Take a Step Inside a VC Partners Meeting
What happens after you pitch a VC
It's Monday. Do you know where your VC is? If their firm is like most others, they are very likely in a conference room most of the day (actually Zoom because it's still 2020). Let's quickly clarify something important: no, not every firm holds its partner meetings on Mondays. Some do it Tuesday, others, who knows? Monday is typically the day chosen by a majority of firms. Why? It immediately allows them to recap news and information gathered from the previous week and provides the earliest opportunity to set priorities for the current week.
Why Are These Meetings Important?
There are plenty of topics discussed in this forum, but what is likely most important is the "investment committee," where the firm's partners decide whether or not to invest. For a founder, this is the moment that determines your fate. Is your product compelling enough? Are you, as a founder, perceived as competent enough? Will your startup generate outsized returns for the portfolio? These topics all get discussed in the Monday Partners Meeting.
Who Attends the Meeting?
Attendance varies by firm, but you can typically expect all the General Partners along with anyone else on the investment team. Other players generally are involved, such as operating partners, venture partners, board partners, or a similar relationship regarding an investment deal. These individuals likely are not full-time investment partners but carry influence with the firm and sponsor deals on occasion.
As a founder, try to gain information about these various partners. Understanding how a VC firm makes decisions can better prepare you when you pitch, negotiate, and overall manage expectations. It's essential to ask your primary contact at the firm about their process and those involved. Also, reach out to other founders who have worked with the firm to get their perspective. Some questions to ask are:
Number of partners
How many of them are active
Which one influences the firm
Relationship dynamics
The temperament of the partners
How do they make their final decision?
Typical Flow of a Meeting
In these meetings, partners will generally review potential investments, discuss portfolio news and follow-on financings, and then update each other on schedules and priorities.
New investments and portfolio companies needing follow-on capital will pitch to the partners. After this is typically a Q&A session where a founder will get picked apart, don't feel too bad, though, because after you leave, your VC sponsor will likely face similar questions. If you are a VC representing a deal, be prepared to defend the company you brought in to pitch. The purpose of this session is to fully understand everything that could go right and wrong with an investment opportunity. VCs want to ensure all bases are covered when considering an investment. If you pass this test, and the partners decide to move forward with a term sheet, the due diligence process will start.
Any extra time set aside will be for open discussions around specific verticals and innovations. Partners can share thoughts and debate different topics on the technology space and where to focus their attention.
The Investment Decision
Many firms make decisions differently, so a founder will likely want to find out how they determine whether or not to invest. There are usually two different dynamics, consensus-driven and conviction-driven. A consensus-driven team will wish to have all partners on board with an investment decision. If one is feeling pessimistic about the prospect, then the answer is typically no. A conviction-driven team will focus on the partner sponsoring a deal. This individual needs to advocate for the startup and be willing to take the heat if the investment doesn't generate returns.
In short, a founder will form a relationship with a partner. That partner decides to push the deal forward and have you present on a Monday Partner Meeting. After your presentation, the team will debate whether or not to invest and tear your pitch apart. The team then decides whether or not to move forward with a term sheet.
This story is from Sutton Capital contributor Zeb Hastings. For more information on Zeb’s work, please visit his website.