Our Framework/Criteria for Investing

We call it a framework because it's meant to be a starting point to evaluating all prospects and standardizing our process, so that all opportunities in the past/present/future are somewhat comparable among each other. We also recognize that there are anomalies which may not fit in our framework, and that's great - frameworks are often just a starting point, or a guiding principle.

In the words of a wise friend, he told me once that as a VC, it's great to have an area of focus or a specific investment thesis, but you'd never want to be held hostage by your own arbitrary constraints.

sanity check(list).

A good indication of a Classic Ventures deal, in order of importance. Typically this list is non-negotiable, as the criteria is quite broad and open to the team's interpretation.

  • Diverse founding team - any underrepresented or under-resourced groups.
  • Impactful cause - a reason to believe that the success of the startup improves / benefits / empowers / enables a group of people in some meaningful way.
    • Indirectly, this also implies that the product should be designed for the masses - not the 1% (in any regard).
    • DTC / B2C / P2P models are preferred, B2B2C models are considered, and we rarely do B2B models.
  • Best-in-category product - a reason to believe that, for a problem / market we agree upon, the proposed solution is the most effective one possible in the present and near future.
  • Founder-market fit - a reason to believe that the founders are the people to make this happen. Any sort of unfair advantages count, including drive & passion.
  • Product-market fit - a reason to believe that product-market fit has been found, not engineered (we love organic traction). We love sexy numbers, but no non-negotiable targets for revenue/growth.
  • Tight-knit community - not just an audience, but brands that are actively developing a relationship with consumers, have loyal/vocal advocates, people who hang out with the brand online, etc.
  • Unfair advantage - defendability built into the business model somewhere, and can be maintained with scale. Preferably in tech, supply chain, partnerships, or distribution.
  • Brand-forward - understands the importance and role that branding plays in today's world.
  • International expansion in consideration - it is our belief that the US market alone is no longer enough to build a cult-classic brand. Given that 9 out of 10 GenZers live in emerging markets, it is reasonable to adapt our current playbook and prepare for the future.
  • Unlikely to compete with our other portfolio companies.

reasons to be excited.

Things that bias us for or against investing

  • Founder(s) and team
    • Founding team we'd personally want to be friends with and hang out with (for founders reading this, no, we won't force social obligations upon you!)
    • Spends only when necessary, miserly with capital until the returns are clear.
    • Reaction to intense pressure or strong criticism?
    • Willing to pivot given new information or learnings, or have done so already in the past.
    • Good listeners.
  • Product & market
    • Products we (or people around us) would personally use on a day-to-day basis.
    • A clear feedback loop with customers & implementing feedback in product development.
    • Be a need-to-have, not a good-to-have product.
    • Identified a single greatest KPI to focus on now.
    • A clear sense of what competitors are up to.
  • Business and economics
    • Strong unit economics that can be sustained in the future with growth.
    • Potential to be cashflow-positive within 18 months if the business chooses to do so (and there are many great reasons as to why businesses would chose not to - that's fair).
    • Clear sense of what the startup wishes to accomplish in the next 12-18 months (i.e how to deploy).
    • Clear sense of why to raise venture capital > debt/non-dilutive financing.
    • Capital efficient business model.
  • Deal terms
    • Founders own enough of the company.
    • Pro rata rights.
    • Information rights (especially to financials).
    • Strategic co-investors (institutions and angels).
Last Updated: 2021/11/24