Our Internal Operating Manual

[I'm a very process-driven person, but working alone thus far, I haven't had a chance to memorialize a lot of what I do into writing. This document, like a lot of the other pages in our Brain, will be a living document, constantly updated and amended as I grow and learn too.]

preface


Why do we keep such detailed documentation publicly?

First and foremost, I want to work towards creating a more transparent venture capital industry. Classic Ventures is all about bring younger stakeholders into important, consequential, decision-making conversations, and it doesn't make sense that there is no "go-to" hub to learn about VC. Upon re-evaluating the resources I had on-hand, there's nothing really confidential or had to be kept secret. The "defendability" of a VC firm is mostly just the investors' judgement and network, and these are not things that can be easily transferred through writing, only time and experience. The playbook is actually quite standard - just not well-documented - and I hope that transparency can help a new generation of investors understand the inner-workings of the industry better.

Second, we value transparency, not just from a philosophical standpoint but also a practical one. It's almost standard to have the "next steps" conversation at the end of every pitch call, which is sometimes followed by an ambiguously worded, polite, rejection email a week later (it's no secret that VCs turn down most prospects). We want to share our exact decision-making process, and both the higher level and granular level traits we look for, so founders understand exactly why we make every decision.

what is not here.


Unfortunately, there are indeed limitations to open-sourcing - some information are simply not ours to disclose or share. I try to keep this list below as exhaustive as possible:

- Anything that contains non-public data from portfolio companies (our investment memos, fundraising decks, LP updates, some internal training material, etc.).

- Anything that contains content not created by us (curated platform resources for portfolio support, trend and industry reports, etc.).

- Anything that contains private information about anyone (private communications, contact lists, etc.).

overview of process.


This manual will be organized chronologically, in terms of our process from meeting a company to making an investment. All prospects go through this process, we have yet to have an exception (but they will be considered should the anomalous opportunity presents itself).

We take first calls with companies that fit under our scope of investments to not waste anyone's time (geographic location, valuation, industry, product). Unless something stands out as a glaring red flag, we reserve judgement on whether or not we actually like the product or value proposition until after hearing the founders pitch it.

Our process is as follows (also how our CRM is structured):

  1. New Prospects - all prospects that we have not yet worked on / discussed / scheduled meetings with.
  2. First/Second Calls - all active opportunities that we are meeting or have scheduled calls with.
    • Need Investor's Deck. Executive summaries / one-pagers are okay too.
  3. Due Diligence (Product) - all opportunities that we are interested in diving deeper into after Monday's IC meeting.
    • Need Products. Typically no free samples, to fully experience the customer journey.
  4. Due Diligence (Data) - all opportunities that pass our product testing.
    • Need access to data room, if possible. Optional. No projections needed, but nice to have an idea of the key revenue drivers and assumptions.
  5. Third Call (Deep-dive) - optional - all opportunities who we have more questions for after research.
  6. IC Meeting - present opportunity to GenZ Council and LPs.

Following successful IC meetings, we'll have two possible outcomes:

We decide to directly write a small check ($10-25K).
In which case we'll proceed to terms and arranging wire. This should take no longer than a week.

We decide to syndicate the opportunity ($100-250K).
In which case we'll proceed to submitting the deal to AngelList and present the opportunity to our LP network. In rare instances, we might decide to co-syndicate the deal, which might slightly prolong the process. This may take a minimum of ~3 weeks, and can run for as long as necessary.

first/second calls.

The objective of the first and second calls is to better understand the opportunity and hear it from the founder's perspective - decks are great, but often it cannot convey passion the way a live conversation can. Plus, a pretty deck might inaccurately bias us for or against an investment.

A standard agenda for having a productive ~30-45 minute pitch call:

  • Introductions (~10 minutes)
    • Sometimes founders are interested in learning more about the fund before the pitch, feel free to introduce us here to help better structure the conversation.
  • Pitch (~10-15 minutes)
    • Some investors jump straight into Q&A given a detailed pitch deck. I personally enjoy hearing the journey / their version of the pitch from the founder's POV, so ask for a short pitch regardless
    • If it's something we are very familiar with, feel free to politely ask to skip over problem and market size slides, etc. so we can spend more time on the business.
  • Q&A (~10-20 minutes)
    • Ask any questions you might have here!
    • Typically, I like to have notes built out on the following sections. They're a good indication of what you're missing up-front:

      Team (background, qualification, personal interest/passion, etc.)
      Journey (how they got here, etc.)
      Opportunity (problem, pain point, solution, market size, etc.)
      Product (description of the actual product / SKUs, etc.)
      Customers (demographic, psychographic, etc.)
      Business Model (pricing, key revenue drivers, etc.)
      Unit Economics (AOV, LTV, CAC, margins, etc.)
      Traction (growth, customer/expert interviews, ARR, press, partnerships, etc.)
      Fundraise (size of round, use of funds, valuation (cap), co-/existing investors, etc.)
      *Supply Chain (not always applicable)
      *Partnerships (not always applicable)
      *Brand (not always applicable, but how they're seen, etc.)
    • Questions for us - typically, founders ask for next steps. Feel free to refer them to our manual (hello!) or explain that:

      We have a process, but we're not here to waste anyone's time. IC meetings are weekly on Tuesdays, so Tuesday / Wednesday is typically when we'll have an answer. If this is realistically a great investment for us, we'll move to diligence, which can take an extra ~1-2 weeks (depending on if we're ordering/testing products, doing data analysis, etc.)
    • Sometimes founders like to ask for feedback, feel free to answer casually and honestly:

      "What are you most excited about with our startup / in this industry?"
      "What are your initial thoughts?"
      "Was everything clear, if you were to pitch the idea back to me?"

diligence.


[coming soon]

Last Updated: 2021/11/24