Investment Committee Process Thwarts Creative Thinking
Need to get this off my chest -
I got into this business because I liked finding the weird deals. The non-obvious thesis, the founder nobody else is taking seriously yet, the market that looks small until it doesn’t. Turns out that’s the fastest way to get your memo killed.
Here’s how IC actually works at a lot of shops:
- The deal has to look like a deal we’ve already done. Anything without a clean comp set gets “interesting, but let’s revisit next quarter.” Next quarter never comes.
- Partners decide before the meeting. IC is theater. If you didn’t pre-sell the right partner over coffee two weeks earlier, your 40-page memo is dead on arrival.
- Nobody gets fired for passing. Missing a winner costs nothing. Backing a loser is a career mark. So the incentive is to say no to anything with real variance, which is exactly where the returns are.
- Diligence becomes a defensive exercise. You’re not trying to find out if the thesis is right. You’re building a paper trail so nobody gets blamed later.
The result is that the junior job turns into figuring out which partner wants what, writing the memo they’d write if they had time, and making their pet deals look airtight. You stop being an investor and become a glorified admin with a model. Your own conviction is a liability unless it lines up with someone senior’s.
And the worst part is the deals we pass on don’t disappear. Someone with less process and more nerve does them. Then two years later we’re chasing the Series C at 5x the price because “the thesis has been validated.”
I don’t think the answer is no process. Discipline matters. But when the process exists mainly to spread blame and protect egos, it’s not risk management, it’s just committee-approved mediocrity.
Anyone else dealing with this? Did you find a shop that actually backs non-partners with original ideas, or is this just the job of ass-licking?
What stage VC and deal profiles ?
Seems like the growth mindset is being suppressed and they’re risk managing. Could be many reasons for that.
It sounds like you're hitting on a frustration that resonates with many in the industry. Based on the most helpful WSO content, here are some insights and strategies to navigate or address these challenges:
Pre-Selling is Key: As frustrating as it may be, the reality is that IC meetings are often a formality. Partners typically make up their minds beforehand, so your best bet is to identify the key decision-makers early and pre-sell your idea. This means having informal conversations, understanding their biases, and framing your pitch in a way that aligns with their preferences.
Compelling Rationale is Non-Negotiable: One of the top-rated WSO threads emphasizes the importance of presenting a strong "why" behind your thesis. If you're pitching something unconventional, you need to back it up with sound logic and data. This makes it harder for others to dismiss your idea without addressing your rationale directly.
Risk and Reward Framing: Highlighting the potential upside while addressing risks transparently can help. As noted in WSO discussions, ICs often shy away from variance, so framing the risk as manageable and the reward as transformative can make your pitch more palatable.
Leverage Past Deals Strategically: If your shop has a bias toward deals with clean comps, find creative ways to tie your unconventional idea to past successes. Even if the deal is unique, draw parallels to elements of previous investments that worked well.
Find the Right Environment: Some firms are more open to unconventional ideas than others. For example, certain private credit or direct lending shops pride themselves on creative deal structuring and non-traditional investments. If your current environment stifles creativity, it might be worth exploring opportunities at firms with a more entrepreneurial culture.
Adapt Without Losing Conviction: While it's easy to feel like you're just catering to senior partners, remember that part of the job is learning how to navigate the system. Use this time to build relationships, understand the dynamics, and position yourself as someone who can balance creativity with discipline.
Long-Term Perspective: The frustration of seeing passed deals succeed later is real, but it also highlights the importance of patience. If you believe in your thesis, keep track of those ideas and revisit them when the timing or environment is more favorable.
Ultimately, while the process can feel stifling, it's also an opportunity to refine your ability to sell ideas, manage stakeholders, and build credibility. If the culture at your current shop feels irredeemable, there are firms out there that value original thinking—finding them might just take some networking and persistence.
Sources: What is the secret sauce? Feel like I don't know anything, Investment Banking to a Hedge fund... Can You Make the Jump?, https://www.wallstreetoasis.com/forum/private-equity/then-and-now-compbanker?customgpt=1, Stock Pitch Sample Template - Proven Examples to Help Ace Your Interview, PE professional, what's your process while judging an investment?
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