For a seed investor, sourcing means building access to companies whose expansion could create economic value consistent with the risks and the way the fund operates. A well-run, profitable business that customers admire may be an excellent company without offering the trajectory a particular VC seeks. Initial screening must distinguish business quality, fit with the investment thesis and the potential for a return to that investor.
Sourcing starts with the question the fund can answer
A usable thesis turns preferences into observable criteria: the problem addressed, buyer profile, geography, product stage, capital intensity, investment size and the fund's expected role. It also states exclusions. A manager seeking repeatable software with recurring revenue needs a consistent approach to businesses whose revenue depends mainly on customized projects, even when their presentations describe them as platforms.
The relevant context is a company with expansion potential, a repeatable product and a fundraising strategy compatible with the investor's mandate. Repeatability must nevertheless appear in operations. If every new customer requires months of bespoke development and continuing founder intervention, scalability remains unproven. Sourcing should expose that gap without treating missing evidence as proof that expansion is impossible.
Before seeking more companies, the fund can ask: what evidence would persuade us that this product can grow revenue without increasing costs and complexity proportionately? The answer guides forms, conversations and document requests. It also helps prevent persuasive presentations from dominating the pipeline when the underlying businesses do not serve the strategy that the fund's investors agreed to finance.
Access channels and the biases each brings
Founder referrals, expert networks, universities, industry communities, customer contacts and connection platforms produce different opportunity sets. No single channel represents the whole market. A familiar founder network can make reference checks easier while repeatedly favoring similar social backgrounds, regions and business models. Open applications broaden access but require more work to verify identity, thesis fit and information quality.
Compare channels across the full process: companies received, opportunities matching the thesis, qualified meetings, diligence started and reasoned decisions. Counting presentations alone rewards volume without showing usefulness. Counting only completed investments also distorts the picture: good sourcing may uncover risks that justify declining an investment. The objective is a stronger set of opportunities and evidence for decision-making.
Record the source alongside the reason an opportunity advances or is rejected. If a channel supplies attractive companies that all require investments above the mandate, search targeting may need adjustment. If another consistently supplies incomplete documentation, clearer entry requirements may help. These corrections should come before concluding that an ecosystem lacks worthwhile businesses.
Conflicts can arise at the point of introduction. A referrer may receive a fee, own equity, provide services to the company or benefit from the round closing. Investors need to understand those relationships and costs. A paid referral does not erase an opportunity's merits, but it changes the assessment of independence. Compensation should be disclosed early, rather than buried in a service price or revealed after the committee has become committed.
A project dossier makes comparison possible
The unit of analysis should be the actual entrepreneurial project: problem, product, customer, operations, ownership, use of capital and available evidence. A dossier brings these together without reducing the company to a score. KEZS connects entrepreneurial projects and potential funders through technology and intermediation. In this context, the method can help organize and interpret information while leaving the investment decision with the investor.
A comparable dossier can separate company statements, supporting documents, independent checks and unresolved questions. Founder-reported revenue is a statement; contracts, accounting records and reconciliations may support it; customer interviews help explain its quality. These sources answer different questions. Records should identify the source, reference period, responsible person and limitations instead of treating every attachment as equivalent evidence.
Standardization does not require making different businesses artificially identical. Common fields covering ownership, revenue, cash, customer concentration and intended use of funds can coexist with model-specific modules. Software companies need to explain implementation and retention; businesses with physical operations need to address inventory, losses and working capital. Consistent definitions should leave room for those distinct economic mechanisms.
KEZS does not assign a credit score, and organized documentation does not replace diligence. Investors must perform their own checks and make their own decisions. A company's presence in a connection environment does not establish regulatory authorization, asset quality or likely returns. The dossier is most useful when it makes gaps visible and allows conclusions to change as relevant evidence emerges.
Market analysis: from a large headline number to reachable buyers
A market estimate helps only when it connects buyer numbers, the need addressed, willingness to pay and distribution capacity. Saying that an industry generates billions reveals little about what a startup could capture. A more useful starting point is an identifiable customer population, with characteristics explaining why those customers would buy and what barriers could prevent a sale.
Consider a hypothetical provider of operational software for service chains. Identifying 8,000 suitable business groups and assuming annual contracts of R$ 36,000 produces R$ 288 million in annual market potential for that segment. The multiplication is straightforward; the difficult work is verifying the buyer count, price assumption and absence of double counting. This total is neither contracted revenue nor an achievable market share.
Next identify the market accessible through current operations. Integration, language, support and channel constraints might reduce the initial population to 1,500 groups. Winning 100 would still require a credible sales process, implementation timetable and service capacity. Other segments may expand the opportunity, but they belong in additional hypotheses with their own costs and evidence, rather than being silently included in the main case.
Investors should also ask why buying behavior would change. An old problem may remain unresolved because buyers do not prioritize the spending or implementation costs exceed the benefit. Interviews should examine budgets, existing alternatives, purchasing authority and the consequences of doing nothing. Interest in a demonstration shows curiosity; paid contracts and repeated use offer stronger evidence, though neither alone proves scalability.
Repeatability and revenue quality require cohort analysis
Aggregate growth can hide deterioration. Revenue may rise while established customers leave, discounts deepen or new contracts require services that absorb the margin. To assess repeatability, a fund should follow customers acquired under comparable conditions. Cohorts organized by acquisition period, segment and channel help distinguish product improvement from growth supported by concessions or a few large buyers.
Break revenue into subscriptions, implementation, additional services and exceptional items. An upfront payment improves immediate cash but creates future service obligations. A large implementation project can increase billings without creating equivalent recurring revenue. When a company reports monthly recurring revenue, clarify which contracts qualify, how cancellations are recognized and whether service installments have been included.
Customer retention and revenue retention answer different questions. A business may lose small customers while expanding larger accounts, preserving revenue but increasing concentration. Another may retain almost every customer by reducing prices. Reconcile new business, departures, expansion, contraction and nonpayment with ending revenue. A convincing commercial explanation still needs an arithmetic bridge showing how the reported total was reached.
Examine delivery effort as well. Implementation hours per customer, support tickets and founder interventions indicate whether the product is becoming easier to repeat. If each new contract needs a dedicated team, the thesis must reflect that cost structure. Narrowing the target segment or standardizing integrations may address the constraint more effectively than simply hiring salespeople faster.
Unit economics: a worked example with explicit limits
Prisma is a fictional company used throughout this article for hypothetical arithmetic. It has 100 customers paying an average of R$ 3,000 monthly, producing R$ 300,000 in monthly recurring revenue. Direct delivery costs total R$ 90,000, including infrastructure and customer service attributable to the contracts. Gross profit is R$ 210,000 and gross margin is 70%. Cost classification must remain consistent for comparisons over time to mean anything.
Prisma spends R$ 180,000 monthly on sales and marketing and acquires ten new customers per month. Attributing all that spending to acquisition gives a customer acquisition cost of R$ 18,000. At the same averages, each customer contributes R$ 2,100 in monthly gross profit. Simple acquisition payback is approximately 8.6 months: R$ 18,000 divided by R$ 2,100, before other expenses and the effects of cancellations.
Assume monthly customer churn of 2%, with no contract expansion or contraction. A simplified approximation divides R$ 2,100 by 2%, producing R$ 105,000 in cumulative gross profit per customer. This is not a promise of lifetime value. It depends on stable churn, margins and cohort behavior. A young company with only a few months of observations cannot treat the implied customer lifetime as an established fact.
On the opening base of 100 customers, 2% churn means two departures; ten new sales would therefore add eight net customers that month. Averages conceal differences: new channels may cost more and retain customers less well. Reconstruct the measures by channel and cohort, include subsidized implementation and test collection delays. Favorable ratios are unreliable when they depend on omitted costs or retention that has not yet been observed.
Cash and milestones: what the investment actually buys
Prisma's monthly snapshot includes R$ 90,000 in direct costs, R$ 180,000 in sales and marketing, R$ 160,000 in product and technology, and R$ 100,000 in administration. Operating expenses excluding direct costs total R$ 440,000. Against R$ 210,000 in gross profit, simplified net cash burn is R$ 230,000 monthly. This calculation assumes revenue is collected and expenses paid in the same month, with no capital expenditure or additional working-capital changes.
The company has R$ 600,000 in cash and receives a hypothetical R$ 3 million investment. Closing costs of R$ 150,000 leave R$ 3.45 million available. At unchanged monthly burn of R$ 230,000, that covers 15 months. This is a static survival reference, not a growth forecast. Freezing acquisition, revenue and expenses makes the assumptions visible; it does not predict how the business will develop.
If preparation for the next round starts in month nine after the investment, R$ 1.38 million remains on this path, equivalent to six months of burn. At the end of month 12, cash is R$ 690,000, or three months. Does that allow time for introductions, diligence, negotiation and closing, with room for delays? A desired round is not cash until a valid obligation exists, conditions are satisfied and funds are available.
The investment should finance milestones that reduce uncertainty: longer observed retention, standardized implementation, a repeatable channel or lower concentration. Cutting burn to R$ 180,000 from the outset would extend the same cash to approximately 19.2 months. Assess what was cut and which milestones would move. Extending survival without generating relevant evidence may merely postpone fundraising difficulty.
Comparing opportunities without manufacturing precision
A comparison matrix should reveal the decision logic without automatically selecting a winner. Suppose Prisma and another company both fit the thesis. Prisma has recurring revenue and a 70% gross margin but needs a longer retention record. The other grows faster while depending on one channel and bespoke integrations. Useful comparison identifies the dominant risk, the cost of reducing it and the fund's ability to help monitor that reduction.
Instead of adding arbitrary scores, the committee can use equivalent lines for each opportunity: evidence of paid demand, margin quality, acquisition cost and timing, operational dependence, governance, capital needed to reach the next milestone and proposed economic terms. Each line should show the data, source, interpretation and gap. An internal score may summarize discussion, provided it does not replace the evidence underlying the judgment.
Separate disqualifying risks from risks that terms can accommodate. A mandate mismatch, missing contracting authority or unresolved product ownership may prevent a transaction. Limited retention history may be acceptable within a particular thesis if price, investment size and monitoring reflect the uncertainty. A lower valuation cannot repair every problem, especially where the validity of the acquired rights is at stake.
Include the opportunity cost of diligence. Weeks spent on a weak fit can prevent investigation of a more suitable company. A legitimate intermediate decision is to request a defined piece of evidence before expanding the work, with a responsible person and clear criterion. Record why an opportunity was declined or kept under review so decision patterns can be reconsidered without retrospectively rewriting the thesis.
Valuation and dilution: build the ownership calculation step by step
Suppose Prisma agrees a pre-money valuation of R$ 12 million and receives R$ 3 million from the seed fund. Post-money valuation is R$ 15 million, and the investor owns 20%: R$ 3 million divided by R$ 15 million. This describes ownership under specified assumptions. It does not prove the company could sell for that amount or establish that a buyer exists for the stake.
Assume the R$ 12 million pre-money figure already includes an equity pool for the team. Immediately after the round, fully diluted ownership is founders 70%, team 10% and seed fund 20%. Team equity may be subject to vesting conditions. Including it from the beginning prevents an anticipated commitment from subsequently appearing as unexpected dilution.
When the pool is created changes the negotiation. Requiring a pool increase before the new investor enters generally places its effect on existing holders; creating it afterward distributes dilution according to the adopted structure. Request a complete simulation covering options, convertible instruments and prior commitments. A percentage without its denominator or the treatment of those rights is insufficient for comparing proposals.
Price should reflect the evidence achieved and the capital still required. A high valuation can reduce immediate founder dilution while raising the hurdle for the next round. An excessively compressed price can weaken incentives and make recruitment harder. Test delayed-growth scenarios instead of choosing a valuation solely because it delivers one party's desired ownership percentage. The cap table must remain workable under less favorable outcomes.
Equity and convertibles create different rights
An equity investment establishes ownership rights within the agreed legal structure. A convertible may postpone the ownership calculation, but its rules must be understood at signing. Loans, receivables, equity, convertibles and donations are not interchangeable forms of funding. They change the funder's legal position, payment conditions, exposure to loss and the events through which a financial return might arise.
For a convertible, examine principal, conversion events, any contractual remuneration, maturity, discount, valuation cap and treatment of a sale or closure before the next round. A conversion cap is not automatically a current company valuation. The ultimate percentage also depends on the capitalization definition and other instruments. Numerical examples must reproduce the negotiated formula rather than assume every convertible works alike.
Separately from Prisma, consider a hypothetical R$ 1 million investment converting at the lower of a 20% discount to the round price and a price derived from a contractual cap. If the round price is R$ 10 per share, the discount gives R$ 8. If the cap produces R$ 6.25 under the contract's definition, R$ 6.25 applies, yielding 160,000 shares. Percentage ownership still depends on the total shares after all issuances.
The instrument requires documentation, authority and distribution arrangements appropriate to the transaction in Brazil. A business classified as MEI cannot admit equity partners while remaining MEI. A nonprofit donation is neither an equity investment nor a promise of financial return. Rights over existing, eligible receivables also differ from hoped-for future sales. Identify the right being acquired before discussing projected profitability.
Diligence: verify the claims that drive the decision
Efficient diligence starts with claims whose failure would change the investment decision. If the thesis depends on proprietary technology, prioritize ownership, developer agreements and usage permissions. If it depends on recurring revenue, focus on contracts, cancellations and reconciliation. A long document checklist can create an impression of rigor while leaving the economic mechanism behind the investment case unexamined.
On corporate matters, establish who holds which rights, who can represent the company and which approvals are required. Reconcile the proposed ownership table with documents and earlier commitments. Financially, bridge contracts, billings, collections and accounting records. A discrepancy may reflect accrual timing, advance payments or an error; explain the cause before treating it as immaterial.
Commercial references should include customers with differing experiences, with appropriate data handling. Speaking only to buyers selected by founders tends to produce a favorable sample. Recent, longstanding and former customers can explain purchasing motives, implementation difficulty and alternatives. Avoid questions designed to invite praise. Investigate behavior: frequency of use, renewal, budget allocation and the consequences of losing the product.
Private information requires proportionate access, a defined purpose and sharing controls. A document room can separate sensitivity levels and record versions and permissions. Personal data and contracts should not circulate indiscriminately among interested parties. The diligence conclusion must distinguish confirmed facts, open assumptions and closing conditions. A material qualification remains material even when moved into an appendix.
Negotiation, disagreement and operational responsibilities
Useful disagreements often concern causation. Founders may attribute growth to product quality while the investor sees commercial subsidies or a temporarily favorable channel. Define evidence that could distinguish the explanations: cohort retention, margin without discounts or sales through another channel. If obtaining that evidence takes time, reflect this in the commitment size or timing of the decision rather than simply negotiating competing opinions.
Assess terms together. Liquidation preferences, information rights, reserved matters requiring approval, anti-dilution provisions, follow-on rights and exit rules change investment economics. A higher headline valuation combined with much stronger investor protections may be less favorable to existing holders than an apparently cheaper offer. Compare distribution scenarios and control implications instead of relying on the announced valuation.
Assign clear responsibilities. The investment professional coordinates the thesis and memorandum; technical specialists examine the product and architecture; legal advisers assess structure, authority and contracts; finance specialists verify numbers and cash. Decisions follow the fund's governance. Depending on the vehicle and contracted functions, the investment manager, fund administrator and other providers have distinct duties that cannot be inferred from a commercial job title.
Disclose conflicts before deliberation: competing investments, personal relationships, referral compensation or an adviser's interest in closing. Governance may require recusal or independent review. Recording disagreement is valuable when it identifies the assumption and its consequences. A memorandum written solely to defend the transaction makes it harder to recognize later whether an accepted risk is materializing.
Follow-on funding: model the dependency before investing
Return to Prisma. After reaching some milestones, suppose it raises R$ 6 million at a pre-money valuation of R$ 24 million. Post-money valuation is R$ 30 million, and the new investor receives 20%. With no other issuances or changes, existing holders retain 80% of their previous proportional stakes. This is a hypothetical future round, not a forecast that capital will be available on those terms.
Ownership becomes founders 56%, team 8%, seed fund 16% and new investor 20%. The first three figures come from multiplying the earlier 70%, 10% and 20% by 80%. The team pool is not replenished here. If an increase is required, it must enter the denominator and ownership will differ. Ignoring that condition overstates the seed fund's future stake.
To maintain 20% in this round, the seed fund would invest R$ 1.2 million of the R$ 6 million, assuming a uniform price and no other changes. Other participants would supply R$ 4.8 million. This is an alternative scenario: the exit calculations below assume the seed fund does not participate and holds 16%. Follow-on reserves must be considered at fund level alongside applicable obligations and restrictions.
Further funding is also an operational risk. If growth disappoints, the fund may have to accept more dilution, finance a bridge or stop supporting the company. None should be automatic. A bridge can be reasonable if it buys a plausible milestone and governance supports the decision. Repeatedly financing the same delay without verifiable learning may increase losses without improving the prospect of an exit.
Exit: ownership becomes a return only when liquidity occurs
Using ownership after the second round, suppose Prisma sells for R$ 60 million. Debt, transaction expenses and other agreed adjustments total R$ 4 million, leaving R$ 56 million distributable. With proportional distribution, founders receive R$ 31.36 million, the team R$ 4.48 million, the seed fund R$ 8.96 million and the new investor R$ 11.2 million. For simplicity, all team equity is assumed fully vested.
For the seed fund, R$ 8.96 million against R$ 3 million invested is approximately 2.99 times capital, before fund costs, taxes and other particularities. That multiple does not establish an annualized return without the time between payment and receipt. It is also not the fund investors' net result. Holdbacks or payments contingent on future targets may reduce cash received or spread it across different times.
Now assume both investors have a one-times, non-participating liquidation preference, ranking equally with each other. A R$ 14 million sale with the same R$ 4 million adjustments leaves R$ 10 million. The seed fund would choose its R$ 3 million preference rather than conversion into a 16% proportional claim; the new investor would choose R$ 6 million rather than conversion into 20%. R$ 1 million remains for common equity.
Founders would receive R$ 875,000 and the team R$ 125,000, dividing the residual in the ratio 56 to 8. In the larger sale, both investors would prefer conversion and the proportional distribution calculated above. If distributable proceeds cannot cover the preferences, contractual priority and sharing rules determine losses. A higher valuation in a financing round does not itself produce cash, liquidity or an obligation to repurchase the stake.
Adverse scenarios, analytical errors and corrections
An adverse case should change mechanisms rather than merely reduce revenue by a generic percentage. If Prisma's acquisition cost rises from R$ 18,000 to R$ 27,000 and monthly gross profit per customer falls from R$ 2,100 to R$ 1,800, simple payback becomes 15 months. If monthly churn rises to 4%, the simplified cumulative gross-profit estimate falls to R$ 45,000. These assumptions weaken acquisition efficiency and consume financial headroom.
Concentration creates another shock. Losing a large customer reduces revenue immediately, while staffing, contracted infrastructure and sales expenses take longer to adjust. Calculate that interval, including termination obligations and collection timing. Many users do not necessarily mean diversified revenue: multiple users may belong to one economic group or depend on a single contract.
Common errors include comparing gross margins built from different cost classifications, confusing contracted revenue with cash collected and extrapolating long retention from few observations. Rebuild the series with common definitions, document changes and show their decision impact. Moving support costs from administration to delivery may reduce gross margin and extend acquisition payback. The revised analysis must reach the committee.
Funding risk can materialize even when execution is reasonably good: less capital may be available when the company needs it. Prepare actions early, such as reducing inefficient channels, renegotiating expenses or prioritizing customers with shorter implementation. Cash and performance triggers support action before urgency takes over. Partial or total loss remains possible. Governance organizes the response to risk; it does not protect invested capital.
Structure, information and a disciplined decision
Before investing, confirm that introductions, offering, distribution and contracting arrangements fit the rights and participants involved. Public securities distribution and regulated financial activities require appropriate structures and providers. Technology, intermediation or a CNAE business activity classification is not permission. Assess Brazilian rules for funds, offerings and other activities as applicable, without importing another market's thresholds or assumptions.
Brazil's Banco Central, CVM, Portal do Empreendedor and ANPD provide institutional reference entry points for researching activities, structures and data handling. They do not prove KEZS or another participant is authorized. Likewise, a blockchain record may help verify record integrity but does not establish factual truth, legal title, reserve solvency or payment. Private documents should not be placed on public blockchains.
A useful final memorandum combines the specific thesis, supporting evidence, strongest opposing argument, simulated ownership, cash burn and closing conditions. Explain completed and pending checks and who owns them. Total cost includes diligence, advice, investment administration and future monitoring decisions. Any expected return must be presented as a scenario dependent on actual liquidity events, rather than a result created by the spreadsheet.
The decision may be to invest, decline or monitor until defined evidence emerges. The investor should be able to explain why the company fits the mandate, how value could be created, how much capital is needed, how rights change under stress and what could allow the stake to be realized. Recording these answers supports later review. Sourcing quality appears in the consistency between initial selection, monitoring and the outcome actually observed.
Frequently asked questions.
Does strong revenue growth mean a company is ready for seed investment?
Growth is a starting point. Investigate its source, margin, repeatability and cash requirements. Revenue can rise through discounts, exceptional services or dependence on one buyer. Readiness also involves product ownership, a clear ownership structure, authority to contract and a use of funds aligned with intended milestones. An attractive company may still need to resolve one of these conditions before closing. Separate evidence of commercial progress from the legal and operational conditions necessary to complete the transaction.
How can investors compare a revenue-generating company with one still validating its product?
Compare the uncertainties each has reduced and the cost of addressing those remaining. For the revenue-generating company, examine retention, margin and contract quality. For the other, investigate the problem, usage evidence, willingness to pay and technical capability. Existing revenue enables different checks without eliminating risk. If stages require incompatible methods or investment sizes, separate comparison groups within the fund's thesis may be more useful than forcing both companies into one ranking.
Does a lower valuation always improve the investment opportunity?
A lower price may buy more ownership, but it cannot repair absent demand, defective rights or insufficient execution capacity. It can also weaken founder and team incentives. Assess price alongside terms, future capital requirements and exit scenarios. A larger stake in a company unable to finance its next milestone may have less economic value than a smaller stake in a more sustainable trajectory. Compare the complete transaction rather than treating the ownership percentage as the outcome.
Does a follow-on participation right require the fund to invest more?
Distinguish contractual rights from obligations. A participation right allows investment under specified conditions, deadlines and procedures; it should not be presumed to create an automatic funding commitment. The fund must reassess available capital, mandate and investment merits. An expressly assumed obligation requires separate analysis. The company should not budget an investor's intention to participate as guaranteed cash. In Prisma's example, maintaining 20% requires a further R$ 1.2 million commitment under the stated assumptions.
How can investors reduce unexpected dilution from a convertible?
Request event-by-event simulations: rounds above and below the cap, application of the discount, other convertibles, creation or expansion of a team pool, and a sale before conversion. Show the price per share or Brazilian equity quota, quantity issued and final ownership. Check the contractual capitalization definition and any additions to principal. Both parties should be able to reproduce the arithmetic. A verbally estimated percentage cannot replace the formula or show how competing instruments affect the denominator.
What does a liquidation preference actually protect?
It organizes the distribution of available value in the events and on the conditions specified by the contract. It may give priority up to a stated amount, but cannot create money when assets or sale proceeds are insufficient. Its effect depends on relative ranking, participation rights, conversion and other classes' rights. Test low, intermediate and high exit values. A preference is not a repayment guarantee, and holders can still suffer partial or total losses when distributable proceeds are inadequate.
What role does KEZS play in a VC or seed fund's decision?
KEZS connects entrepreneurial projects and potential funders through technology and intermediation. A project-based method can help organize information, expose unresolved questions and make comparisons easier to understand. Investors remain responsible for their diligence and decisions; KEZS does not assign a credit score. A connection does not establish investment quality, participant authorization or future liquidity or returns. The usefulness of organized information depends on its sources, completeness and independent verification.
When is monitoring an opportunity preferable to investing immediately?
When a material uncertainty can be reduced through defined evidence and waiting is compatible with the company's circumstances. Examples include observing cohort renewal, completing a transfer of product rights or checking margins after implementation. Specify what will be observed, who will provide it and how it could change the assessment. Without that criterion, monitoring can become an indefinite wait that consumes both parties' time. It should not be presented as a funding commitment or used to imply that approval is assured.
References and context
Institutional reference points for checking applicable rules and guidance. Calculations and scenarios are original examples, not quotes, historical results or individualized recommendations.
- Banco Central — correspondentes no País ↗
- CVM — Resolução 88, texto e alterações ↗
- CVM — Resolução 175, fundos de investimento ↗
- Portal do Empreendedor — perguntas sobre MEI ↗
- ANPD — orientações e perguntas frequentes ↗
AI-assisted educational content. Decisions require verification of the information, instruments and providers in each actual case.
