Before being the two founding partners of Wasabi Ventures, along with Chris Yeh, we had participated in over 30 rounds of fundraising as early stage technology entrepreneurs. We have always thought of ourselves as entrepreneurs first and foremost. As people who have spent most of their adult lives on that side of the investment table, it made perfect sense that when we decided to build a new style of VC firm ten years ago we would want to make our firm incredibly founder-friendly.
To live up to that goal, one of our biggest efforts is complete transparency during the due diligence process. Our approach to due diligence is fairly unique. When a pitch comes to the firm (note: we hear about 100 pitches per week from all avenues), one of the general partners or venture partners reviews the pitch and speaks with the founders/team. Once that step takes place, if the partner likes the company at a high level, he/she assigns it to one of our analysts. The analyst will then conduct a due diligence effort. This will include interviewing the team, a market analysis, a competitive analysis, and business review. These findings go into a due diligence report that the partners use in making an investment determination. The transparency comes after the partner decision. No matter if it is thumbs up or down, we provide all due diligence reports to the prospective investment. The founders get to see exactly what we were thinking. This amounts to free consulting, but even more than that it provides completely clear communication.
To any experienced entrepreneur who has done a pitch to an investor, one of the biggest frustrations is that investors almost never say “no”. They will be more than happy to tell you that the “timing isn’t quite right.” Or they may say “we are really interested, but couldn’t get all of the partners committed.” Those statements are usually followed up with “make sure you keep us in the loop and chat with us again in six months”. This communication method doesn’t ever tell the founders why they weren’t a fit. Giving explanations can help a founder tighten up his/her business plan or pitch. We think our model of transparency helps grow an early stage founder into a better entrepreneur.
As investors, we think we have a responsibility to help the ecosystem get stronger. We believe our approach to due diligence transparency plays a small part in this objective.
About the author: Tom “TK” Kuegler is one of the Co-Founders and General Partners at WV.