Variety - A VC's perspective

Aug 18, 2022

What are the stakeholders looking for in the present league of the VCs? Take a deep dive into the psychology involved through the blog.

Recently when I visited Subway, I discovered that I can have more than 30 million (28 computations of 12 menu items) customizations of their product - the sub. It's great to offer variety, but do the quantity of customizations pull customers?

One can observe the same in the VC ecosystem, where they seek to identify and close the highest possible number of deals to attract true-blue stakeholders. Do the stakeholders get attracted to the quantity of deals?

Returning to our first example, organizations that provide options, hope to appeal to a wider range of customers. The same concept that defines the story behind Samsung offering 200+ smartphone variants in India.

But when the options are constrained and targeted to the audience. Regardless of the brand's outreach, the target customer and the organization tend to form a natural connection. I use one of the 14 Iphone variants offered in India…….

On our understanding of the above mentioned narratives, we can classify the organizations into the following 3 categories:

  • Clarity driven: These are the organizations that know their target market hence have the ability to offer consumer focussed products. 

  • Mass driven: These are the organizations that have no market restrictions therefore provide a wide range of products aimed towards a large audience.

  • Situation driven: These are the organizations that dynamically adapt to the above strategies in chorus as and when appropriate.

What, then, do the stakeholders want their VCs to be from the list above?

To begin with, it is not practical for VCs to work under a mass-driven approach. VCs all across the globe work with small teams, read this forbes article to know why. Due to this, it is not feasible for them to devote limited resources into review of every deal that has been received on top of all other activities of stakeholder interest.

Moving forward, however, we can find the solution in a term used commonly across the VC ecosystem - "Investment Thesis".

A thesis is a concept that is tested across domains to see if it adheres to the set objectives.

Investing into next generation, tech-led, consumer focused businesses that are driven by subscription economy

Investment thesis, like the one for Auxano Capital stated above, help VCs focus and efficiently manage the resources by defining the field and stage to consider while screening through a large variety of deals. Similar to defining what their target audience wants, as suggested by the clarity-driven approach

It's also important to understand another strategy - the situation-driven approach. This strategy emphasizes adapting to the needs of the situation. Even if a VC bases its decisions on its thesis, it may ignore certain leaks in the pursuit of the best deal for its stakeholders.

One can observe that while the current generation of VCs focus primarily on the clarity-driven strategy, they are unable to ignore the demands of the situation as suggested by the situation-driven approach hence they discover themselves adopting a strategy that is somewhere between the clarity-driven and situation-driven approaches.

Author(s) :
Kanuj Jadwani