# 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](/vc/mondayvc), [Edition 1](https://www.linkedin.com/pulse/mondayvc-newsletter-alex-samson-2md1c), 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](https://www.linkedin.com/in/remdarbinyan/) at [STAN](https://www.linkedin.com/company/science-and-technology-angels-network-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](https://saalse.com/_astro/startup-outcomes-chart.DoSwGgkC_1VtylQ.webp)

*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](https://www.linkedin.com/posts/saalse_mondayvc-marketsize-biotech-activity-7183139248735240193-de6_); see also [Unicorn Market Size](/articles/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](/articles/how-career-predicts-startup-success), my research on screening founders by career history.*

*Next in MondayVC Newsletter: [Edition 2, Finding VC Co-Investors](/vc/vc-partnership).*