Deciding: Conviction Does the Deal

Short Description:
- The inverse of Consensus (or Veto), with Conviction, Does the Deal, an individual partner can authorize an investment in a company. Firms that run this way often have process rules about what information has to be shared, with whom and that feedback has to be received from other partners.
Benefits:
- More likely to invest in non-obvious or contrarian opportunities.
- Can retain partners who might otherwise desire the autonomy of their own fund
Trade-offs:
- Without an internal culture that reinforces truth-seeking, feedback and has enough trust that people do listen to each other, may allow for mistakes or self-delusion to drive investment decisions
- Requires trust in partners that they won’t abuse the power
- May reduce team feeling or willingness for partners to help on other people’s deals as they don’t feel ownership
- Often runs with some flavor of Eat What You Kill carry economics. If not paired with it, Conviction Does the Deal can reduce the feedback loop or incentives to a partner to make good investment decisions.
- Requires constant attention to ensure it does not devolve into a lack of clarity about decision making with a consultation that feels like the informal need for consensus.
Examples:
- Venrock