Up to this point in the book, we’ve been exploring the market and industry aspects of the value network. Now it is time to look at the mechanics of how an investment in a startup would fit into our fund, or as VCs like to say, “can we make the math work.” We will explore strategies to maximize financial return.

As we are looking at a startup from the VC fund perspective, it may not be surprising that many founders have not deeply considered this point of view. They understandably focused first and foremost on product/ market fit, ensuring that they could indeed create value.

What this means in practical terms is that VCs may not get much help from the founders in determining whether the startup is a fund fit. Whereas, we’d expect slides in their pitch decks to cover the key aspects of product/market and founder/industry fit, we will have to perform much of the fund fit analysis on our own.

Further, we’ll have to gauge whether the founders will be on board with the direction we would need to take to make the deal work for us. With our hit-driven investment thesis, we count on a small number of startups in our portfolio to outperform the rest. We need each investment to have the potential to be one of those hits to move the needle on our fund.

This focus on the endgame and whether a startup might be a hit for us creates a structural challenge for this book. Arguably, these chapters are out of order. Rather than starting with growth milestones, we should probably put the exit first (as we discussed in Part I, “Work Backwards from the Exit,” p. 68). However, I have decided that the exit feels more natural to be at the end, but we will necessarily allude to our exit strategy as we look at the growth milestones we intend to hit along the way.

Another consideration for these sections of analysis is that they are even more future-focused than any chapter we’ve covered so far. In competition, we were concerned with today’s threats as well as how competitors may react tomorrow. In product/fit, we wanted to understand product/market fit for the current target market as well as future segments.

However, fund fit is *all* about the future, specifically a *new* future for a startup that only becomes possible if the startup receives our venture capital investment. This is a future that we will help create. Every venture capitalist must have a vision for how to make this happen, becoming both strategist and prognosticator.

Given the level of uncertainty in predicting the future, different VCs will have different approaches and will often disagree. This level of analysis does not lend itself to right and wrong answers. More relevant are compelling narratives, weaving numbers and story into a vision for the future. We will never know what was right or wrong. We *will *know, with the help of time, if the path chosen worked or not, but we’ll never know what *might have* worked.

We’ll be investigating three elements of fund fit: growth milestones, exit strategy and return analysis, answering these fundamental questions:

- What can the startup achieve with a VC investment?
**GROWTH MILESTONES** - How will we ultimately get out of this investment?
**EXIT STRATEGY** - Can we make the math work?
**RETURN ANALYSIS**

BONUS: there is also a bonus MORE VC MATH section on this website, as well as a RETURN ANALYSIS WORKSHEET.