Masterclass Live! How Triphammer Ventures Evaluates a Deal

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• Where is the transcript for this webinar?

  Speaker 1:
  Welcome everyone. Thank you for joining us. For those of you who don’t know me, I’m Brian Keil, one of the managing partners on Triphammer, and I’m joined today by Wesley Yiu, who is a partner on the fund as well. And we’re here to take you through how we undertake the evaluation of a deal. We have a very specific framework that we use at Alumni Ventures and at Triphammer, and we want to walk you through that to give you a little bit of behind the scenes of how things are done in terms of evaluating an individual deal opportunity. Before we dive into the presentation materials though, I wanted to take us through some disclaimers and also some housekeeping material or housekeeping items as well. 

  So today we’re speaking about Triphammer Ventures and our views of the associated venture capital landscape. This presentation is for informational purposes only and is not an offer to buy or sell securities, which is only made pursuant to the formal offering documents for the fund.

  If you do intend to invest with us, please review important disclosure materials that are available on the Alumni Ventures website. In terms of the housekeeping items, I’ll just go through a few things. You will be on mute for the entire presentation, and the webinar will be recorded and shared after the event. We encourage you to submit questions throughout the webinar. We’ll do our best to answer all of those questions on the webinar itself, and we’ll follow up with you via email if we can’t answer it here. And we’ll also defer some questions that may be very specific to an investor’s circumstances that may not be appropriate for this format as well. And finally, to ask questions, please enter them in the question section in the GoTo Webinar control panel and hit submit and we’ll use those at the end.

  So a quick introduction—Triphammer Ventures is a venture capital fund that’s part of Alumni Ventures, which is America’s largest venture capital firm for individuals. On the whole, across the entire Alumni Ventures network, we have raised $1.3 billion from individual investors. Since Alumni Ventures was founded, Triphammer Ventures seeks to create wealth for Cornell alumni and supporters by building portfolios of 20 to 30 venture capital-backed companies. We have over 25,000 alumni and community members that are subscribers to our newsletter and follow our activities. And our team is made up of full-time members that are alumni of the university as well as other Alumni Ventures, experienced venture capital investors.

  We also leverage an investment committee, which includes alums from Cornell with decades of investment experience. They help us evaluate and make investment decisions. We support the Cornell community as well with our Fellows Program, which educates mid-career professionals on the venture capital profession. And we also provide opportunities with our portfolio companies and occasionally Alumni Ventures to members of the Cornell community. And then we support the portfolio companies, many of which are run by Cornell alums, with help with connections. We point folks in the right direction to raise capital if it’s not coming from us, and we’ll provide customer connections if we can as well. So we’re part of the community, and we value this relationship both on the fundraising side but also on the investing side and finding opportunities and helping evaluate them.

  Next slide. Thanks. Before we dive into things, I want to first introduce the team. So myself, Brian Keil—as I mentioned, I’m a seasoned venture capitalist with 20 years of experience in the profession. I have a bachelor’s in industrial engineering from the University of Southern California and an MBA from the Wharton School. I grew up in the Silicon Valley and worked in high tech. Prior to attending the Wharton School post-MBA, I spent five years in the management consulting field with the firms of AT Kearney and Bain and Company. And then after leaving Bain, I joined the principal investing field where I spent the majority of my time in the venture capital space, specifically investing in technology companies as a corporate venture capitalist at GE Capital NBC. And in my prior role before joining Alumni Ventures, I ran a $150 million venture capital investment program for New York State.

  To my right on the slide is Jonathan Meltzer. He is also a managing partner on the fund. He’s been a private company investor for 16 years. He has a background in investment banking, most recently at Goldman Sachs. He has an undergraduate degree from the Wharton School and an MBA from Columbia University. Prior to joining Alumni Ventures, he spent 10 years of his career investing in private equity and venture capital on behalf of the family offices for two different billionaires.

  Wes, can you reintroduce yourself and the rest of the team?

  Speaker 2:
  Great, thanks Brian. Good afternoon everybody. Some of you may have known me or gotten to know me over the years here, but just a quick background on myself. I spent my career in both tech and investing over the years. Started off at Cornell as an undergrad in the engineering school with a degree in operations research and moved over to a tech role within BlackRock’s risk management platform out of school. This was back in 2011. I did that for a number of years before I moved over to an investing seat at Goldman in their fixed income arm of their asset management division. I served as an investment strategist with that organization, and I joined Triphammer and Alumni Ventures in the 2018 timeframe. So I’ve been with the team coming up on six years here. I’ve been primarily focused on the sourcing and investing side of the house within the Triphammer and Alumni Ventures team.

  And lastly, but not least, we have two junior folks on our team here, both Mason and Lucas. They both recently joined our team within the last two years or so and have really been helping out on the sourcing and diligence aspect of our process.

  Speaker 1:
  And finally I’d add, behind the scenes here is Emily, our Investor Relations Manager. For those of you who joined us recently in one of our last couple of funds, you probably had the opportunity to work with Emily in closing your investment. And for those of you who are new to the community and you’d like to invest with us, Emily’s available to help you complete any new investment that you might be making.

  So we thought we’d start out here with a little bit of a grounding in what is venture capital. Venture capital itself is a form of investing in private companies. In contrast to public companies that are listed on stock exchanges, these are companies that you invest in with a privately negotiated transaction between folks that are managing the money and then the companies that are looking to raise money. So this isn’t a very organized and structured market like the public markets.

  There are agreements that must be negotiated between the provider of capital and the company, and the price and terms of that investment are negotiated for each and every transaction. And typically startups or relatively young companies are looking to raise capital to support their growth. These are not profitable enterprises. They want to continue to grow, they need outside capital to fund that growth. They’re young companies as we mentioned, but many of them have grown into these large public behemoths—Apple, Amazon, Facebook, Google. All of these companies started as venture-backed companies and they’ve grown into market and world leaders, and those are the companies that we’re trying to invest in as part of our process.

  And it’s a part of the process or the investment horizon for a company where a lot of the value is created these days. There was a time when a company like Amazon went public when it was a market cap of well under a billion. Nowadays, companies don’t even think about going public typically until they’re worth tens of billions. So there’s a lot of value creation from when a company’s worth 10 million up to being worth 10 billion, and that’s being captured in the private marketplace. It’s not something that generally you can access as a public investor. So that is one reason that we are a proponent of having venture capital be part of an investor’s portfolio and that one should take a very disciplined approach about doing so.

  Wes, would you add anything about venture that would add any context there?

  Speaker 2:
  Yeah, for the context, important thing to note about this asset class is that the types of companies that end up being in a venture capital portfolio are companies that tend to have very large aspirations. As an example, if your neighbor is thinking about starting a restaurant, that might be a very compelling cash-on-cash investment, but probably not going to be one that resonates very well with a venture capital investor.

  Typically, venture-backed businesses tend to focus on hopefully disrupting very large addressable markets, and they have a strategy built around innovation in terms of either a new business model, specific technology that hasn’t been seen before, or specific IP that is very strongly protected on their side. So companies like the Apples, the Amazons, Facebooks of the world—back when they were young fledgling startups—they had a very unique appeal to them because of the markets they disrupted or because of the technology that they had developed. That was interesting from a venture capital perspective and attracted other VC investors that ultimately funded their initial growth.

  Speaker 1:
  That’s a great point. These are not lifestyle businesses like a restaurant or some other small business. It might turn out to be, as Wes pointed out, a good cash-on-cash investment, but it’s not likely to attract venture capital where they’re looking for hypergrowth and really disrupting large markets. A single restaurant in a single community isn’t looking to do that, even if it might be a good investment.

  So, giving you a little context, it’s important to note that venture capital as an asset class has outperformed public markets for many time periods, and there’s a lot of reasons for that. One I highlighted earlier is that a lot of the value that a company has in total over its life is captured in the private phase of it these days, not in the public phase. So as a public company investor, if you’re waiting until a company IPOs, a lot of the gains that are going to be made on that company over its lifecycle have already occurred, and you’re just going to get that tail end.

  There can be some very good public company investments that might double or triple—that does happen—but you’re not going to see 10, 20, 50x returns as you might see in the venture capital landscape. And that bears itself out in how the asset class itself performs. It’s really also one of the reasons why you tend to see the outstanding performance: there’s an opportunity to participate in value creation in these really large markets.

  As we’ve noted earlier, it’s the seismic shift, it’s the true game-changing technologies that get backed by venture capital and end up being incredibly valuable and therefore delivering these above-market returns. It’s not run-of-the-mill manufacturing businesses. These are creating whole new markets with brand-new technologies, and that manifests itself, when it works, in just outstanding performance.

  It’s really a bet on the future. And that’s something else to be cognizant of—these are long-term investments, and it’s a place where you put patient capital. It takes a long time to create kinds of significant values. It doesn’t happen overnight.

  Anything you’d want to add to that, Wes?

  Speaker 2:
  Yeah, and honestly, for venture capitalists in this asset class, startups are probably the best way for someone who wants to participate in the value being created in kind of game-changing industries. So for example, if you had a specific view—a positive view—on AI in the ecosystem, you may want to buy stock in Nvidia or Microsoft because of OpenAI, for example. But there are very few pure play companies that are available in the public sector that allow an investor to do so. Whereas in the startup ecosystem, there are hundreds, maybe even thousands of companies that are doing some sort of innovative build in the AI ecosystem that could be ultimately, down the road, a game-changing company within this ecosystem. So there is a much larger universe that’s accessible to folks that do want access to these kind of pure play investment themes that can be done via venture capital as an asset class.

  Speaker 1:
  And as Wes mentioned, there are many private companies out there creating value, and we have to evaluate and determine which of those we want to include in our portfolio. So part of the goal today is to provide you with a sense of what’s the process, what’s the framework, what’s the thinking behind our investment decisions, and how we try to find the best of these companies and make sure they’re part of the portfolios that we’re constructing for our investors. So maybe Wes, you can handle the next phase where we’re going to take you through the detail.

  Speaker 2:
  So like Brian mentioned, we are here to give you a window into our investment process. When it comes to evaluating companies that ultimately go into the portfolio, every year we see a large number of companies—hundreds, even thousands of companies per year as an organization. And because there’s so many companies that are out there looking for VC funding, we do have to be ultimately very disciplined in terms of where do we actually want to spend our time, energy, and focus in evaluating these types of businesses.

  There are opportunities that may survive an initial screening and then be subject to further diligence to find, hopefully, the best of the best when it comes to companies in this specific area. But ultimately, this represents a very tiny percentage of all the opportunities that are ultimately out there for us to play in. So we do need to be quite selective when it comes to building the portfolio.

  So in order for us to do that, we had to establish a framework or blueprint for us to follow that gets at the key questions or some of the key cruxes when it comes to figuring out if a company ultimately has the potential to be a home run at the end of the day in the future. We have kind of distilled this down to a scorecard—a numeric rating or metric that we assign to every single deal that we ultimately put through the process on our side. And depending on that ultimate grade or score for that company, that dictates whether or not the company ultimately makes it into the portfolio.

  I will say though, at the end of the day, even if a score might pass or hit the passing threshold, that doesn’t necessarily mean we’ll automatically just go ahead and blindly invest. There might be some underlying risks that may not directly be captured in the rating or scorecard itself.

  So it is important to note for our investors that ultimately the scorecard is a guide, and there is some degree of additional analysis or opinions that might come into the process to ultimately decide whether or not a company makes it into the portfolio or not.

  As an example, a lot of people consider Apple to be this great company success story over the years, which is absolutely true, but its share price at a given day might dictate whether or not it presents a good investment to you as an investor. So like that parallel in the public sector, we also see the same thing within the private sector as well. Does the price of this given company make sense for us to invest at this given time based on the current traction that it has?

  Because ultimately, at the end of the day, just because it’s a great company doesn’t mean it’s going to be a great investment for us down the road. So with that, we did want to kind of walk through this scorecard or grading methodology with you all here to give you a sense of what we’re thinking about—what’s kind of topical for us—when it comes to looking at investments.

  Anything you want to add there, Brian?

  Speaker 1:
  Just building on the points that you made earlier, the scorecard here—it’s not a precise judgment of a company. It’s really a tool that allows us to put our thoughts down in a structured manner, share them with our colleagues who’ve done the same thing using the same framework, and then we can work through the merits of the investment. It’s our way of trying to put some science around the art of making venture capital investment decisions all in one place.

  And it also needs to be used holistically, meaning that we look at the relative strengths and weaknesses of a company and see whether they offset each other. An example might be if we’re backing a company with a first-time CEO, is that balanced by having an experienced venture capital firm backing him who can provide that guidance about building and growing a company? So it helps offset—we want to see, do the strengths offset the potential weaknesses? And we just don’t add up the numbers and say yes or no. We put a lot more thought into it. It’s evaluated holistically. So as we go through these sections, keep in mind that we go section by section, then you have to look at it in its totality and take a step back and look at it holistically.

  Speaker 2:
  Great. So we break down the scorecard or grading system into three main buckets. The first one here is deal dynamics. And then within this main bucket—sorry, deal dynamics, not lead dynamics—and within this main bucket, there are three main subsections that we score individually as well.

  Now, to sort of walk through each one here, we do have an example that we point to in the portfolio that addresses the various buckets and how we thought about the scoring process. So the first sub-bucket here under deal dynamics is the round composition. Essentially, we’re trying to figure out who is investing in this round and who set the terms and price of this round. Most importantly, is the round led by a brand-new investor that’s new to this company, or is it led by an insider—an existing investor, a firm that’s already sunk capital into this company in prior rounds?

  This is an important distinction to note off the front here because there are different motivations depending on the situation. For example, if a specific VC investor has already put in $10 million into a given company, they have different motives compared to a VC that has never put capital into the company at all and is coming in as a brand-new investor. The existing investor might have incentives to try to attract investors to kind of keep the company alive if it’s not doing so well.

  So all else being equal, we do prefer to invest in rounds that are led by brand-new investors because those incentives of those investors are perfectly aligned with us, versus the incentives of an existing investor who might have already put capital into the company at this point.

  There are some exceptions to this. So for example, if there is a company that is doing a new fundraise round that is led by an existing investor, sometimes there are situations where the existing investor may be showing extreme conviction in the company.

  So for example, doubling down or putting a very large check into a new subsequent round even after putting capital into a prior round—that, to us, is generally speaking a positive signal because it shows to us that a company is doing really, really well and the investor wants to put more capital to work to support that business because they see a positive growth trajectory over the years in the future.

  And there have been many success stories over the years in the VC industry where there have been companies that have, for example, been solely funded by a single VC investor because ultimately that VC investor saw what was in front of the company and they decided to be a greedy investor and not let other investors into that round to share in the future spoils. So there are some exceptions to this broader rule, but by and large, we do prefer rounds led by brand-new investors to a company.

  Speaker 2:
  The next sub-bucket here is kind of valuation and terms—so understanding the price that we’ll ultimately be looking to pay to invest in this company at this given time, as well as if there are any special rights or terms that we’d be signing up for within the specific fundraise round. There might be certain liquidation preferences or voting rights that might be tied to this specific fundraise round that we want to be cognizant of.

  So we do this evaluation both on internal and external data that is available to us when we are looking at the specific fundraise in terms of the actual deal of this specific company. Ultimately, we try to figure out the price that we’re asked to pay today. Based on this price, do we still see the potential for a future venture-style return—hopefully a home run at the end of the day down the road?

  If we are paying a premium for this company, which there can be some situations where that happens to be the case, is this company worth that premium? Are they, for example, demonstrating significant growth that warrants paying a higher price than, for example, comps—comparable companies—might be getting in this broader industry or this broader marketplace?

  And if it’s cheaper—if we’re getting a really, really good deal on the investment—why is that the case? Is the company slowing? Are there some inherent risks to the company that ultimately investors are underwriting into the process that allows them to throw a cheaper valuation into the fold here? So trying to get our heads around the pricing and the terms of that fundraise round that we’re investing in is a key part of this deal dynamics section.

  And then lastly, we want to focus on the runway. So how much time does this fundraise round buy the company to achieve their next milestone so that they can raise a new round at hopefully a subsequently higher valuation than the current round?

  We understand—does the company have enough time to get those milestones achieved? Because if they don’t, we could be looking at a future round where the company raises at a lower valuation than our current round, and that typically doesn’t bode well for a company if things don’t go well.

  So we do want to get a sense of how much the company’s spending on a per-monthly basis and how much time, based on the size of that round, this ultimately gives them. Now, sometimes it’s not obvious at the get-go. So for example, if the company’s spending, for example, a million dollars per month, we don’t know at this point in time—is it looking to expand that spend after this round, or is the company looking to keep that flat and just coast on this current runway?

  So we do want to spend time with the company to truly understand where are their capital expenditures and how does this round actually help them get to their milestones, because if they can’t get to those milestones, we could be looking at some negative outcomes in the future.

  So trying to understand the runway is an important piece, and generally speaking, we do favor companies that can buy themselves at least two years of runway, if not more. That is typically the amount of time that is necessary to achieve key milestones to hopefully warrant a new round at a higher price.

  One example of a company that we want to walk through here on the slide for this section is a company called Nfaa. They design networking chips for AI computing workloads. So the company raised a Series B in the fall time of last year. A substantial amount of funding came from new investors, such as a tech specialist at Tradies Management and strategically, Nvidia as well.

  In addition, the prior lead investor, Sutter Hill Ventures, more than doubled down on this specific company and this specific fundraise. So we have two very positive signals that we can kind of see based on the deal dynamics. You have a brand-new lead investor writing a significant check, and then you have the existing investor showing very, very strong support for the company by more than doubling down on their initial investment as well.

  So overall, these two signals were very strong for Nfaa, and ultimately, this company scored pretty well within this deal dynamics section of our blueprint or scoring rubric.

  Speaker 1:
  One thing I’d add is, for those who don’t know us that well, we operate as a co-investor. So we are not setting the price and terms of the deals that we invest in. So if you’re a co-investor, those deal dynamics are very important to understand—whether you’re stepping into a good opportunity or one where it’s adverse selection, that the reason you’re getting into the deal is because it isn’t one that is as attractive as others in the marketplace, or it’s one that’s not priced correctly.

  So we are looking for these signals that tell us that we’re stepping into an appropriately priced and structured transaction that’s roughly at market terms when we’re making our decision. So that category of deal dynamics is one that we look at very closely—as well as this next one up here: the lead investor specifically.

  Speaker 2:
  So the next main section of our scoring methodology is focused around the lead investor. So like Brian mentioned, we don’t set the terms and pricing around—we co-invest alongside a lead investor that takes that lead role. So ultimately, the important part about this section is: how do we think about the investor that we are ultimately partnering with in the specific round of the specific company?

  We want to understand ultimately, first, what is the lead investor firm’s quality and track record as an initial screen for these types of companies that have a new fundraise round coming to a head here. We want to know: what is the historical investment performance of these funds, of these VC firms that we’re looking to partner with?

  And similarly, what are the kinds of outcomes that have driven large outsized gains for them relative to the specific company that we’re evaluating? So, are they a specialist that has, for example, invested in the cybersecurity sector? If we’re looking at a cybersecurity company, for example, do they have proof points that they can point to that allow us to believe that they have a strong sense of knowledge and domain expertise—that they can pick, hopefully, the right winners in this specific domain that this company is operating in?

  Another factor that we look at for this section is the conviction of the lead investor. Are they demonstrating strong conviction in this company that they’re looking to write a check into? The principal indicator that we look to demonstrate for this specific section is the size of the check that they’re writing—but not just the absolute size. I would say the size in conjunction with, or compared to, the overall fund that they’re looking to deploy—as a percentage of that specific fund.

  If they’re looking to invest, for example, 10% of their fund into a specific company, that, in our minds, is showing very, very high conviction. Even if a check might only be, for example, five to ten million dollars—it’s not too big from an absolute perspective—but as a whole, for their portfolio, that is a very big chunk of their fund. That leads us to believe that they are demonstrating high conviction.

  Contrast this with an investor that might be running a $20 million check, for example, but they’re investing out of a multi-billion-dollar fund. This investment that they’re looking at running a check into might not be that high of a priority for them, or it might just be a modest conviction level for them in this specific company.

  So we do want to try to understand the size of the check in comparison with the overall fund that they’re looking to deploy out of.

  And the last part of this section is looking at the specific lead partner at this lead VC fund to understand their personal track record, as well as their personal domain expertise in this specific sector that this company is operating in. Do they have considerable historical performance that they can point to? Do they have specific relevant domain expertise that could be helpful to the company as they’re growing from point A to point B?

  These are the kinds of things we try to evaluate from an individual partner perspective at the VC firm. At the end of the day, we do want to partner with VCs and partners at VC firms that ultimately could be a good steward and advisor to the CEO as they navigate their journey. Because oftentimes, especially at the early stages, building a company requires a lot of outside expertise from investors, and we want to make sure that the company aligns itself with the right partner at the right VC firm.

  So one example we have here that talks about this section of our scorecard is a company called Cytiva—a recent investment of ours in the last couple quarters or so. High level on what they do: they built a medical diagnostic that is used to help emergency departments at hospitals to quickly detect with high probability whether or not a given patient has sepsis or not—which, sepsis is a very critical condition that hospitals are very troubled with on a regular basis.

  So it’s a company that is a diagnostic for that type of condition. We invested in a round that was led by Norwest Venture Partners. Norwest, in our opinion, is probably considered one of the best, if not the best, in terms of the healthcare and MedTech expertise that they possess.

  On their healthcare side, their team has always placed a special emphasis on research and outcome-based solutions to critical healthcare needs. And oftentimes, their investment partners hold MDs or PhD degrees, so they have a unique knowledge base that they can tap into when trying to evaluate the underlying science of a given healthcare or medical device company. So they have really strong expertise that we really liked within this specific company.

  The lead partner specifically, Zach Scott, on this deal—he takes a critical clinical approach when looking at an investment, both in terms of evaluating the patient outcomes and the clinical benefits of a specific procedure and weighing those risks of that specific therapy.

  His focus has always been around devices, diagnostics, and health tech or tech-enabled services. And one of the areas of focus for him on businesses is companies that have been selling to hospital systems and physicians, where he can tap into his expertise and experience and understand the realities of practicing medicine.

  So he had been investing in healthcare for over two decades at this point. He has a very strong, unique background that we can tap into. And more specifically within the Cytiva or sepsis realm, he’d actually been looking to make a bet in this sepsis area for the last five or six years. And it wasn’t until he looked at Cytiva—that was his very first investment in this domain. So he’d been looking at this space for a number of years here before finally jumping in to make a bet on this specific company.

  Speaker 2:
  So that’s on the lead investor and the partner. Lastly, I’ll just say that they wrote a very big check into this specific round. I would say—I can’t remember off the top of my head the exact number—but it was 35-plus million dollars, is my recollection. So a very meaningful check for Norwest into this specific company at this stage. So the company scored pretty well from a lead investor dynamic perspective.

  And then lastly—sorry, not lastly—the next section here is looking at the company specifically. So we talked about the round, the terms, we talked about the lead investor. Now we’re trying to understand the key parts about the business itself that we’re ultimately looking to invest in. So here, there’s a couple of subsections. I’ll quickly rattle through them really quick.

  We have customer demand—so looking to evaluate, based on the current stage of the company, how much have they been able to demonstrate from a sales or go-to-market perspective? Have they actually demonstrated product-market fit for their solution? Is there someone that’s actually willing to pay for their solution that’s out there? If not, why is that the case? Where do they have some shortfalls in that? Trying to wrap our heads around the go-to-market aspect and traction of this specific solution.

  Next is the business model. So how profitable can this company be? How scalable is the mousetrap that they built? At the end of the day, generally speaking, we like to see high-margin businesses with strong recurring revenue as a framework, but that doesn’t mean we will only invest in those types of businesses. But we do, generally speaking, like to have profitable and scalable businesses down the road at the end of the day.

  Next is momentum. Are they actually achieving their goals? Are they actually achieving their numbers? What’s the traction that they have behind them right now? Are they at an inflection point right now where things are starting to really scale? Or are they at a point where they kind of have plateaued and things have started to slow down a little bit? And if so, what is the main reason? We want to understand where this company is in its current life cycle to figure out how much further room does the company have to grow from this point here on and out.

  Next is capital efficiency. So, of the dollars that they have raised to date, how have they been from a utilization of those funds in the past so far? Have they actually achieved significant milestones, or have they actually burned through a significant amount of cash without having much to show for it? So truly understanding where they’re spending their dollars and how they’re doing it is a key part of the capital efficiency evaluation process.

  And then lastly, looking at the competitive moats. How much differentiation does this company have at the end of the day? Do they actually have strong IP protection that can allow them to stand out versus the rest of potential competitors that ultimately enter the marketplace—or are already out there existing today? So we want to understand what is their special sauce or their competitive edge that they can leverage to support their business from here on out.

  Speaker 1:
  Just to jump in quickly—as we mentioned that we’re a co-investor, the first two sections that we walked through, a lot of that is observing the situation and weighing it versus what the marketplace looks like and looking for signals within the data. Here is more of our direct underwriting and evaluation work.

  A lot of it is confirmatory—we’ve talked to the lead investor, we’ve understood their viewpoint on these items, and then we take the data, we talk to management about these items, and we form our own independent opinion on the company issues as opposed to looking for signals from others’ actions. This is a little more direct and hands-on, this section right here.

  Speaker 2:
  And then one good example of this part of the scorecard here is a company called OfferFit. It’s a Trip investment in a number of our portfolios today given the conviction we have in the business.

  High level—they deliver AI-based decision-making for marketing purposes for large enterprises. So we’ve actually invested in this company twice now. Originally at the Series A time of investment, we were impressed by how quickly they had built their product and the speed by which they got to their first million dollars of annual recurring revenue. So kind of highlighting the customer demand aspect, the momentum aspect—they kind of went from zero to one in very short order within a couple of months after launching their product. So really good signs from a demand and momentum perspective.

  On top of that, this is an enterprise software solution. So with that, it typically comes in a package of high-margin, recurring-revenue business model. So again, favoring things that we like to see from a business model perspective. So a lot of good things from a structural perspective on the company side of things.

  At the time of our second investment—so they raised a new round in the fall of 2023, so just last year—the ARR growth since our original investment in the Series A was almost 400%. So with the previous round of funding that we had given them, they had demonstrated very, very strong momentum with that. That ultimately led them to seeing a new Series B round from other outside investors.

  This actually attracted the attention of a VC firm called Menlo Ventures, which has a very strong track record in the enterprise software space. And just like we look for very positive signals, Menlo had also looked for very strong signals as well that allowed them to write a very prominent check into their Series B round as a new investor.

  So OfferFit had a lot of very positive things going from a company perspective, and ultimately that’s the kind of thing we’re looking for. We’re looking for companies that have strong business models, have good momentum. It’s hard for us to invest in companies that are flailing or slowing down, because the upside from those types of companies is a question mark to us. So we try to look at these companies that are at a tipping point or at an inflection point that we capture by investing today—hopefully for future growth down the road.

  And then lastly, the last part of our rubric here is on the team of the investment that we’re looking to make. So we talked about the company and some of the bells and whistles of the specific product and business that they’re building. We also want to spend some time on the evaluation of the leadership of the team as well.

  So a lot of factors come into play here, but I would say a lot of the time, we generally speaking like to see teams that have strong backgrounds in the specific domain that they’re building a company in. Does this team actually have relevant domain expertise that can help them grow a business in this specific area?

  For example, it’d be hard for us to invest in a consumer-facing business if the CEO has a biotech background. There’s a natural mismatch there. So we generally speaking like to see teams that have strong domain expertise that they can leverage.

  On top of that, we do like to see teams that have had prior entrepreneurial or startup experience in the past. Maybe they’ve been a founder already that has already seen an exit under their belt that they can point to. Being a repeat founder gives them certain knowledge on certain pitfalls or mistakes that they may have made in their first venture that they’re probably going to avoid in their second venture down the road.

  And generally speaking, we do like to see those startup founders because they are generally more scrappy and a little bit more efficient—have more drive than someone that has been, for example, a long-time executive at a large organization that has more resources to work with. So we generally speaking like to see those repeat startup founders as part of the team aspect.

  I think the last thing that is sometimes overlooked but also important—Is this a team that has actually worked together in the past? Is this a team that has already had success actually under their belt together and is looking to bring the band back together for a new opportunity?

  Because ultimately, when you are a startup founder and you’re looking to build a company for the first time, and you’re looking for a co-founder, you may or may not gel with that co-founder off the bat. And sometimes we have seen companies that—ultimately there are disagreements between the two founders—and they end up splitting. So that is a smaller piece, but it’s sometimes overlooked, and also a key piece we’d like to understand as well.

  So from an example perspective, we actually have a company here—Wealth.com—which is in a couple of our portfolios. They are a pioneering fintech company led by Rafael Rero. They’re specifically focused on the RIA space in the estate planning industry. So Wealth is a SaaS platform used by RIAs to help their end customers or end clients from an estate planning perspective.

  Speaker 2:
  So this company Wealth was actually co-founded by the co-founders of a company called Emailage, which was a fraud prevention and identity verification platform. Emailage was actually acquired by LexisNexis back in 2020, so about four years ago, for nearly $500 million. So the founders of the prior company already had a significant exit under their belt. That was a very positive signal for us when it comes to looking at this specific team as they’re looking to build their next venture together.

  On top of that, again, the team had already had familiarity with working with each other in the past, so it was pretty easy to kind of spin up a new business, spin up the roles that they want to take on within this new venture, because they already had that working relationship from their prior company.

  On top of that, although their prior company Emailage is a completely different business, it is similar in that it is a B2B SaaS platform. So from a go-to-market perspective, the team at Wealth took a lot of learnings that they had when it came to selling their solution at Emailage to their core customer base and applied that to their core customer base today, which is vastly different in Wealth.com. So there are a lot of learnings that they can take from their prior go-to-market experience and apply that to this given company that allows them to avoid some early mistakes that a founder without that experience might not avoid as a first-time founder.

  So we invested in Wealth’s Series A round, and they have raised a little bit more capital since our initial investment, but the company is really firing on all cylinders from our perspective. They’re doing really, really well, and ultimately, we’re proud that we chose to work with these folks because that experience really goes a long way.

  However, I will say one thing when it comes to looking at the team: just because we have a founding team that has experience doesn’t mean it’ll always work. Or conversely, if there’s a first-time founder, it also doesn’t necessarily mean that he cannot have success.

  So for example, if we chose to not invest in Facebook because Mark Zuckerberg was a college dropout with no prior experience, we would have missed that as a very large VC opportunity. So all this being said, we want to kind of end this scorecard section by saying that at the end of the day, we look at all these sections of the scorecard together to hopefully come to a conclusion. Because one section doesn’t necessarily outweigh another, we do want to try to understand as a whole: does this company, does this round, ultimately fit our portfolio for us to make an investment to hopefully see a venture-style outcome down the road.

  With that, I’ll kind of turn it back to Brian.

  Speaker 1:
  Thanks, Wes. I think that illustrates—by walking through the individual pieces and then seeing how they get put together—this is a puzzle or a mosaic that we’re putting together that tells us, when we step back and look at it: is this a company that makes sense to invest in?

  We look at the individual pieces, but then we assemble the whole and make a decision based on all of that and our collective judgment. And we hopefully feel that that’s going to lead to better decisions across the board. Because as you can see from this illustration, we cast a really wide net—both at the Triphammer level and the Alumni Ventures level—in search of compelling opportunities. And we have to then sort through all of those opportunities to make the best decision.

  So some of them are screened out early—they’re just not fits. That’s not a venture-backed business; it’s a restaurant versus a software company that can scale. So various things will knock it out. The lead investor that we’d be following may not be appropriate from our perspective. It’s a strategic investor that isn’t necessarily one that we think is pricing the investment to reflect financial gain—they’re maybe reflecting strategic importance to their business. A lot of things might come into that to screen things out.

  But then we still have to go through that subset where we’re down into—and this illustration here—we go from 500 to 50 using these sort of broad-based metrics to reduce that. But then we’ve got to take the rest of them through our scorecard. And once something makes that initial cut, we take it through our scorecard, share those views with our peers, and then hopefully make the most compelling decisions from a risk-reward profile.

  This result is hopefully an unmatched ability, we believe, to build highly diversified portfolios for each of the funds that we’re building at Triphammer. And in the broader Alumni Ventures network, we’re going from hundreds of opportunities to hopefully the 25 or 50 that are the very best that we’ve seen in that cycle. And then that’s what goes in the investor portals that we’re building for you.

  And the next question that might come from all of this is: how are you getting those 500 investments? And I’ll start it off, but would love for you to chime in as well, Wes.

  It really is often a network-powered way of sourcing. We don’t rely on a single tool to find opportunities. We started with using the alumni affinity and tapping into our alumni communities, which are rich with founders. Cornell is one of the more fruitful university entrepreneurial ecosystems. And at Triphammer, we tap into that to find great and interesting companies. But we also use other dimensions to find interesting investment opportunities as well.

  Maybe you want to touch on a few of those, Wes, that you’re leveraging to bring in opportunities these days.

  Speaker 2:
  Yeah, sure. I think we do spend a lot of time talking to our peers in the VC ecosystem—especially folks that we have worked with in the past and done deals with in the past with. So we already have a good working relationship, we understand how they operate, we have trust in their process in evaluating a business. So oftentimes we turn to our peers and figure out what’s topical for them and see if anything that they’re looking at could make sense for us from a portfolio perspective.

  We also do see a lot of inbound deal flow from our community—our broader Cornell community—not just our investors, but folks that we have gotten to know over the years that happen to be Cornell alumni. Like Brian mentioned, Cornell is a very robust ecosystem when it comes to startups. So we see a lot of inbound that comes from folks on the phone here who might be investors or folks on the phone who might just be a casual outsider that knows a great company that is raising a new round.

  We take the sourcing aspect both from an inbound perspective from our community, but also we also do a lot of significant outbound as well—talking to our peer VCs, but also talking to companies that we think could fit a specific theme that we’re looking at in the portfolio, or a company that we’ve been tracking over the years as an outsider as well.

  Speaker 1:
  So when we’re building portfolios, the point is we don’t limit ourselves. In the case of Triphammer, we’re not limiting ourselves to Cornell-founded companies or even just companies connected to the Cornell community. We look more broadly than that. It’s an important tool that we do leverage, and we think it sets us apart from other funds within the Alumni Ventures family and other funds outside of Alumni Ventures—the kind of network that we have.

  And as Wes mentioned, all these deals—we’ve done 1,300 deals within the Alumni Ventures universe—each time we do one, it creates a new set of relationships that we can leverage too, for deal flow: new founders that we’ve backed who can introduce us to fellow founders and other startup businesses; and venture capitalists who now we have a working relationship with, who might also introduce us to new things.

  So all of that is what allows us to get that 500-plus opportunities per year that we’re sifting through and selecting the very best to go into the portfolios that we’re creating for our investors.

  If you are interested in investing in our current fund, just wanted to touch on a few things that you should be aware of—but also wanted to highlight that our firm, we took you through this process—our sourcing, our evaluation process at a high level, and then specifically the scorecard that we’re using to analyze those 50 that make it through the high-level screening.

  All of that has led to us being—as Alumni Ventures, and as a result, Triphammer Ventures—being ranked as a top 20 venture capital firm by CB Insights, which is one of the leading information providers for the VC industry. And this was an evaluation based on the quality of our portfolios and the quality of our investments. They have their own methodology—CB Insights does—to make that assessment. But we were proud to be ranked as one of the top 20 firms by their viewpoint in the most recent year. So this came out just, I think, in the last three to six months, and wanted to highlight that for folks. It’s an honor and one that we’ve worked hard to achieve.

  Which brings up the topic of—if you’re looking to invest, we do have a fund in market: Triphammer Fund VII. It launched to our existing investors in June. It is now open to the entire Triphammer community.

  December is the deadline for the final call for those who want to be part of it, but there are opportunities along the way. We have three closing dates this year that have various rewards for participating in them.

  So if you’re part of our first closing—which means you have to sign the documents and then fund within 30 days of signing those documents—if you do that by August 31st, you’ll get a 10% reduction in the management fees that are part of the investment.

  If you wait and invest in October, at the end of October, it’s a 5% fee reduction. And then if you wait until the final close, there isn’t any fee reduction at that point.

  So for those of you for whom it’s something you think you want to do, you might want to take advantage of those first-close opportunities. But this is the timeline that we’re working on for our current fund.

  And I think we want to leave a few minutes here for Q&A. If you do have questions, myself, one of the investment professionals, or one of our senior partners here is happy to answer any questions you have. I’d encourage you to book time with us or view our fund materials at our secure data room. We’ll send you the information about how to do that or we’ll make it available in the chat here.

  But otherwise, we just want to thank you for taking time to spend with us today, and we’d love to start answering some of your questions.