The VC Stack: what do we do under the hood
VCs are weird animals. The industry, which has a large impact on the economy, and significant “cultural mindshare”, is surprisingly small. Even the giants of the industry, like Sequoia and Benchmark, are actually very small enterprises, with fewer than 100 staff. It is also a very young industry, subject to fast changes (side note: I cannot recommend Sebastian Mallaby’s The Power Law, a history of the venture capital industry, highly enough). As a result, there are very few industry standards.
So– to provide a bit of transparency– and hopefully to get some feedback on other tools that we should be using, here is how we run our firm.
For context, because this may impact choices that others make, we are a small (~$150M AUM), American VC. We have 4 full time partners and 4 full time staff, and a bench of 9 venture partners (who work on a deal-by-deal basis). We only invest in North America, and our sources of capital are overwhelmingly US institutional and family offices, but we also have a small number of international family offices among our LPs.
Fund administration:
Aduro Advisors. This is an important piece of the puzzle– small funds should never try to take fund administration in-house. There is a level of complexity and AUM that funds will eventually reach that will necessitate bringing this function in-house, but that level is certainly well north of $500M. There are other firms that perform this function: notably Carta and Standish. Juniper Square started in the real estate investment domain, and is moving into the PE/ VC domain.
When we chose Aduro, Carta was just building their practice, and we felt that we would need more hands-on help than others would provide, and we have been fairly happy with this relationship. They are one of the industry standards, so many of our LPs have other investments also using the Aduro fund management portal, which is convenient. They are highly professional and competent, and their account team is extremely responsive (I will personally give a shout-out to Brandi Boykin who is on top of everything, day-and-night). On the other hand, their reporting tools are built on top of Salesforce, which is a bit clunky to use, and not integrated with our other systems (like Affinity, which we use as a CRM)
Aduro brings a suite of tools to help manage our back office, including Bill.com, Expensify, and Xero. All of these tools are as delightful as expense management tools could be (which is surprisingly delightful, actually).
HR systems
We run our own HR systems on Gusto, and our 401k through Guideline. Both are “industry standards” for small businesses, and both work well.
Deal sourcing, screening, tracking and analysis
For large-scale programmatic deal sourcing, we built some custom tools around harmonic.ai’s API. We have a fairly well-defined ideal founder profile (we’ve written about one of our target profiles– PhD Founders– here), so harmonic.ai has been powerful to search the universe of potential founders at scale.
We use Pitchbook as our primary source for start-up and VC data. Pitchbook is expensive, but in our experience, it has the best coverage. We tried several other tools that are competitive, and found that Pitchbook consistently had a more complete record of the start-up universe (especially for the early stage start-ups that are our bread and butter).
For deal analysis, we are very Google Sheet/ Google doc centric. We collect a TON of metrics with every meeting we take, and we periodically do retrospective analysis to see if our scoring heuristics are helping our decision quality. We actually published the results of our retrospective from last year here, and also provided a look at how we make decisions here).
We are HUGE users of Otter.ai (automated note taker) for meetings (disclaimer: Otter is a portfolio company of ours). In the past year or so, Otter has gotten so much better– when we first started using Otter, it was somewhat useful to have a transcript so that we could search through meetings quickly, and review transcripts if we forgot what was discussed in any given meeting. However, the current version of Otter allows screenshots of slides interspersed with the discussion; it automatically generates a meeting summary; and allows the overlay of our notes with the transcript. This means that we can divide and conquer much more effectively– ie., not everyone has to be in every meeting, because the Otter notes give a very good approximation of the actual meeting.
For dealflow tracking, we are very heavy users of Affinity. I have found VCs to give very mixed reviews of Affinity, and I get that it could be so much better. However, it can also be quite powerful. The most attractive part of Affinity is that it pulls in the email records for our firm automatically, which automates a lot of information collection. It is very easy to create lists and metadata in Affinity. On the other hand, its analytics are quite poor (we run a lot of analytics in parallel in Google Sheets, because Affinity is really not well-suited for calculations), and the CRM functionality is hamstrung by extremely rudimentary bulk mail functionality.
Part of the issue is that Affinity is at the center of many different functions: deal tracking, investor contact and stage management, entrepreneur contact management, etc. This leads to some friction, for example, since Aduro is the system of record for our LPs, while Affinity is our primary CRM database, this creates an unhelpful disconnect (this is actually one of Juniper Square’s primary advantages: their platform is both the system of record for LPs AND the CRM for the VC, allowing far more seamless investor management processes).
Investor relations
As mentioned above, we primarily use a combination of Aduro (which has built an investor portal– on top of Salesforce– called FundPanel that works *okay*) plus Affinity. To generate more descriptive analytics and reports, we use an unholy Frankenproduct of our own design that combines Airtable, Integromat, and Google Docs that is surprisingly satisfying. Someday, we’ll get around to coding something more elegant, but we also love to hack things together that save time.
Portfolio support
The most direct way that VCs add value to portfolio companies is by ensuring that the portfolio company is able to raise money round-after-round. In the past, we have maintained all of our intelligence about our relationships with VCs in Affinity; we would then build a Google Sheet based target list for each of our portfolio companies for their raise. This can work, but it’s clunky and somewhat manual.
We have now moved to an Airtable base that will grow over time. Eventually, we’ll probably code this into a webapp front-end (probably using Bubble– another portfolio company).
The second most important portfolio support area is hiring/ talent. Our portfolio job boards are powered by Consider (also a portfolio company), which automatically scrapes and organized all of the jobs offered by all of our portfolio companies. We’re huge fans of Consider — this makes it a snap to consolidate all of the jobs offered by our portfolio companies, and overlay very clever search capabilities. Consider also has great workflow capabilities (for example, allowing us to create very smart outreach automation for candidates).
We have a full-time Operations Partner (Phoebe Fan) who helps our portfolio companies with finding, landing and retaining talent. She uses a combination of LinkedIn Recruiter (search), Consider (search, referrals, and smart outreach), and SmartRecruiters (a simple ATS solution) to find and process candidates. Phoebe is fantastic (she used to perform a similar role for Andrew Ng’s AI Fund, and was also a technical recruiter with Amazon).
Another significant area to help portfolios is to make sure that all of the companies in our portfolio are able to share best-in-class vendors/ service providers for every conceivable need. For that, we’ve licensed Proven to act as a “Yelp for vendors”. To be honest, we could just maintain a “preferred vendor list” and provide this through a Google doc or DocSend link, but the benefit of Proven is that the metadata (in particular portfolio company ratings) will grow over time.
Finally, we have set up a Slack channel for our portfolio companies to interact with us and each other. This works, but is not yet as active as we would like.
Our pain points
As is easy to see, we have a lot of siloed solutions, many of which could be integrated better. For example, information often lives in multiple systems (eg., Affinity, Aduro, Google Sheets, Airtable). This causes both efficiency and accuracy problems.
We also believe that the biggest power that a VC has is facilitating a transparent network across our portfolio companies (ie., the power of the knowledge in the heads of our portfolio companies FAR outweighs the talents of the partners in the VC firm). But, we have not yet found a great way to unlock this power. Certainly, part of that is a “soft systems” issue (ie., we have to invest in building real-life relationships among founders). However, part of this is building systems to allow founders to help each other seamlessly.
Any questions? Any advice? Reach out and tell us!
one more thing (h/t Monica Lee, who sent this my way)… to look the part, here it is:
