Behind the scene of a VC decision making

@stefanovirgilli

Three months ago I joined an investment firm, which could be loosely categorised as a Venture Capital. Without going too much into technicalities, Venture Capital is money deployed to support the growth of a start-up at any stage.

In our case, we mostly invest in web3 related early-stage start-ups that are aiming to list their blockchain tokens on an exchange.

Although the field is not new to me, sitting on the other side at the negotiation table has been quite interesting.

For most of my career in start-ups, I “chased” investors looking for funds to grow my business. Now, I am “chased” to invest in other people’s projects.

Many ask me what are our decision making criteria when we look into a project. I would love to say that there is a single answer to this very complex question, but the truth is that there are too many factors to keep into consideration. In this article I will highlight those that are usually core to our decision making process.

First of all, we have divided into teams. This might not be the case across all VCs, but in our case it works well. The first team is the one looking into the project on a surface level.

This team has some knowledge of the market and a good feeling of the market’s sentiment. They run through essential information, such as: The team, the market, the product, the tech used, the list of other investors (existing or in talks). Then, 3 times a week we have our Investment Committee calls, during which this first team presents the opportunities that they have evaluated.

The second team is more experienced in investment specifically, having in it first-hand investors. They have more “grey hair” than the first team, both in terms of age and experience. I must admit that it is always amusing to see the incredible amount of connections that this team has. It is not an exaggeration to say that they almost know everyone in the industry.

Sometimes, it could be the case that the first team might support a project, but the second team has some insights that point in the opposite direction. That might result in a rejection, or in more facts-finding needed. That is when the third team comes into the picture.

The third team is very technical and data-driven. They have developed internally a decision making engine that is proprietor to our VC, so I cannot expand too much in terms of what we factor in.

The third team is there to provide the data that was not available on the surface or through insider’s knowledge. Their research however, is also kept in consideration before any decision to invest, even when all teams are in agreement. It is like a rational safety net.

Eventually, we present all information found to our Managing Partner, who has the last word on the decision making. At the moment we are approving about 5 investments a month. During each Investment Committee we are evaluating 3 to 5 projects.

What I described might be unique to our VC, but in general, as an advice to those “chasing” me, be ready to have your project scrutinised in depth before attracting your next investment.

(The writer is a member of the International Press Association)