VCs: Post-investment Analysis Helps Make Fundraising Less Miserable
In a perfect world: your brilliant investment thesis would be enough to fundraise successfully with reasonable effort.
In the real world: it’s not. At first glance—i.e. the only glance most funds get—your fund looks no different than the staggering number of VC funds an LP meets in a month/quarter/year.
In a downturn: it only gets worse.
So how do you cut through the noise?
You expect disruption from your startups…what’s yours? How do you quickly and visually highlight your fund’s differentiator? This differentiator should be both painkiller and vitamin for LPs — i.e. it needs to alleviate LP pain points and help achieve important strategic goals. What is that thing? See below. 👇🏾
Show your work
Showing (not describing) a rigorous process and meaningful data to LPs is the key differentiator in this new landscape. Why is this more critical than a dazzling investment thesis, or highlighting historical returns, or showcasing your team’s CVs?
In a market downturn, those elements are the very conditions the market is losing confidence in. In a downturn, allocators of capital are, by definition, bearish that an unproven thesis is right, historical returns are repeatable, and a team can pick winners. In other words, you have to show your work.
“It is a capital mistake to theorize before one has data.” Sir Arthur Conan Doyle, Sherlock Holmes
Here are 3 practical implementations if you’re not already doing these:
- Demo for LPs the actual tools you use for diligence/vetting and post-investment portfolio analytics — don’t just tell them that you have a process. Every deck says they have a process.
- Include forms of your metrics dashboard and other analytical tools in your pitch deck.
- Incorporate your ongoing analysis in investor relations. My clients include our KPI Dashboard in LP quarterly reporting, showcasing it as a way to communicate pre-revenue portfolio company progress clearly and concisely.