Portfolio ventures that are going great need almost no support, and the ones that are in the bottom aren’t worth helping. Apart from the two extremes, how do you know how much effort, time, persistent to put in the ones that are somewhere in the middle?
PC: At Faraday Venture Partners, we support all companies which are performing well, regardless of how well they are performing. Sometimes, we even support less performing companies. Our differentiated business model allows us to this, because we leverage on our wide network of individual Partners (our LPs) who add considerable value to the portfolio themselves. In fact, we have some very interesting turnaround cases in the portfolio.
How do you balance your time between (1) sourcing quality prospect ventures (2) doing due diligence for prospective investments and (3) helping current entrepreneurs? Which of these are you comfortable outsourcing to principals/analysts and which do you absolutely have to do yourself?
PC: Sourcing quality prospect ventures takes a considerable chunk of my time. However, given the lean structure of Faraday, I am also deeply involved in the due diligence process. As I mentioned previously, our differentiated business model allows us to leverage on our network of individual Partners, so we enable our entrepreneurs to access not only our own support, but also from our Partners.
Nowadays, mental health is more present than ever, with things like burnout, stress, depression, among others. What do you think of external intervenients like executive coaches, both for a founder and for a VC partner? Do they usually add value?
PC: Everyone can be an entrepreneur, but being an entrepreneur is not for everyone. We try to support our entrepreneurs on the bad days, so they are motivated and, at the same time, try to keep their feet on the ground when they get over realistic.
How do you solve important conflicts with CEOs, such as lack of alignment on exits, strategy, or just the CEO being in denial about things like performance? Does the resolution begin with a private conversation or with involving other board members in a decision?
PC: We deal with eventual conflicts and/or lack of alignment with the CEO, before we enter the deal. Our approach to deals is made in such way that everyone’s interests are fully aligned, and we use very straight forward and measurable metrics regarding performance. We keep an open channel with all our portfolio, so these issues can be approached in different angles.
When raising money from LPs, what is the thing you emphasize the most when “selling” the fund? Past returns? Team expertise (domain and/or entrepreneurial expertise)? Unique angle?
PC: Our core business relies on fund raising on a deal by deal basis. As such, most of our LPs made several investments with us previously, and we have a strong long term relation with them. They know we have a remarkable track record and a unique angle in the way we do deals. We believe that this unique angle is strongly correlated with our returns.