narrative, is revealing in ways that almost no other diligence source can match.
Background research on the founding team is not primarily about verifying credentials, though we do verify what can reasonably be verified. It is about understanding the trajectory of the team's careers, the consistency between their described experiences and the depth of knowledge they demonstrated in our meeting, and any patterns across their professional history that are relevant to how they will perform as founders. We also look for references from people who have worked closely with the founders in demanding situations.
The Product Conversation
We spend significant time on product. Not because product quality at the seed stage is a decisive predictor of eventual outcomes, but because the way founders talk about product, the decisions they have made and why, the tradeoffs they have navigated, is highly revealing about their product instincts and their ability to make good decisions under constraints.
We ask founders to walk us through the product decisions they made in the first six months of building. Why did they prioritize certain features? What did they decide not to build and why? Where did they get it wrong and what did they learn? What does the current product do very well, and what is it still not good enough at? The answers to these questions tell us more about the founder's product quality than a demo does.
"We are not evaluating whether the product is finished. We are evaluating whether the founder's instincts about what to build next are reliable."
Market Timing and the Structural Shift Question
One of the questions we spend the most time on in our internal evaluation of any company is the structural shift question: what change in the world is making this the right moment to build this company? Every successful technology company is built on the back of some structural shift, whether regulatory, technological, behavioral, or economic, that creates a window of opportunity that did not exist before and may close before too long.
When we understand what structural shift a company is riding, we evaluate whether the shift is real and whether it is durable. A shift that is real but temporary creates a window that may close before the company can compound into it. A shift that is real and durable creates a foundation on which a category-defining company can be built over time. We look for the latter, and we look for founders who understand the shift they are riding deeply enough to use it as a genuine competitive advantage.
How We Think About Term Sheets
When we decide to invest, we issue a term sheet quickly, typically within a week of making the internal decision. We write term sheets that are straightforward, with standard venture terms and no unusual provisions that would create problematic incentives later in the company's life. We believe that a clear, founder-friendly term sheet is both the right thing and the strategically intelligent thing, because the founders who are serious about building enduring companies are the founders who read and understand their term sheets and care about what they contain.
We do not use term sheets as negotiating chips. If we issue a term sheet, it means we have made a genuine decision to invest at the terms specified. We expect a clear yes or no in response, and we extend the same clarity and directness to every founder we work with. Our goal is for every founder we interact with, whether we ultimately invest or not, to come away from the process feeling that we were straight with them and that we treated their time with respect.