The VC/PE Investment Apprenticeship

Forming Deal Sourcing Teams:

At the end of Week 1 (The VC/PE Masterclass), Cohort members form deal sourcing teams focused on Consumer, Enterprise, Fintech, Frontier, Healthcare, and PropTech based on each cohort members interests, expertise, and background.

 

Startup Madness:

Week 2 is Startup Madness, where ~60-100 companies pitch VU's investment team from some of the top accelerators in the world. Throughout the rest of the program, there are also additional Pitch Days, where other startup accelerator companies pitch VU's investment team.

 

Deal Flow Assignment:

Each cohort member is assigned ~100 companies to review and reach out to. These companies are sourced and identified by VU's internal deal flow tracking system of top companies (~3-4K companies per quarter).

 

Market Landscape Development:

Each cohort member identifies, builds, and evaluates their own market landscapes within the sub-verticals of their deal sourcing team's focus.

 

Sourcing Proprietary Deal Flow:

Each cohort member generates their own proprietary deal flow after being trained in five core deal sourcing methodologies, and adds to the overall total deals sourced per quarter (~4-5K companies per quarter).

 

Weekly Deal Sourcing & Management Team Meetings:

Each of the deal sourcing teams meet weekly with VU's senior investment team to discuss their top deals, ask questions, get feedback, and request introductions to help with deal sourcing and due diligence.

 

Weekly Partners Meetings:

Each Monday, VU has a weekly Partners Meeting across all offices (SF, NYC, and Hong Kong), where each deal sourcing team presents their top two deals to the General Partners. A decision is then made to pass or move forward into deeper due diligence on each company. Each deal sourcing team competes their prior weeks top deal flow with the current weeks top deal flow, narrowing down to their best investment opportunities over ~3 months.

 

Due Diligence:

Each deal sourcing team completes multiple levels of due diligence, including initial, 2nd level, 3rd level, and final level of due diligence. Deeper due diligence includes market sizing (TAM, SAM, & SOM), competitive landscape analysis, evaluating the team, reviewing historical and projected financials, reviewing cap tables, speaking with current and potential customers, speaking with current and new investors, and building a waterfall and return analysis.

 

Investment Committees:

If there is an investment opportunity that has the conviction of one or more members of the investment team, the opportunity can be brought to the investment committee for review and approval. Bringing a deal to the investment committee does not require the consensus among a deal sourcing team. The investment committee includes VU's senior management team and one person from each of the other deal sourcing teams. Each quarter there are usually 5-10 investment committees, and each member of the cohort has the opportunity to pitch to as well as vote on one or more of the investment committees.

 

Green Lighting Investments:

Once an investment opportunity has received the "green light" at the investment committee, the investment opportunity is shared and presented to VU's VU's Investor Syndicate. VU's investors in the Investor Syndicate then select investments on a deal by deal basis and makes initial investments of ~$100K-$1M per company.

 

If there is availability in the investment rounds, at VU's sole discretion, and with no obligation, current cohort members, VU alumni, and close relationships of cohort members and VU alumni may participate in the investment rounds if they are accredited investors. If a current cohort member participates in an investment round through VU's Investor Syndicate, there is no management fees or carried interest on their investment.

 

Investments:

Each cohort makes ~2-5 new portfolio company investments and ~1-3 follow-on investments per quarter.

 

Possible outcomes: It's possible that each of the sourcing teams (Consumer, Enterprise, FinTech, Frontier, Healthcare, PopTech) will make one investment each during the quarter, but it's also possible that a deal sourcing team (e.g. the FinTech team) will make two investments or no investments by the end of the quarter.

 

There is no requirement for a deal sourcing team to make an investment during the quarter. Having the strength to pass on making an investment, and not feeling the need to make an investment, is an important lesson and skill to gain. Equally important is gaining the strength to pull the trigger when you've identified a truly extraordinary opportunity that has ability to yield a 10-100x return and is worth the risk with real capital.

 

At the end of day, the overall investment team is looking to make the best possible investments in any given quarter. It is important each cohort member acts as a team player, as all cohort members equally share in the upside across all investments made during the quarter.