Does your investment committee fit the range of what you invest in

What this check compares

This check reads two declared choices together: how the investment committee votes, and how broad the fund's industry scope is. Both are ordinary decisions that most firms make early and rarely revisit. The question is whether the voting model the firm chose can carry the thesis the firm actually pursues.

A consensus vote works well in a narrow thesis, because every partner can hold a defensible view of every deal that comes through. As the thesis broadens, that stops being true. Partners are asked to vote on categories they do not cover, and the vote becomes either a formality or a bottleneck. A conviction model, where decision authority sits with the partner closest to the deal, handles breadth well, and is often underused in a narrow thesis where the whole partnership has real coverage.

Why it is worth checking

Voting structure is usually chosen when a firm is small and its thesis is narrow, and industry scope is what tends to widen later. A firm that broadens its mandate across two fund cycles without revisiting how it votes will drift into this tension without a decision ever having been made. The check reads the two as they stand today, which is why it can surface a mismatch nobody chose.

A question that comes up on all three IC checks

Readers ask a version of the same question on each of the three checks that read the investment committee: does the norm against funding competing companies still hold, and does the model assume it does. The honest answer is that the norm is visibly eroding, and that the model does not depend on it either way.

Charles Hudson of Precursor Ventures has argued that as venture fund sizes keep growing, the tradition of firms holding a norm, if not a stated policy, against investing in competitive companies is likely to go away, and that this is a case where the business model for large funds is at odds with what most founders want. Chris Neumann, writing up that argument, notes that smaller funds and single-stage specialists are rethinking their own approach as well.

This is a long-simmering tension rather than a new development. Hunter Walk laid out the same mechanism in 2019, observing that large firms writing early checks would eventually find they had blocked themselves out of a category, and predicting pressure on the traditional principle that a firm will not back two competing companies. Two arguments seven years apart, reaching the same conclusion, is evidence of a slow structural drift, not of a break.

What this means for these three checks is narrow. The model reads the firm's declared voting structure, its declared scope, its declared economic rights, and its partner count, and asks whether those choices fit each other. It does not read the firm's conflict policy, and it takes no position on whether a firm should hold one. A firm that has relaxed its conflict stance has changed something real about how it operates, and the model will see that only where it changes one of the structural variables above.

• VCs are Changing Their Tune on ConflictsChris NeumannQuotes Charles Hudson of Precursor Ventures on why the norm is likely to go away as fund sizes grow.
• Coming Storms: Three Reasons That VC Firms May Start Overlooking “We’re Conflicted” and Make Competing InvestmentsHunter Walk, October 2019The same argument, made seven years earlier.

What this check does not say

The check does not say that one voting model is better than another, and it does not say a firm should narrow its thesis. Consensus, majority, and conviction are all workable structures, and the model takes no view on which a firm should run. It reads whether the pair as declared holds together, and the resolution, if a General Partner wants one, can come from either side.

This is one of the ten checks that read structural relationships without reference to lifecycle stage. The tension it surfaces reads the same way for a Conviction-stage firm as for a Continuity-stage one.