How Investability Ratings Help VCs Source Better Quality Deals

In the high-stakes world of venture capital, the success of a fund hinges on sourcing the right deals early. Yet, every investor knows that finding high-potential startups—before the competition does—is as much art as science. For every unicorn that emerges, hundreds of lookalike startups fail. The challenge isn't a lack of deal flow; it’s the overwhelming flood of applications, most of which don’t meet investment criteria.

Each year, venture capitalists are inundated with thousands of pitch decks. These slide presentations are meant to encapsulate a startup’s vision, market opportunity, team strength, and financial potential. But here’s the harsh reality: over 90% of pitch decks are rejected. Why? Because the applicant is not investment-ready or because VCs don’t have the time, resources, or data to rigorously assess them all resulting in some good prospects being overlooked.

In a world where investment decisions are increasingly data-driven, the traditional pitch deck is therefore no longer enough. That’s why a growing number of founders, investors and support organisations are advocating for a new global standard: investability ratings.

The Cost of Sourcing Quality Deals

For most VCs, sourcing high-quality deals is a labour-intensive, time-consuming process. Here’s why:

1. Volume Overload: A typical VC receives hundreds, sometimes thousands, of decks per year. Most are not investment-ready, but still demand attention.

2. Low Signal-to-Noise Ratio: A majority of early-stage applications are rejected—not because the founders lack passion, but because they lack traction, clarity, defensibility, or execution ability. Finding the few gems amongst the crowd is a massive resource drain.

3. Network Bias: Many VCs rely on warm introductions and closed networks, meaning they can miss out on under-the-radar founders—especially those lacking presentation and marketing skills and those from diverse or non-traditional backgrounds.

4. Inconsistent Screening: Each analyst or associate may apply slightly different evaluation criteria, leading to inconsistency and potential bias/oversight of promising founders.

5. Time Pressure: Deals move fast. Diligence is often condensed, meaning VCs may pass on promising startups simply because they lack the bandwidth to investigate further.

How AI-Powered, Investability Ratings Improve Deal Sourcing for VCs

1. Sharper Filtering: With a reliable rating system, VCs can filter inbound applications more efficiently. Instead of wading through 100 pitch decks, they can quickly shortlist startups with high investability scores—saving hours of initial screening time.

2. Broader Access Without the Noise: Ratings democratise deal flow by surfacing quality startups from outside a VC’s traditional network. That solo founder in Birmingham or fintech innovator in Nairobi can now be fairly benchmarked against the same criteria as startups from Stanford or London’s Tech City.

3. Reduced Bias: When VCs rely solely on gut feeling or personal connections, unconscious bias can creep in. A data-driven rating system brings consistency and objectivity into early-stage decision-making.

4. Faster Diligence: Investability reports can double as mini-due diligence summaries, highlighting red flags, traction gaps, or risks upfront—allowing investors to dive deeper only when warranted.

5. Higher Conversion Rates: By focusing time on startups that have already passed a rigorous screening process, VCs can increase the percentage of meetings that lead to actual investments.
   

The Bigger Picture: Validate First. Fundraise Second.

VCs face an ironic challenge: they’re drowning in deal flow but starved for quality. In this environment, relying on intuition and warm intros is not sufficient. Added to this, the traditional pitch deck model is fundamentally flawed—it favours design skills over business fundamentals and creates information asymmetry.

AI-powered, Investability ratings represent a new infrastructure for startup investing—one that empowers VCs to source smarter and cheaper. Our research indicates that VCs, accelerators and incubators can on average save over £200,000 annually by automating key processes such as startup screening, investability assessments and growth support.

Investability ratings offer a clearer, standardised and structured approach that aligns with how modern investment decisions should be made: transparently, efficiently, and with better data. The VC narrative should therefore change from “send us your pitchdeck” to “send us your investability rating”

 About Our Investability Ratings Fundability Ltd, a UK-based business assessment and rating firm, has established a strategic partnership with Pitchago AB, Sweden’s leading investment readiness and growth platform to increase startup investment success. Working with other stakeholders, Fundability and Pitchago aim to build the first credible global standard for investability ratings that is transparent; neutral; data-backed and aligned with investor workflows.

Pitchago’s AI-driven platform combined with human expertise, provides entrepreneurs with a comprehensive evaluation across 16 key business areas, generating a proprietary "Venture Score." This score highlights a startup’s strength, weaknesses and investment readiness whilst offering tailored roadmaps and automated action plans to navigate and accelerate growth and fundraising.

Nigel Farren, Founder of Fundability Ltd, has over the last 40 years, helped businesses raise approximately £1 billion in funding.  Thorgeir Einarsson, founder of Pitchago, has deep expertise in venture capital fundraising across Silicon Valley, the UK, and Europe. Both founders share a common vision: establishing investability ratings as a global, industry standard, similar to credit ratings/scores from Moody’s or Dun & Bradstreet, making investment decisions more data-driven and transparent.

Tackling the 90% Investment Application Failure Rate

With around 90% of investment applications failing annually, this partnership provides a game-changing approach for startups, investors and founder support organisations offering:

·         Comprehensive Assessments – Evaluating funding readiness before application.

·         Venture Scoring – Standardised probability ratings for securing investment.

·         Personalised Growth Strategies – Tailored milestones and action plans.

·         Financial Health Monitoring – Tools to track performance metrics and capital efficiency.

·         Investor Matching – Tools to pitch succinctly to a database of 6,000 investor contacts.

This collaboration ensures that startups are better prepared for investment, investors receive data-driven insights for smarter decision-making, and business support organisations have enhanced tools for evaluating and mentoring startups.

Just as the credit rating industry enabled trillions of dollars of debt to flow into companies with greater confidence, investability ratings can do the same for investment.