At a horse race, people bet on any possible indicator of success they can get their hands on. Some don't dive as deep into a pool of stats, choosing instead to simply bet on a gut feeling: that inexplicable sensation that, "Horse No. 7 is really going to be lucky this time. I can just sense it." Here in the venture capitalist world, we do our best to bet on more than just pixie dust, even though this isn't the Sport of Kings. If we're not gambling on a feeling about a company, what do we hedge our bet upon when you pitch us? We use a combination of the following factors to make the best possible investment decisions:

The Horse. Some investors choose to place a bet with a company based on what it is doing, akin to the muscular beauties dashing forward through a race. This is not only a company's signature product, but also the business model, and the team's plan to accomplish its goals. Conceptually, your idea needs to solve a problem in a unique way, because the world doesn't need a "me too" anything. Your plan of attack should demonstrate an ability to execute: this isn't just showing traction, although that's an important factor. At the end of a close race, the winning horse has to put in that extra effort—head down, at full sprint—to cross the finish line first. Are you capable of this? Does your model allow for intensive periods of development, sales, improvements, and connections? Your company becomes a safer bet for an investor if the product shines and if your methodology establishes a willingness to survive—and thrive—on a rollercoaster ride filled with tremendous pressure to get things done. This capacity provides the power of sustainable competitive advantage, which differentiates the wannabes from the Thoroughbreds.

The Jockey. Other investors decide to put their money on the rider, the responsible source of direction to lead the horse where and when it needs to go. A jockey's instantaneous reaction time and long range of focus are crucial for running a smart race. In any startup, the founding and executive team serves as its jockey, commanding the animal and keeping it in control. With so many moving targets, a company’s team is strongest with the most variation. The more differentiation in strengths that exists among a group of co-founders, the better: every person brings his or her insight to the table. Each area of expertise—whether it’s technology, engineering, sales, development, financial or design—will prove necessary along the way. The more talented people on board to give direction with each turn of the track, the more stable a venture capitalist's bet.

The Race. Many investors begin a debate on whether to back a company by determining their bets based on the race itself. Some tracks are longer than others, requiring a different type of strength: will a horse need agility or endurance? On certain days, a race track's conditions may not be favorable for a particular horse—or any horse, for that matter. If it's muddy or raining, horses are likely to slip and jockeys have a hard time seeing the course clearly. Similarly, on a seemingly bright day, sunshine can serve as an unexpected blinder. For venture capitalists hearing your pitch, your race is the market in which you're hoping to enter and disrupt. What does your landscape look like now? How will that change in the next five or 10 years? As a horse and jockey duet competing in this race, are you cut out for that type of track, or would another market better suit your strengths as a company and executive team?  We VCs often ask ourselves if a deal is on the "right side of gravity," meaning a market that is experiencing natural growth and expansion.

As the pack comes around the final turn, the crowd develops a strained hush. Binoculars tip forward, jockeys coax their companion, and horses hurtle at a nearly-incomprehensible pace, dancing toward the finish line. As the attendees watch with bated breath, the winner crosses this prosperous threshold first and cheers ring out. In the end, any venture capitalist wants to be the gleeful person after the race with the roses, as much as any horse's owner and trainer. It's a big risk to take on a company into a portfolio, but with the promise of a potentially much bigger reward. It takes a lot of thought to bet on a start-up—that's obvious. Sometimes though, a little pixie dust doesn't hurt.