By David J. Blumberg

If there is one question I’m most often asked as a VC, it is: “How do you decide to fund one company and not another?” I always tell people the same thing and want to share it with you here. At Blumberg Capital, we follow the Six T’s that a wise man taught us.

1) Start with the theme: Tell us the problem you’re solving. Be crisp, articulate and brief. The most important step is to find the right problem. As strange as it may sound, this is much harder than finding the solution. For example, the founding team at Lendio clearly recognized a problem for SMBs – the inability to borrow at affordable terms. SMBs need more access to loans and Lendio solved this problem by creating a marketplace where businesses can find loans that best meet their needs. Lendio showed us the problem and explained how they could solve it. That’s the theme.

2) Build the right team. The best ideas are worthless if you aren’t able to execute. So we need to know whom we are investing in. Why are you the right people? Show us you have the technical chops, the experience and that stick-to-it-iveness to see the project through to the end. But don’t fake it; don’t pad your resumes. For example, if your team has three all-star founders, but none of you have sales expertise, be upfront about that. We can help train team members in various functions and provide operational expertise. We also can help you recruit strong players to fill open positions. It’s all about the team.

3) Know the terrain: Good ideas don’t exist in a vacuum. We need to understand how and why your startup can capitalize on industry trends and succeed in a competitive market. How do you compare to competitors? Are you early or late to the market? Will you need to do a lot of market education? How long are sales cycles in your industry? Will you sell direct or through distribution channels? What is your business and pricing model? Be honest: Show us why your solution is superior, but also tell us about your weaknesses and how you will address them. An honest competitive review is one of the clearest indicators of your character and if you have what it takes to succeed. Map out the terrain to show us where you’re going.

4) Deliver the right technology: There may be multiple ways to solve a problem and your approach may or may not be the best answer. Explain how your technology works, how it is better than alternatives and why it has a sustainable edge in the market. It is also important to address how you protect intellectual property you have already developed, or will in the future. For example, when we met the Nutanix team they explained that compute and storage hardware was moving towards commoditization and software defined solutions. Drawing on their software expertise from Google, Oracle and Asterdata, they convinced us that their low cost, high performance and flexible appliance/software solution was the best way forward. Show us why your tech rocks.

5) Show traction: First movers often have a big advantage, but not always. My mentor Fred Adler used to say the only thing worse than being late to market is being too early – like tomatoes picked before they ripen on the vine. It is important to demonstrate timing, fit, and show traction with customers, users or thought leaders. When we first met Yotpo and Hootsuite, two of our portfolio companies, neither of them had revenue. But they each had thousands of customers and demonstrated reasonable paths to monetization that instilled confidence in their business models. Strong customer traction reduces risk.

6) It’s the terms: When all is said and done, it comes down to dollars and sense. How much money do you need and what are the uses of proceeds? Are your valuation expectations reasonable and supported by comparables? How do you want to structure the board? There are also other, less tangible factors that cannot be ignored. For example, we recently funded a company where we negotiated with management on vesting and aligning incentives so we were all rowing in the same direction. Terms are best when they are clear, simple and align incentives.

The key takeaway is to always be upfront and open when presenting to VCs. Starting the relationship on the right foot is the best way to form a great long-term partnership. So remember: State the theme, present your team, map the terrain, demonstrate your technology, show us traction and align on terms.

David J. Blumberg is the founder and managing partner of Blumberg Capital. Follow him on Twitter at @davidblumberg