Welcome to the Family: Managing Laconia's Portfolio

The whirlwind of 2018 has caused a brief blogging hiatus on our end, and we’re happy to finally finish this blog series on our story, thesis, and investment process. With a now fully deployed first fund and a budding second fund of four portfolio companies to date, we have re-thought much of how we onboard, engage, and support our family of founders. Though a lot of our efforts will be upgraded after the new year (announcements coming in 2019!), we’re excited to share the foundation of our community management.

Our last blog ended at the point of closing the deal. Here’s what happens after the money is wired.

Diving In: What You Can Expect in the Investment Process

This is part 4 of a 5-part series. If you haven’t done so already, you can read the first three posts here, here, and here.

Navigating the fundraising process is often one of the most frustrating parts of running a startup. It can be slow, opaque, misleading, and even contentious. We at Laconia do everything we can to make the experience not just relatively painless but also productive for founders. Regardless of the final investment decision, we hope each of the founders diving in with us take away something useful from the work itself.

VCs are not all the same, so what you see below may or may not apply to any other firms. The short story is that we focus on operations, leverage our community, and build a strong partnership over the course of the process. In more detail, here’s what you can expect from us:


The objective of the first one or two meetings is to determine whether this opportunity is a mutual fit. Because we make investment decisions by consensus and place a huge emphasis on relationship-building, you will typically meet our whole  investment team (David, Jeffrey, and Geri; interns too if they are around) within our first two meetings. Here are the questions we aim to answer in these discovery sessions:

  • Does your company fit our investment thesis in terms of stage, geography, and sector focus? More on our focus in blog #2. As a side note, occasionally we meet impressive founders who, for whatever reason, do not quite fit our investment scope. In those cases, we are happy to make introductions to VC friends and colleagues who may be a better fit.

  • Do we bring value beside capital to the table? We only make 3-5 investments per year and work side by side with our entrepreneurs in the first 12-18 months post-investment. We want to make sure that we are able to open doors for you and provide the operational support that you need at your current stage.

  • Do we get along? Investing is a long haul relationship, so we have to be able to work together.

Due diligence

If we are all in agreement that the answers to the above are “yes”, we will move into our formal due diligence process. We break the DD process into the three main stages below:

  • Stage 1 is centered on the operations of your business & your thinking around it. Across 1-3 working sessions, we will cover the following:

    • Financial statements (historical & projected)

      • This part is fairly standard: revenues (especially monthly recurring), costs, margins, growth assumptions, revenue concentration, and so on. Having an intuitive and easy-to-follow model greatly works in your favor.

    • Sales, marketing, and distribution

      • Sales & marketing strategy as a lever for revenue acceleration

        • As former operators and entrepreneurs, we dive into all of the assumptions surrounding your sales process to determine what actually drives your numbers. We go into these meetings with the understanding that you know your business best and that we are here to offer insight and suggestions based on our vantage point. A sample of questions is below:

          • How are you segmenting and prioritizing your customers?

            • How do you define product/market fit?

            • What are the components of your sales cycle, and what drives results at various stages of your sales funnel?

            • Is your pricing model right?

            • How is your sales team structured?

            • What will enable you to go from x% to y% market share?

            • How can you meaningfully and efficiently scale your sales efforts?

      • Market size with supporting market research

        • True market size numbers are hard to come by. We are not looking for a top-down data point for “total IT spend in X industry”. Segment your market fully and calculate every sales dollar you could feasibly close based on total number of potential customers and total revenue you could generate. Do this both for your current products as well as for future product development/market opportunities. In conducting this analysis, we are looking both for downside protection with regard to your current in-market product as well as the “big vision” that funding and growth would enable.

    • Competition

      • Clearly map out your market position and unique value proposition relative to your competition. We often find that competitive sets are not fully identified.

    • Capital structure: cap table, copies of convertible notes, debt, etc.

      • Far too often, we meet late seed-stage founders with multiple layers of stacked notes and limited understanding of everyone’s true stake. We will work with you on cleaning up your cap table, understanding the founders’ ownership, adjusting the option pool, and conducting scenario analysis for current/future rounds. Our top priorities are ensuring that founders are probably incentivized & that the company is as attractive as possible for future investors.

      • This topic includes discussion of current round terms. Are you raising the right amount based on your operating plan? What are the milestones you need to reach to trigger your next financing event? Does the valuation you want make sense given the stage of your company, and how does it align with your projected growth trajectory? (More on capital strategy here).

  • Stage 2: Once we have gotten comfortable with the above, we will start including others into the process as well. We will reach out to our LP base, comprised predominantly of family offices and high net worth individuals, to leverage their expertise and networks. We almost always get 3-5 responses with potential customer introductions that simultaneously give us real market insight and provide you with sales leads. While conducting these calls, we will make a few more document requests on:

    • Customer information: top customers, churned customers, etc.

    • Product development: roadmap, development costs, execution risks

    • Management

    • References: customers, existing investors, potential target co-investors

      • We will hold off on calling any of your customers until the very end. Toward the end of this second stage, we will begin putting together the investment syndicate. We do not invest as the sole institutional VC.

  • Stage 3: This is the home stretch! The final items are tech due diligence, customer reference calls, and some more checklist documents.

    • Tech due diligence: infrastructure, tech stack, security, tools, etc.

      • For each tech due diligence call, we bring in one of our portfolio CTOs to lead. This approach allows us to leverage their expertise and also introduce founding teams to each other, which is key to the Laconia community we are building. As our focus is on applications of technology for high pain-point B2B problems, we often are not taking on significant risk with cutting-edge technology.

    • Terms & investor syndicate

      • The timing varies a bit case by case, but typically we will formally issue a term sheet post tech due diligence . We increasingly prefer leading, and we are open to co-leading or following if that makes the most sense for a given company. If we have not yet finalized the syndicate, we will focus all of our efforts on that now.

    • Reference calls: senior executive team & customer reference calls

    • Legal & tax documents: trademarks, litigation, tax returns, incorporation docs, etc.

While this may all seem overwhelming on paper, it is a highly collaborative and engaging process. The most important parts for us are deeply getting to know founders and building lasting relationships with them and the co-investors in the round. We can make an investment decision in as little as a few weeks, but seeing founders execute and showing them the way we work are critical to setting a strong relationship foundation. Most of all, we enjoy rolling our sleeves up side by side with founders and leveraging the growing Laconia community. 

Some final tips on managing your investment process if you are still awake:

  • Create a target VC list that makes sense for your company. Make sure a VC’s fund size makes sense for the company you are building (e.g. a $1b fund will have no interest in a company planning a $100 million M&A exit) and that its investment velocity aligns with what you need (e.g. a fund that writes 2-3 checks per week will not be providing the deep dives and hands-on support described above).

  • Prepare a deal room with your deck & the docs listed above prior to beginning your fundraising process.

  • Treat fundraising as a sales process. Identify your prospects, move them through the funnel, and close them.

  • Do your diligence, too. Call a VC’s existing portfolio founders and find out what they do, not only when things are going well but especially when they are not.

Next & final blog in this series will be on what it’s like to be in the Laconia family. What can you expect from our onboarding, community, and ongoing support? Keep an eye out. In the meantime, let us know if you have any feedback here or on Twitter - @jsilverman22, @djarcara, @geri_kirilova, @dleect.

Moving Forward and Beyond: Our Statement on Diversity, Inclusion, and Anti-Harassment

The business case for supporting diverse teams is cut and dried. This blog is not the place for a recap of the comprehensive and compelling data on the topic. Instead, we want to move the conversation forward from “Why?” to “Here’s how.”

The past year, and especially the past month since International Women’s Day, has exploded with new voices, organizations, and initiatives for moving the tech and venture industries forward. It has sparked conversation and, more importantly, action, not just in the broader community but also in our own tight-knit office at Laconia.

When I received an offer to join Laconia full-time about a year and a half ago, I was ecstatic. Having entered the VC world at age 19, I had already learned the hard way how important it is to work with advocates and allies. My decision to join Laconia full-time was solidified in no small part by Jeffrey’s & David’s demonstrated commitments to transparency, inclusiveness, and empowerment.

Who You Are: The Entrepreneurs We Seek

This is part 3 of a 5-part series. If you haven’t done so already, you can read the first two posts here and here.

The more our portfolio grows, the more convinced we become that in the early stages of a company, the founders are most of the bet. We consider our portfolio an extension of our core values of transparency, collaboration, and community. So, when evaluating potential investment opportunities, we benchmark the founders against our existing portfolio entrepreneurs.

While there is no “one size fits all”, we’ve found certain commonalities in successful founders. Below are the core characteristics we search for:

Checking Boxes: Our Investment Thesis & Parameters

This is part 2 of a 5-part series. If you haven’t done so already, you can read the first post here.

Very often when we meet founders, whether they are pitching their company for investment or just asking for our insight during one of one of our mentor program meetings, they ask what would make them a “sure venture capital investment opportunity”. The short answer we give is that there is no such thing, because every single VC firm has different investment theses/parameters. One perspective we can offer is the overview below of our own strategy.

Laconia’s Story: Who We Are & Why We Do This

Holding true to our core values of transparency, collaboration, and community, one of the things we’ve decided to do this year is publicly share our story, thesis, and process. We hope to demystify venture capital’s insularity and enable founders to more easily access and navigate the venture world. We are therefore publishing the following posts over the next few weeks:

  1. Laconia’s Story: Who We Are & Why We Do This (this blog)
  2. Checking Boxes: Our Investment Thesis & Parameters
  3. Who You Are: The Entrepreneurs We Seek
  4. Diving In: What to Expect in the Investment Process
  5. Welcome to the Family: Managing Laconia’s Portfolio

So, how did we get here?

My co-founder David Arcara  and I met after living parallel lives for decades. Both of us came up through the ranks in sales, marketing, and management roles, eventually founding, running, and selling multiple media & tech companies. Much of this involved raising money.

Intrigued by the other side of the venture capital table, we had both begun to angel invest, eventually crossing paths in 2010 as members of the New York Angels. During the next 18 months as our friendship grew, we spent more and more time co-investing together and with others, until we reached the point of “What’s next? Where can we go with this?”