How VU Venture Partners standardizes data-driven investing and builds a world-class VC fund and investor accelerator program with Affinity
VU Venture Partners is a multi-stage global venture capital fund focusing on 7 verticals: Consumer, Enterprise, FinTech, Frontier, Healthcare, PropTech, and Web 3, with HQ offices in San Francisco and Hong Kong. Founded in 2018, VU’s 3 partners alone have over 45 years of Venture Capital experience combined and have been some of the earliest and largest investors in over 20+ unicorn startups, including Uber, Facebook, Venmo, Beyond Meat, Palantir, and Wish.
With VU rapidly growing and its Venture University accelerator bringing in 40+ new individuals per cohort four times a year, the firm needed a solution to manage deal flow and a frame of reference to evaluate all companies. Additionally they wanted to ensure individuals joining Venture University could easily access firmwide information around companies and contacts, and capture the research they compiled.
VU Venture Partners chose Affinity as their CRM to track deal flow in an intelligent way that provided the views for each of their 7 verticals. Affinity’s customization allows the team to incorporate its investment evaluation sheet into the platform, ensuring all companies are evaluated using the same criteria and calculations.
Educating the next generation of investors and investing in the next big unicorns
Breaking into the Venture and Private Equity world can be difficult. It takes learning from those who have invested in hundreds of companies over decades and the opportunity to gain real world investment experience from being a part of the souring, due diligence, and decision making process that has made Venture University the world's leading investor accelerator for venture capital, private equity, and angel investing.
VU is made up of about 15 employees and an additional 60 Venture University cohort members (around 35 are in the US, 15 in Asia, and 10 across Latin America, Europe, Middle East, and Africa). Each cohort has 7 teams that correspond to VU’s verticals and individuals who make up the cohorts. Every year VU Venture Partners invests in around 30 companies (usually 20 new portfolio companies and 10 follow-on rounds within the existing 75+ portfolio companies). This enables cohort members to build an investment track record of 7-30 companies depending on if they join Venture University's program for 1-4 quarters. The cohort members also receive a profit sharing agreement to share in the upside on the investments made.
As J. Skyler Fernandes, the Founder and General Partner at VU Venture Partners shares, “At VU, individuals have the opportunity to focus on sourcing, doing due diligence, and actually making investments. They can use the skills they learn and the solid investment track record they've built to then go on to either launch their own fund, launch an investor syndicate, or join other funds. VU also has its own fund admin services platform, Finally Fund Admin, to launch SPVs and funds quickly and at an affordable price.”
With 4 cohorts a year made up of around 60 cohort members, the firm needed a way to retain all the institutional knowledge acquired over the years while making it easy for anyone in the program to access that information.
Like many investment-driven firms, VU first turned to Excel to keep track of that knowledge, in addition to their deal flow and the 20,000+ companies they research a year to make investments. Unfortunately, one human error while trying to sort the data could result in a completely mismatched spreadsheet. VU wanted a solution to manage their deal flow, contacts, and information that provided the same tabular view as an Excel spreadsheet but operated like a CRM and would allow for multiple teams to access the information they needed that pertained to their vertical.
A CRM with a database approach for deal flow management
When the team came across Affinity, they found a solution that could both offer the database they were looking for to track deals and also offer a level of personalization for each of VU’s vertical teams.
“Affinity by far was the best option for us not only in the capabilities as a database but also that every team could have their own view of deals they were managing.” The Healthcare team can quickly access all the healthcare companies they care about, and the Fintech team can do the same for their own dealflow, all while being able to sort, filter, and export whatever necessary information without impacting others’ data in the process.
As each new Venture University cohort joins the firm, Affinity’s CRM serves as the source of information each individual can quickly access to know if a company has had contact with VU and who VU has spoken with in the past. “Given that we have such a massive team and a group of those individuals changes every 3 to 12 months, knowing the prior communications that have happened with startups is extremely important.”
With VU reviewing 20,000+ companies a year, averaging around 15+ companies at each of the weekly U.S. and Asia Partner Meetings, it can be difficult to remember each company. "With multiple startup pitches a day, I know that I sometimes forget if I asked this company a specific question or I asked the prior company that question. It starts to kind of blur together a bit.”
In response to this challenge, Fernandes has created a framework, known as their Investment Evaluation Sheet, to ensure all companies are evaluated the same way, where core information is thoroughly captured, and enough due diligence has been done from a numbers perspective.
VU created fields in Affinity that correspond to the questions in the investment evaluation sheet. Those fields are used during partner meetings to indicate the market size according to VU’s equation, which is calculated by multiplying the target number of potential customers based on target demographic by the average revenue of each customer. This number, called the Serviceable Addressable Market (SAM), has to be entered in Affinity in order to present the company during their partners meeting. As Fernandes shares, “it is unacceptable at VU to present an opportunity and say a company has a $50 billion target market because that's what the company told you.”
By requiring this, the team can sort in Affinity by the largest market opportunities they’ve evaluated over the last quarter and ensure the metrics around each companies’ markets are standardized across the board versus based on each company’s own way of calculating that market.
These calculations came into play at a recent investment committee meeting where they approved their next investment. “That company, for example, has anywhere between $600 billion to over a trillion market size, and that was supported by the math that we did in evaluating the company. To be a great VC and have great returns you need to go after the world's largest investment opportunities at each point in human civilization which in turn can reach the largest future equity valuations. Not all market size opportunities of companies are created equal. There is 10,000x spectrum between a company worth $100 Million vs. $1 Trillion.”
Enabling the next generation of venture capitalists with Affinity
With continued growth and Venture University cohort members, now at 550+ alumni, graduating on to their own venture endeavors, Affinity has remained the constant in capturing information. As Fernandes best puts it, “having that cycling of amazing cohorts, who are the top 1% of individuals accepted into VU, creates an impressive level of intelligence across markets, and is a key ingredient for what makes VU outperform. We could have never scaled that intelligence without Affinity.”
Affinity has been instrumental in helping VU scale both its firm and Venture University that they recommend it to their cohorts as they’re graduating. “They're going to face similar issues, and so we’re getting them used to using Affinity, which makes it easy for them to bring it on to the new funds that they’re either joining or launching afterwards,” says Fernandes.
In 2021, VU had a 72% IRR, beating even top decile 2018 VC funds at 68% IRR. In 2022 and onwards, VU has a seed/series A portfolio where they are approaching 7%-10% of their portfolio companies are becoming unicorns, which is in part due to their hyper-selectivity of investing in ~0.1% of the companies they evaluate (20/20,000), 10x more selective than a traditional VC fund that invests in ~1% of deals sourced (20/2,000).
As Venture University continues to gain momentum, Affinity ensures the team’s investment decisions are made with as much information as possible and Venture University individuals get the maximum value from their experience.