Venture Capital

Getting to “Yes”: The Black Box of Venture Capital Decision Making

The best venture capital firms in the world do three things exceptionally well:

  1. They have significant visibility and access into the startup ecosystem that they hope to invest within
  2. They repeatedly make the correct decisions on which companies to spend time on and invest in
  3. They have the ability to be the investor of choice for the companies they want to invest in

Points 1 and 3 are mission-critical and you cannot be top tier without them, but point 2 is where the magic happens and how the best firms in the world continue to stay on top. Achieving point 2 ultimately allows points 1 and 3 to strengthen.

Although the general framework for being successful is the same across venture firms, the way top tier teams make their investment decisions is across the map.

Photo by Michèle Eckert on Unsplash

There are four common approaches to how decisions are made within Venture Capital Partnerships:

  1. Voting

The most common approach to venture capital partnership decision making is via voting systems. These systems vary:

Unanimous — Everyone votes “Yes” or “No” and if there are any “No’s” then the investment is not approved

Percentage Based — Everyone votes “Yes” or “No” and there needs to be a certain percentage that vote “Yes” in order for the investment to go through

Score Based — Everyone provides a score (say 1–10) on the investment opportunity and a specific threshold needs to be met in order for the investment to be made

2) Consensus

In a consensus-driven format, everyone shares their feedback and collectively they determine whether or not to make the investment. There can be people that dislike the investment, but are supportive of the sponsoring Partner making the investment. At we have historically been consensus-driven and more often than not, this is generally the case.

“Speak now, or forever hold your peace.”

Should a Partner severely disagree with the investment, then they are responsible for sharing that perspective in hopes of getting the group to not want to make the investment. The question of “does anyone feel strongly that we should not make this investment?” is commonly asked.

Conversely, there are occasions when everyone wants to make the investment and those discussions turn into “What can we do to win here?”.

3) Support-Based

At some firms, an investment in a company can be made as long as some composition of Partners or investment team members are supportive of the investment. For example: As long as two Partners want to make it, then go for it.

There are firms that have various Partner tiers, wherein those tiers can represent their power as it relates to the support-based model. For example, one Managing Partner plus one Partner are required to make an investment.

4) Free Solo

The last approach, which is quite rare, is when an Investor can make an investment without any oversight. When this is in play, it is largely due to the sheer size of the firm (being large).

When a Free Solo approach is in effect, the individual Investor typically has a limit to how much capital they can deploy.

On that note, many firms do allow for Free Solo investing in checks that are much smaller than their typical investment size. For example, let’s say a Series A firm Investor wants to make an investment in a seed round of a company, that Investor may be able to do so on his or her own discretion.

A Few More Factors/Trends

Multi Sector Focused Firms - With firms that are multi sector focused (let’s say healthcare and enterprise software), some firms break apart the decision making by sector in order for only the sector experts to be weighing in on those investment decisions. Many larger firms in the Bay Area do this with their consumer and enterprise teams.

Vetos - Although few and far between, there are firms out there where even if a company has been supported via one of these frameworks (outside of the unanimous voting structure), a veto can be held by a certain member of an investment team. These vetos are typically held by the “Managing Partner” of that specific fund.

Purely Data Driven Decision Making - A growing trend, but still a small minority, we have come across that firms make their final investment decisions entirely based on data/algorithms. Correlation Ventures is one such firm. If their model says not to make the investment, they will not move forward.


There are pros and cons of each of these: Some of them promote group decision making, whereas others are focused more on an individual’s choice. There is no right or wrong answer, and with some of the best firms in the world, their approach has evolved over time. I know for our firm, we are constantly evaluating whether our approach is leading to the correct decisions.

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Brendan Wales is a Partner at (, a global venture capital firm with offices in San Francisco, Berlin, Sao Paulo, Tokyo, and Beijing. Since joining in 2012, he has been a Seed or Series A investor in Segment, Shipt, HousecallPro, Fetch Rewards,, and Shopmonkey.

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