How Equal develops a “Prepared Mind”
The other day, a far more accomplished GP in the industry asked me if we could discuss our research process. They’ve been part of some incredible outcomes, but had done that by following the founders, more so than being thesis-driven in the way we are. For better or worse, myself and our firm have always been thesis-driven and I thought it could be helpful to explain how we model our process for research and thesis development.
Our commitment to a “Prepared Mind” is at the core of what we do at Equal, which goes beyond research and thesis development. As we think about the markets we approach, we are making a 20 year commitment to the category and the activities of research / thesis development become intertwined with many other facets of our firm, I do find that there are 5 specific processes we have implemented that continuously drive our prepared mind development.
Product Owners: Several years ago, we implemented the process of “Product Owners”, which makes an individual responsible for industry activity in that particular space. While I invest across all our sectors, the Product Owner is honed in on a single category, enabling them to go deeper into developing relationships, insights and nuanced sourcing channels than a generalist otherwise could. These individuals are ultimately responsible for driving our “product” for that space with the stated goal of ensuring that we have the best “product” in that vertical for seed stage founders. A Product Owner tends to spend their time differently than traditional VCs. We anchor on developing proprietary insights, customer networks and sourcing channels from industry, rather than lamenting what’s the latest “thing” on Twitter. Generally speaking, our POs tend to spend more time with industry professionals than generalist VCs, although they certainly have networks in both.
Bridger Networks: Bridger Networks are core to this process as well as every aspect of our firm. Ultimately, we feel that the value of paid guidance from folks outside of our firm is relatively limited. They often have their own agenda and struggle to connect the dots on how opportunities could work. We try to develop authentic relationships with folks who can bridge the divide between the legacy world and the future for their industries. These folks can take many forms (ranging from public company CEOs, accomplished start-up founders to forward-thinking private equity executives), but they are unanimously long-standing partners to our firm. Rather than paying per hour for their guidance, we often invite them to be LPs in our fund or angels/advisors to our companies.
Research Briefing Book: One of a Product Owner’s responsibilities is to drive our research in a particular space and to ensure that the rest of the team appropriately understands the major developments and opportunities in their space (this enables us to collaborate across vertical on thesis development and deal evaluation). With that, our team is constantly doing research and network development calls with customers and experts in the industry. While we no longer adhere to a strict KPI, this was formally a minimum of 10 meetings per week. The POs will compile the learnings from these calls/meetings alongside other research findings they have (articles, research reports, etc.) into our briefing channel on slack, where those findings will be compiled into our weekly briefing book. Each week, we meet for 90 minutes to dive into the findings that the PO has uncovered and discuss/debate these topics as a group (we generally rotate across our POs enabling us to go deeper in our allotted time, rather than spreading ourselves across multiple topics). All the findings that we have from these calls, research reports and articles are summarized and filed into our knowledge management system (which has now logged thousands of pieces of content and too many pages of information for us to count). We can search for targeted key words (e.x. D&O Insurance) to pull summaries and reference files related to those terms in the event we are diving deeper on a category.
Idea Pitches: One of the outputs of these research briefings may be an idea pitch – an opportunity for the PO (or another team member) to pitch an area of interest to the team for further exploration. We’ve flirted with different formats to this process, but ultimately have taken some of the guardrails off to enable freer exploration. If a team member has an idea that they think we should be exploring or simply wants feedback on the area, we use this to discuss it and our team members have access to a wealth of information on the topic in advance of that discussion.
Prepared Mind Deep Dives: In the event that we like an idea enough to consider it for our “Hunting Range”, we will decide to engage in a “Prepared Mind Deep Dive”. This process will generally last 4-6 weeks with intensive research within our network and potential customers for the concept. We will generally start off as directional and become more prescriptive with where we see the opportunity unfolding and use a continuous dialog with our industry networks (“Bridgers”) to challenge and refine the concept. This process can be shut down at any time when we believe our hypothesis has been invalidated by market feedback, but if successful results in a 20-30 page PowerPoint outlining the concept across a few of our core frameworks. We will then discuss the concept as a team and determine whether to incorporate the topic into our Hunting Range. Previous examples of Deep Dives resulting in deals for us include “Inventory Apocalypse” (Ghost) and “OS for Clean Energy Developers” (Odyssey), just to name a few of the deals that have resulted from this process. Sometimes we publicly share these reports (especially when we would like to stimulate more inbound dealflow) and other times we choose to keep them for internal use only.
The most fortunate thing about this approach is that it compounds. Our people get smarter everyday, enabling them to attract the interest of increasingly more amazing founders and Bridgers. These folks enable us to build increasingly stronger portfolios, where we can learn on the ground industry insights from the companies operating in those sectors. This yields new research opportunities for us to pursue, ultimately perpetuating the process further. Never complete and always expanding – that’s our philosophy of a prepared mind.