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Alex Samson
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VC Due Diligence Math: 3,226 Startups per Outlier

Why an emerging VC has to review about 3,226 startup applications a year for a chance at one outlier startup, and how to handle the due diligence load.

Originally published in MondayVC Newsletter, Edition 1, April 15, 2024, on LinkedIn. Updated October 30, 2026. Figures are as of 2024.

Key numbers: 1% of deal flow gets funded, 3.1% of funded startups outperform, so one outlier takes about 3,226 applications and 323 due diligences a year.

The first week at the VC Lab Venture Institute gave me two key insights:

1. Seek opportunities for 10-100x returns, rather than just investing in any new tech business that can earn a profit or be acquired with at least 2x returns.

2. 1% of startups in deal flow get funded, which requires reviewing 1,000 applications to make 10 investments per year. Out of 500 applications, about 50 make it to a first call, 10 to due diligence, and one gets funded.

Why 3,226 applications#

We all know that 90% of startups fail. In April 2024, 60x angel investor and LP Rem Darbinyan at STAN's webinar added that another 6.9% become self-sustaining businesses that don't deliver the returns VCs need to cover failures. So basically, 3.1% of the 1% of invested startups outperform.

Donut chart of startup outcomes: 90% fail, 6.9% become self-sustaining, 3% exit through IPO or M&A, 0.1% become unicorns
Startup Statistics: data by Rem Darbinyan, chart by Alex Samson.

This means a VC has to review 3,226 startup applications per year (1 ÷ (1% × 3.1%)) to get a chance at one outlier.

And these should be 3,226 applications from a strong, warm deal flow. Only about 10% of applications come from cold outreach, and cold applications rarely make it through, so with them in the mix the number grows further. Without connections, a startup's chance of a round is about 0.1%.

The due diligence load#

Let's omit from today's math the time required for screening and scoring deal flow to get 10% picked for due diligence (DD).

One investment requires 10 DDs. To get one outlier startup in the portfolio per year, a VC has to conduct DD on 323 startups per year, or 6 startups per week without vacations.

With my tech and new market due diligence, which takes one intensive week, I will need six years to invest in a super opportunity.

How can emerging VCs address the due diligence swamp?#

Or how to explain the DD strategy to an LP who can do the math.

No way:

  1. 🦮 Don't do due diligence, blindly follow top-tier VCs: Not much sense for LPs to invest in an emerging VC rather than directly in a top-tier VC.
  2. 🎸 Get together with 6 active GPs: An option, but management risks with such a boys/girl band founding team size.
  3. 🧐 Hire 6 analysts: Let's take a $120K annual salary each, which means $720K per team. With a 2% management fee, this requires $36M for Fund 1 capital only on the DD team. Not feasible.
  4. 🕴️ Outsource: Same cost as a team of 6 plus a consulting profit margin. Not feasible.

Art of Combinations:

  • 🏭 Specialize in an industry/market to have metrics and access (see my post on market size in biotech; see also Unicorn Market Size).
  • 🗓️ Do DD week by week to increase productivity.
  • 🤝 Have a team with a few GPs, VPs, and associates.
  • 🐢 Reduce expectations to have 1 outlier startup every 2 or 3 years.
  • 🦮 Follow top-tier VCs sometimes.

Related: How Career Predicts Startup Success, my research on screening founders by career history.

Next in MondayVC Newsletter: Edition 2, Finding VC Co-Investors.