Trust the Process: Investment Process and Pace

TVP Investment Process

There’s a lot of talk in the venture world these days about the investment process, the speed of that process, and the pace (i.e., frequency) at which VC firms make investments. Of course, in hot markets like this, it’s fast, fast, and fast.

Venture Capital is a broad category. Obviously, the dynamics between investors and team and the hard data available to investors to inform their decisions are much different in later stage rounds. For this discussion, let’s focus on early-stage investing, primarily Series A rounds where we generally first invest.

Founders should understand the typical Series A investment is the beginning of a 7–10+ year relationship. Not to be coy, but that’s longer than the average marriage in this country, and unlike a marriage, you can’t divorce your investor. In our portfolio, Chip was on the board of Appnexus for 10 years before they were acquired by AT&T for $1.6B. Brian was on the board of Shopkeep for over 9 years before they were acquired by Lightspeed POS and is still on the board of our now public portfolio company ACV Auctions (ACVA). Across the industry, this is now the new norm.

In 2021, we hear stories of founders getting term sheets after one meeting or Zoom in today’s world. That may be a great thing in some cases, but remember, this process is a two-way street. You have to consider whether you are comfortable entering a long-term relationship with a firm or a Partner after one or two meetings. And BTW, we’re not naive. We’ve raised hundreds of millions for our funds and helped our portfolio companies raise tons of capital over the years. It’s time-consuming and frustrating, and all of us would rather be focused on running our businesses instead. With that said, it’s worth really thinking about what YOUR process looks like and not just the VCs.

When people ask us what our process is, we answer as honestly as we can…it depends. Every team, relationship, company, market, and tech is different and therefore requires a different process.

At a very high level, it looks something like this:

1. We seek out the very rare intersection of team, tech, market trends, and macro drivers that can yield a company that can return our fund and then some. We find a way to get a meeting, and if we’re lucky enough, the team may come inbound via our network.
2. There’s an initial meeting with one TVP team member.
3. If interested, we discuss as a group then work on key questions/issues. If that works out, we socialize with another team member.
4. We typically have another round of questions and info gathering. If it makes sense, we then have a full group meeting.
5. This can lead to an investment decision but more often than not leads to more questions. And of course, there are references, customer calls, and intro’s to potential customers/partners.
6. If we have positive signs, then there’s a final pitch meeting with the full team. Somewhere toward the end, we start talking ballpark terms to make sure we’re all in the same zip code and then put a fine point on it via a term sheet.
7. Finally, we execute the term sheet and close the deal.

We’ve done this really fast (i.e., ~2 weeks) and candidly really slow. Often we meet with teams when they raise their seed rounds to start building the relationship. We let them know it’s a relationship-building meeting and make it their call to meet or not.

We could make this look more structured and formal, but we’re not going to pretend by making it look faster or cleaner than it really is. But here’s the thing…all those interactions are not just diligence for us, they’re diligence for YOU. Do our communication styles mesh? Do we both say what we’re going to do and do what we say? If and when we get to an impasse, how do we manage through it together? After 20 years in early-stage VC, we’ve found that the process itself is the best diligence for everyone involved.