FAQs

Our goal is to generate returns for shareholders who share our values. We do not have any government-linked or sovereign wealth investors.  

We are committed to a safe work environment in which no member of our community is discriminated against on the basis of sexual orientation, race, religion, age, nationality, gender identity, or any other characteristic protected by applicable law. We will promptly take appropriate remedial action to address any form of harassment or discrimination that is brought to our attention. We will also address any reported claims of retaliation to ensure a comfortable and productive work environment for all those who work with our team. We have posted publicly our Anti-Harassment & Anti-Discrimination Policy and Procedures. To confidentially report any incident involving one of our team members, contact us.

We measure our progress through both traditional and impact KPIs. Traditional KPIs are:

• IRR (and secondarily cash-on-cash multiple on our investment)
• Percentage of investments outside of the major US tech hubs (New York, California, Massachusetts). Target: 50%
• Net Promoter Score from Founders we back. Target: 75.
• Number of investments we make annually per full-time investing team member. Initial target: 12
• Percentage of the Inc. 5,000 where we are the first venture capital investor. Target: 1% by 2030.

Our impact KPIs are:

• % of companies we invest in which include (at time of investment) a cofounder or C-level executive who is female/trans. Target: 30%
• % of companies we invest in which include (at time of investment) a cofounder or C-level executive who is an underrepresented minority. Target: 40%

For more on metrics-based management, see How to run your company based on metrics: what, why, how, who, and when.

We have designed our firm to exploit two particular market inefficiencies:

• VCs are generally uninterested in companies outside of certain narrowly defined sectors, despite the fact that many fast-growth businesses are not conventional tech companies. We think this is a mistake. As proof, we’ll note that any analysis of the best-performing stocks of all time will show many companies which don’t look like conventional VC-backed tech companies (example). Of the 2020 Inc. 5,000, only 1,150 are in traditional tech industries (“Computer hardware”, “IT Management”, “IT Services”, “IT Systems Development”, “Software”, and “Telecommunications”).

  In particular, any young company in any industry, if led by a tech-savvy management team, is going to approach growth very differently than their old-fashioned competitors. We’re particularly interested in founders bringing tech savvy to stodgy industries. We’re most interested in fintech and salestech, but have flexibility to invest in other sectors.

• VCs are generally biased against founders who are not White/Asian males, and/or who are not in core geographies, despite the fact that the data says that you’re better off investing in diversity. Paul Graham, cofounder of Y Combinator, observed, “many suspect that venture capital firms are biased against female founders. This would be easy to detect: among their portfolio companies, do startups with female founders outperform those without? A couple months ago, one VC firm (almost certainly unintentionally) published a study showing bias of this type. First Round Capital found that among its portfolio companies, startups with female founders outperformed those without by 63%.” For more on this, see The iconic VC-Backed founders are all White & Asian men. So why invest in diversity?  

 

We own AltsTech, a community for family offices, private equity funds, and VCs focused on using technology and analytics to make better investments in private companies. Our members are coinvestors and early adopters of our companies.

We also own Founders’ Next Move, a community for founders researching their next move. This serves as a source of dealflow, talent, and clients for our companies.

We have over a decade of experience investing in investment technology and advising professional investors on best practices.

We have also invested significant resources into our internal tech stack, home to our proprietary data and process flows, which will be difficult for others to fully replicate. We have posted our long term road map. 

We already have developed original, thoroughly-researched, and actionable content on many different topics, which improves our visibility on search engines and social media. We particularly optimize to rank highly for content related to alternative VC; free money and VC; founders in transition; VC/startup careers; the tech stack of private equity/VC; diversity and VC; and disruption of investment management.Try exploring our affiliated websites at teten.com and AltsTech.com.  

We believe over time Versatile VC will build two other several other barriers to entry:

• We will build a reputation for a differentiated investing approach. This results in more relevant founders approaching us and/or responding positively when we approach them. This is one of the reasons that past outperformance correlates with future outperformance in VC. Our founder has this reputation personally; we will build that reputation institutionally.
• Over time, we anticipate we’ll develop an expertise in alternative VC which will be extremely hard for others to replicate, despite the fact that we anticipate open-sourcing many of our documents.

We are primarily focused on backing companies which help investors succeed: generate alpha, run more efficiently, or acquire clients. That said, we are open to other types of businesses.  

We don’t think VCs can predict the future. Founders do, because they’re on the cutting edge of innovation in their respective disciplines. We’re fortunate to work with founders who can teach us what’s next. 

We do not invest in drugs; and/or adult/NSFW content. For more details, see our formal criteria.

The most important factor in our decision-making is always the founding team.

• Why will you win when others didn’t? 
• Are you creative?
• Are you gritty? 
• What are each team members’ superpowers?
• Do you have a history of success in prior endeavors? (even if not in business)

We want to work with companies all over the US (and the world), not just in the tech hubs. We want to invest in founders who come from all educational and national backgrounds, not just the Ivy League/Stanford/MIT.  

See our formal criteria.

See Cheat Codes for Raising Capital from Venture Capitalists.

• Have a demoable wireframe or preferentially a product, even if you don’t yet have revenues.
• Evidence of customer demand, at market prices. We need evidence that customers will pay full price. 
• Detailed use of proceeds. A clearly defined plan on how you intend to spend the investment dollars received. The funds should be for business growth, i.e., not normally to buy out investors or fund an acquisition.
• Plan for gross margin over 40% and LTV/CAC over 3x, either today or based on a reasonable forecast
• Service providers enabling professional accounting infrastructure according to GAAP 
• A technology-enabled business. You must be doing real engineering of some nature.

Since we do not require a personal guarantee, our focus is the business’s sustainability and growth plan, not on your credit score or past credit history.

For more details, see our formal criteria.

Typically, our initial investment is $100,000 to $1m.  We can write much larger checks as well, typically through Special Purpose Vehicles.

No.

In addition, we don’t prioritize growing our stake over time. Rather, our goal is to maximize the value of our investment, which often means raising further capital sparingly or not at all. We care about dilution just as much as you do.

For our initial investment into a company, we typically invest as part of rounds between $200,000 and $3m. We can invest larger checks in larger rounds. 

Definitely not. We have a long track record of partnering with other investors. We will coinvest with other VCs leading a round if we are excited about the opportunity.

We are also glad to include other VCs/angels in rounds that we lead. The other investors need to be comfortable using our investment structure.

Note we strongly believe that it’s in your best interest to have an active, credible, and experienced lead investor. We won’t invest in a “party round.”

We do not require a board seat, but we will take a board seat where we think we can be helpful, and you have interest as well.

Regardless of whether we take a board seat, our goal is to be your most value-added investor during the two years after we invest. In lieu of or in addition to board meetings, we organize “working sessions.” In these sessions, we go deep with you on a major challenge. We’ve found this type of collaboration very valuable. 

If you do have a board (which we strongly recommend), please see our guide to preparing a board deck.  

No, except in extraordinary circumstances.

See:

1. Why Most VC’s Don’t Sign NDAs
2. Why VCs don’t like signing NDA
3. Why a VC will Take a Lighter to your NDA.

1. Read Please don’t pitch a venture capitalist without this checklist
2. Read Versatile VC’s investment criteria
3. Via our application page. We give equal consideration to all companies.

You’re welcome to mention that you were referred by someone we work with, but a referral is absolutely unnecessary. One prominent VC reports, “For a long time, VC has been predicated on this idea that the best opportunities come through referrals, yet companies that we discovered through other channels — Twitter, Demo Day, etc. — outperformed referred companies by 58.4%. And founders that came directly to us with their ideas did about 23% better.”

We respond to your initial approach within 2 weeks of applying, and usually much more quickly. 

Most companies receive a quick no, which we think is better than a slow maybe. If we think that we’re a fit, our typical next steps are:

• Initial indication of interest. A 30-60 minute videoconference with one or more of your leadership team. The majority of companies do not pass this initial screen.
• A second indication of interest, within 1 week. A 30-60 minute videoconference where you can ask us any questions you like, and we will likely have followup questions. 
• Optionally, further conversations. We may introduce you to a Venture Partner who has great skepticism about your vision, precisely to ensure that we’ve given you a harder test rather than an easier one.  
• Formal offer letter, within 1 more week. Once we’ve agreed on terms, we’ll ask you to complete our due diligence checklist.
• Reference calls and other diligence, typically in a 2 week window. In particular, we’ll work with you to develop monthly revenue growth projections based on your historical financials, future growth plans, and industry average growth rates, and agreed-upon metrics.
• Invest! We sign the investment documents and fund our full investment via a wire transfer to your corporate account.

When you’re raising subsequent rounds of financing, we can invest up to our risk management limit.  In practice, this usually means we can participate in the first round of financing after we invest, if any. We also have the flexibility to invest effectively unlimited amounts of capital through Special Purpose Vehicles, where appropriate.

We have a decade of experience working with other VCs who make later-round investments, lenders, and other financiers. We are glad to introduce you to the right capital sources in our network. 

When limited partners, our investors, ask us this question, here’s how we answer:

The conventional wisdom in tech VC is to double down on perceived “winners” regardless of price. We disagree with both parts of that sentence. In conventional VC there’s usually great business risk at every single round, so it’s often opaque who are the “winners”. Any unprofitable company is inherently vulnerable to the kindness of strangers (investors). And even a profitable company still faces other types of business risk. And secondly, all investors face the risk of investing at a valuation which is too high and/or a poor structure. 

We evaluate follow-ons as though it were the first time we were investing in the business. The question we try to answer is the following: knowing what we now know about the team and business, would we invest in the company at this valuation?

That said, we cannot invest more than a limited percentage of our fund in any one company. This creates a built-in limit on follow-on investments, both because many of our companies do not raise follow-ons because they’re managing their cap table conservatively, and because we think we’ll generate higher returns if we stay focused on early-stage investing.