The Road Taken By a Venture Capitalist

By Gavin Teo, General Partner, B Capital

Gavin Teo, General Partner, B Capital

• How do you work with the companies in which you invest? Tell us about your investment style.

I believe in a active, value-added investing. When we invest, we commit to a partnership and journey with founders and management teams that will last many years. Therefore, establishing a baseline of mutual trust, candor and transparency is critical. We are lead investors and are often the largest single check in the rounds we lead, and therefore our engagement with the company is an important signal to the broader market for future financing rounds. We take board seats and allocate reserve capital to back our companies over multiple stages of maturity when we write our first check. Overall, our investment style is to take a long view, where working closely and adding value is critical from day one.

• How do you differentiate between the opportunities that you see?

At B Capital Group, we focus primarily on B2B and B2B2C venture growth-stage companies that are at the cusp of scaling globally. This means they have shipped at least one generation of product from which they are already generating high-single digit millions in revenue from referenceable and enthusiastic customers, but are pre-profitability. At this stage a $10-15M equity investment from us can be deployed into marketing, customer acquisition and commercial team expansion to drive immediate growth. In addition to our capital, we also provide a network of corporate relationships, via The Boston Consulting Group, our strategic Limited Partner. The differentiated opportunities where we can best add value are companies led by world-class management teams, pursuing large addressable markets, who have demonstrated product-market fit, and in leadership positions in their respective verticals.

• What are the key attributes you look at when evaluating a deal?

Deal evaluation—the process of selecting a company into which we invest—is the most important art and science in venture capital. We typically price and lead rounds and take boards seats. We have invested in 20 companies in our current fund and expect to support six to seven boards per investment partner at the firm once we are fully deployed. Therefore, we need to be selective and we expect our entrepreneurs to feel the same way when they chose a lead investor. The key attributes I look for are (1) thesis fit—do we truly understand the space and have we looked at several companies in this peer set to form an opinion on “what good looks like”; (2) large Total Addressable Market—is the current or future addressable market large enough to support venture returns; (3) product market fit—has the company demonstrated that their product or service meets the needs of the market; and (4) most importantly, team—is the team complete, experienced, transparent and a good mutual fit with our active board governance style.

"We focus primarily on B2B and B2B2C venture growth-stage companies that are at the cusp of scaling globally"

• How do you work with clients post investment?

We are committed and active partners to our customers. We think of our customers as both our Limited Partners, the investors in our fund who have entrusted us with their capital; and our portfolio companies, the entrepreneurs, CEOs and management teams who have entrusted us to provide capital and expertise. Both of these constituents represent multi-year relationships. When we invest in a company, we often offer our LPs the opportunity to directly co-invest on the same terms as our fund. The LPs who opt-in tend to be very strategic to the given portfolio company, for example an LP with a specific interest in healthcare may choose additional exposure to a digital health asset. After we invest in a company, we work with management to put into place a 100- day plan focused on helping the company grow. This involves tactical actions such as commercial introductions, team hiring and compensation plans, which over time evolve into longer cycle Board-level projects such as capital formation, M&A activity and international expansion. Our platform team works closely with our investment deal teams and portfolio company management to prioritize and execute on this value add via a set of playbooks. An example of such a playbook is “how to scale an enterprise sales team”, a universal question for B2B software companies across our portfolio which we will tailor specifically to the individual portfolio company’s needs.

• How do you think your current portfolio of companies has benefited most from your guidance?

We are incredibly privileged to support a passionate, talented and inspired group of entrepreneurs across our portfolio. We regularly ask our portfolio company CEOs how best we can and expertise. Both of these constituents represent multi-year relationships. When we invest in a company, we often offer our LPs the opportunity to directly co-invest on the same terms as our fund. The LPs who opt-in tend to be very strategic to the given portfolio company, for example an LP with a specific interest in healthcare may choose additional exposure to a digital health asset. After we invest in a company, we work with management to put into place a 100- day plan focused on helping the company grow. This involves tactical actions such as commercial introductions, team hiring and compensation plans, which over time evolve into longer cycle Board-level projects such as capital formation, M&A activity and international expansion. Our platform team works closely with our investment deal teams and portfolio company management to prioritize and execute on this value add via a set of playbooks. An example of such a playbook is “how to scale an enterprise sales team”, a universal question for B2B software companies across our portfolio which we will tailor specifically to the individual portfolio company’s needs.

• How do you think your current portfolio of companies has benefited most from your guidance?

We are incredibly privileged to support a passionate, talented and inspired group of entrepreneurs across our portfolio. We regularly ask our portfolio company CEOs how best we can support them. In response, we hear that while we may add value in many different areas, it is specifically (1) active, regular engagement as long term strategic advisors; combined with (2) our ability to make commercial sales introductions and support management team hiring—that are considered most beneficial. One CEO in our healthcare portfolio described his appreciation in terms of “intestinal fortitude”–our willingness as investors to take capital risk in funding his company’s long term strategy of maximizing AI collaborations with academic medical research vs. being only tracked on commercial opportunities with large pharma partners.

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