How to be a top VC: Tips from MassMutual Ventures

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For venture capitalists who want tips on improving relationships within their existing network, Samantha Santaniello is the person to seek advice from.

As Head of Business Development and Partnerships at MassMutual Ventures, Santaniello supports portfolio companies in fintech, cybersecurity, digital health, and climate tech. She has mastered the warm partner and customer introduction—and she has a lot to say about how VCs can continue to be successful amidst economic uncertainty.  

We asked Santaniello for strategies around making the most of her network, in addition to her perspective on the latest data on unicorn growth and how market conditions will continue to change into 2024. Watch the full conversation or keep reading for the highlights, with time-stamps to help you dive deeper at key moments.

Network depth versus network breadth

Starts at 10:44

When we analyzed data from Affinity, PitchBook, and DealRoom for our latest unicorn report, we defined “top VCs” as those who invested in at least one company that unicorned in 2022. 

These companies tended to be larger firms, so it makes sense that their networks were 63% larger than other VCs. But what we also saw was that top firms added 13% fewer contacts to their network, supporting a previous finding that top VCs expect 45% of new deals to come from their existing networks.

When we asked Santaniello if these numbers rang true, she estimated that an outstanding 80% of MassMutual deals come through referrals. “The quality of our deal flow is the single most important indicator of a fund's performance,” she said. “Relationship management is what we do consistently well. When I reach out to someone new, I make it a priority to connect with that person on a personal level.”

Santaniello said that, after three years, she has a network of about 300 people she can reach out to. “If I had to quantify my time, I'd say I spend 70% of it nurturing existing relationships. I’ll always have a need to build new connections for a hyper-specific request that comes in from a portfolio company, but most of my time is spent engaging with the people I know.”

For Santaniello, this engagement looks like:

  • Attending conferences
  • Using Affinity’s reminder function to keep in touch with founders
  • Hosting happy hours at the office 
  • Hosting happy hours at events like SXSW
  • Engaging with social media content 
  • Organizing lunches and coffees throughout the year

What we can expect from the market into 2024

Starts at 23:16

Santaniello acknowledged there’s no consensus on the direction the economy will take next. “But I do think almost halfway into 2023, we're seeing dealmaking regain some of its mojo. I think 2023 into 2024 is going to be a very good time to invest in a startup or VC fund.”

As new investors and founders who weren’t around for the dot com boom enter the market, we’ll see similar patterns play out in the near future as they did back then: Valuations will come down, and VCs will exit when the economy has recovered three to nine years later.

At the same time, Santaniello believes we’ll also see more realistic valuations: “I think we’re going to see a return to sanity. We won't see the majors anointing $10 billion startups anymore,” she said. “Expect rounds to take much longer to close. Potential investors are going to start calling customers to examine the quality of each revenue stream, expenses, sales cycles, and in and out cash flows.”

If you’re an emerging fund manager and want to know which industries look promising, Santaniello and the team at Affinity see some specific areas of growth—namely in cybersecurity and climate.

Cybersecurity and climate: New opportunities for investment 

Starts at 6:30

As part of our latest Investment Benchmark report, Affinity assessed which industries have experienced the most growth and therefore the most unicorn potential. Cybersecurity and energy both stood out. 

“Cybersecurity is about a quarter of our portfolio,” Santaniello said. “In the past founders struggled to sell investors on the importance of cybersecurity, but then we saw cyberattacks proliferate during the pandemic. It caused billions of dollars of damage and immediately changed the risk-benefit equation.”

Santaniello says MassMutual Ventures is seeing an uptick of requests from their network to reconnect with their cybersecurity portfolio. Cybersecurity budgets are rising as businesses start to understand the real cost of a cyberattack. Coupled with the talent shortage for cybersecurity professionals, there’s a huge opportunity for a vendor to see massive market penetration.

Second to cybersecurity as an immediate need, climate tech is seeing long-term growth potential. For the first time in 2022, energy made it into the top five industries for new unicorns (pushing out transportation). The sector moved up from 12th place just two years ago, and the number of unicorns more than doubled. 

If you want to learn more about how to meet the challenges of the present moment—while still finding and closing the deals most likely to become unicorns in the years ahead—read our 2023 Investment Benchmark Report: Global Unicorn Edition. Here are three things you can expect from the report:

  • Unicorn trends by geography, industry, and investment size
  • What sets top firms apart when it comes to key dealmaking activities 
  • New strategies to help your firm get ahead in today’s investment environment

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