In general, VC decision-making can feel like a black box, which can be frustrating for founders who are trying to manage their fundraising process and timeline. It usually involves many meetings over the course of weeks (if not months) with various members of the firm, and the process can look quite different from one firm to another. Regardless, your singular goal is typically to drive towards a “Partner Meeting” where you can pitch the story and vision to the entire investment team.
What is usually less understood is what happens after these Partner Meetings – How do VCs debrief and how are decisions made (or not made)?
First, to set some context around the Partner Meeting. Usually by this point, the lead partner has done a fair amount of work to build conviction and the rest of the partnership has a high-level understanding of the business (with varying degrees of excitement and skepticism).
The lead partner might also be using this opportunity to dive deeper into areas that you might not have had the chance to cover during the first/second meetings. For the rest of the partnership, their focus would be to quickly form an opinion about the team and probing on the areas of their hesitation.
With the disclaimer that every VC firm could be quite different in their decision-making process, I think it could be helpful to shed some light on how we at NextView debrief and drive towards a decision after the Partner Meeting.
At NextView, we have a conviction-based decision making process, which means the strong conviction of the lead partner could drive towards an investment decision (unless it’s something that’s clearly outside of our strategy/scope). However, this doesn’t mean that the opinions and feedback of the rest of the partnership are not important.
At this juncture, the lead partner is weighing the opinions and feedback of the rest of the partnership, which could either strengthen or weaken their own conviction.
We usually try to debrief immediately after the partner pitch while everyone is still in the room and the memory is fresh. There is no formal structure of how we debrief, but it usually unfolds with everyone going around the room sharing the high-level sentiment coupled with things we love and areas of concern. The high-level sentiment can range from “I love it” (i.e. I’d be happy to lead the deal if you don’t), “I like it”, to “I support you” (i.e. I don’t really like it, but I support you if you have strong conviction).
Things we most often hone in on are around the team and the market, but we also frequently debate about the product, GTM strategy, and competitive landscape/differentiation.
Usually, one of these three sentiments emerges from the discussion:
- “Let’s do it” level of enthusiasm across the board. This is the easiest one to move forward with because everyone is either in “I love it” or “I like it” mode. The discussion of the room would usually shift to deal dynamics and tactical next steps. This actually happens less frequently than you might think.
- Interesting but have doubts about XYZ. I’d say this is the most frequent outcome. Most of the time, there’s varying degrees of enthusiasm around a given company, and the debrief helps crystalize areas for potential follow-up diligence, or think through the risks we’re underwriting by proceeding with an investment.
- One or multiple partners have a very strong negative opinion. This is when one (or more) of us voice the “I support you” sentiment. We are deliberate in how we frame this vote because the intention is to truly “support you doing the deal if you have the conviction”, but the reasons behind this opinion are nonetheless important for the lead partner to consider. Usually the lead partner would acknowledge such feedback and do her best to address specific areas of concern with follow-up diligence.
In situations 2 and 3 above, the discussion and follow-up work could either strengthen the lead partner’s conviction (despite additional things to dig into regarding the business), or dampen enthusiasm. Regardless, the founder should expect to hear from the lead partner in 24-48 hours after the partner pitch regarding next steps – a clear yes, a clear no, or “we want to do more work on XYZ”.
Don’t assume that the lead partner is already “in the bag”. As mentioned above, every new data point and piece of feedback could either strengthen or weaken the lead partner’s conviction level. It’s not uncommon that a seed stage deal would move quickly and the partner meeting is only the second meeting that the lead partner has with the team – second hour of interaction can tell you just as much as the first hour.
Partner Meeting is not always the very last step. It could feel like a drag, but any follow-up items at this stage should be very targeted. As you respond to these, think about how to best frame the information/response so to help your lead partner address concerns from others and strengthen the case for an investment.