How this investor widens the net by refusing warm intros

I have often been annoyed by warm introductions. I get why investors insist on them, but it has always struck me as lazy and un-inclusive.

So I was filled with great delight and curiosity when I was introduced to GoAhead Ventures. The firm claims it will hear anyone’s pitch, no matter where in the world you are or what you are building as long as you are a pre-seed or seed company.

The catch? They insist on a video pitch. The upside? They promise to get back to you within a few days to let you know if you’re through to a partner meeting. Assuming the (very light) due diligence goes to plan and they like your company, you could have the money in your bank account within a week.

This approach is different enough from most venture outlets that I decided to talk with Clancey Stahr and Phil Brady, both managing partners at the firm, to find out what life is like with the proverbial VC doors thrown wide open. I was also keen to get the inside track on what the firm looks for in investments and what founders can do to stand out.

“When we were getting started, what we were doing was very similar to other VC firms: We were trying to do some thought leadership, do some grassroots marketing around the Stanford campus; that kind of stuff. But it wasn’t until COVID that we started to differentiate and move into our current process,” says Stahr, describing the firm’s journey from 2014. “Phil created and drove that.”

COVID changed investing for a lot of firms. Gone were the days of in-person meetings and everyone had to deal with days of Zoom-induced chaos. That’s when GoAhead decided to try to rethink its processes.

“We wanted to figure out how to scale [our process] up most effectively. Now, we just have founders submit a video pitch through our platform. It literally takes about five minutes from start to finish; it’s a four-minute elevator pitch. They just fill out some basic information like their name and company name ahead of time. From the moment they submit that pitch, we let them know in three days or less if we want to invite them to a partner meeting or not,” explains Brady, revealing that the firm gets more than 3,000 pitches per year.

The company still maintains its promise of a three-day turnaround. “If we invite them to a partner meeting, we give them a final decision the next day at five o’clock. So the entire process can be done in a week. You could submit a pitch on Monday and you could have money in the bank on Friday, feasibly.”

“We get people a decision the following day, so we don’t have time to review what other firms are doing. We just state the amount of money we want to invest and the valuation cap we want to invest at.” Clancey Stahr, managing partner, GoAhead Ventures

On the face of it, it seems like a very founder-friendly way of deploying capital: Anyone can pitch and once they do, the process is transparent, quick and relatively streamlined. Most importantly, the fact that anyone can submit a pitch on its website means the firm presents a level playing field to potential investments.

“We do deals anywhere in the world. We cover all sectors. We’re completely flexible and the only ‘gating factor’ is that we are only focused on the early stage. Aside from that, we are just choosing people, so we wanted to put all founders on equal footing. We felt that most other funds ended up only inviting founders to pitch if they have some kind of warm intro or some kind of strong pedigree in their background that kind of gets them in the front door,” said Brady.

“We love to be able to watch all these pitch videos apples-to-apples to try to decide without other extrinsic factors. So far, it has been great. We launched it around COVID and it has really skyrocketed our deal flow in ways we couldn’t have imagined. I think it’s been kind of a win-win for founders and for us.”

Picking a fight with warm introductions — replacing them with the hurdle of having to record a video — has given the firm an edge, it believes.

“There are a lot of really well-known firms. When you go to their website, it says something like ‘Find a partner for a warm introduction to the partnership.’ For us as emerging fund managers, the most frustrating thing about starting a VC fund is also fundraising. Everything about the process sucks. You need to find a warm intro to this billionaire. You need to find someone who knows someone who knows someone — the process is entirely unclear,” Stahr laments.

“You meet someone, they say, ‘Oh, this sounds great,’ and then they disappear. I know that happens to founders all the time, too, and all the fine-tuning we’ve done to our process around the top of the funnel as well as making it transparent is mainly built around our frustration with fundraising for our own funds. We just hated that so we decided to change it.”

The firm is explicitly not investing with a consensus-driven model: If one of the investors wants to write a check, they can, even if the others think it’s an awful idea.

Checking their work

The firm’s three partners apparently watch every video (the company uses recruitment platform Vidcruiter for its submissions), which helps them make independent decisions. Even though the partners try to avoid reading each other’s comments on the videos, if one partner thinks there should be a partner meeting, they hold one. If one of them wants to put forth a term sheet, they can.

That doesn’t mean they invest in a vacuum, though.

“We actually have a panel of 150 raters. We send them three videos from every batch that we think are the best, and they rate them,” Brady explained when I asked about the quality of the pitches. “When we first started doing that, the score differential was pretty high. We would also add some YC demo day videos to the mix, and we discovered that the YC founders were reviewed almost twice as well. That has changed over time and now it’s almost perfectly level for the three videos we send each week. That’s probably the best subjective measurement that we do for quality.”

Of course, there can be some serious downsides to investing like this: Putting hurdles in the way of someone submitting a deck is a challenge. In the beginning, GoAhead tells me submissions were heavily weighted toward international founders rather than the standard tranche of top-tier university founders from the east and west coasts of the U.S, but things started to shift as it started building its profile.

The investments

The company invests between $200,000 up to $1 million but usually writes checks toward the middle of that range: think $400,000 to $500,000. The company ‘leads’ all of its deals, which means it runs a fast process and gives startups an offer.

“Unlike many other funds, we kind of run our process in a vacuum. We don’t consider who else may be involved, who’s about to write a check or who’s leading. We just run our process and get the founders a decision. If they say ‘yes’ to it, we wire the money the next day,” says Stahr, taking a stand against what he perceives as a herd mentality.

“We meet a ton of founders who are raising a million-dollar round, and they’ll have a million dollars committed but they’ll be waiting for someone to lead the round. We like to do it differently. Because we get people a decision the following day, we don’t have time to review what other firms are doing. We just state the amount of money we want to invest and the valuation cap we want to invest at. We don’t negotiate, which lets us keep our timeline short. A lot of people continue to raise money on our SAFE. We don’t really use the phrase ‘lead investor.’ We just say what we want to invest and at what terms.”

Curiously, the firm invests without a most-favored-nation clause in its deals: If the startup can get a better deal elsewhere, good for them, GoAhead says. The partners feel they get along just fine without the downside protection in the contract.

The firm tells me it has around $180 million under management and around $20 million or so of “dry powder” left to invest. GoAhead, on average, makes an offer per week to a new startup, aiming to close about half of those deals.

“If we start to win more than half of our offers, we start to reduce our valuation caps. If we start to lose more than half, we increase our global pricing a little bit,” explains Brady.

The firm has been optimizing its investment path over time. If someone reaches it via an email blast, for example, the firm will gently guide them toward the video-based system. It says that the video system has been fine-tuned to make it as easy as possible to get a foot in the door. The original version of the video pitch included seven questions that founders would have to answer, some of which were tricky. But over time, the firm reduced the process to just the elevator pitch.

On the due diligence front, the company has simplified its process to 10 questions to tick the major boxes of diligence.

“At every part of the process, we tried to fine-tune and A/B test to see how many people were dropping off,” Brady explains. “Even for founders who just want to blast a few lists and get [the fundraising] process going, our process ends up being faster and easier than meeting us several times and stepping through a more traditional partner process.”

Is it working?

With any venture fund, deploying the capital is only the beginning of a long journey. Ultimately, the limited partners in a fund will want to see a return — that’s how you can tell whether an investment thesis has legs or if it was a harebrained flash in the pan.

The unfortunate truth for GoAhead Ventures is that it doesn’t, and cannot, know if its plan is working yet. It has a few promising companies in its portfolio, but until the companies start maturing and exiting (typically through an acquisition or an initial public offering), there’s no way of knowing whether it works.

The firm has solved a couple big problems in VC — the group-think and the exclusivity — but time will tell whether it has solved the more important challenge: generating outsized returns through its strategies to reduce selection bias when investing.

The firm isn’t overly worried, though.

“If we were buying houses, you can’t have 90% of the houses you buy turn out to be zeros. You can’t make money like that. In our business, though, no matter what you do, 90% of the companies you invest in are not going to be great,” says Stahr, reflecting on how the firm is building a broad portfolio with the shared experience of the three partners investing in what they believe in.

“I actually think that a lot of VCs confuse their expertise with biases based on their previous experiences in the space. We see founders going to VCs, and they are told, ‘We don’t do advertising technology,’ or ‘We don’t do e-commerce,’ because those investors had one or two bad portfolio companies in that space in the past. Now they think they know everything about the space and how bad it is,” he says.

It’s apparent the firm prizes divergent thinking and it acknowledges that its partnership would have to reflect that as well.

“If we look for a fourth [investor] at some point down the road, we’d like to consider not how they fit in, but what they can bring to the table that we don’t think about,” says Brady. “And how they can think differently. How they can find those positive signals and founders that we’re not capturing — founders that we don’t see because of the way the three of us think.”

Time will tell whether GoAhead Ventures’ strategy is paying off financially, but I know one thing: The startup ecosystem is far better off with GoAhead in it, and I wish more venture firms would open their doors a little wider and look a little bit more broadly at the ecosystem as a whole.