At Ulu Ventures we generate great financial results using a disciplined, repeatable decision making process that analyzes risk-reward trade-offs. We also follow logical principles of portfolio construction. This approach makes us conventional in the world of institutional investors but contrarian as compared to other VCs.
Ulu’s portfolio construction takes into account the low chance of an outlier and optimizes for outlier success. We invest in a minimum of 50 companies per fund to achieve a 90% chance of an outlier in that fund. However, to generate outliers across a portfolio of multiple funds, probability requires that we invest in significantly more than 50 companies in each fund. Those who do not understand the mathematics underlying this insight call it the “spray-and-pray” method; It is anything but. It’s the best way to generate consistent strong performance across multiple funds.
At Ulu Ventures, we show entrepreneurs how we evaluate startups before they even meet with us by making available a rubric for evaluating startups for seed funding. This communicates the high bar companies must demonstrate to be moved from our qualitative process to the next level of diligence.
Using decision analysis before investing
We do a rigorous decision analysis before making any investment. Each investment is held to exactly the same hurdle rate of a 10x probability weighted multiple. The rigorous metric exceeds the standards of most seed-stage VCs. Our strategy generates outstanding returns. Ulu Ventures Fund I is returning a 4x multiple and our Fund II is on track to do the same.
We have customized our decision analysis for the VC world through a process called market mapping. It’s a collaborative learning process where the data underlying our decision to invest, or not, are shared with our entrepreneurs. So what do our entrepreneurs think of our rigorous decision-making process? They love it! We often hear that this was the most value-added part of their fundraising process. Entrepreneurs who have multiple term sheets often elect to take Ulu’s investment because they obtained insights as to their business through our process. You can learn more about how our entrepreneurs view the market mapping experience.
Decision analysis minimizes bias
Ulu’s process minimizes bias; as a result, we also have one of the most diverse portfolios in the country.
While a majority of our founders are white males, a third of our CEOs are women and more than a quarter are minorities. Teams with diverse professional backgrounds and life experiences are better at problem solving and therefore create greater business opportunities.
Entrepreneurship is the best tool set
We believe entrepreneurship is the best tool set for solving the world’s toughest problems. We strive to learn about our entrepreneurs on a human level, to celebrate who they are and support them in being authentic to their visions. Today’s entrepreneurs want VCs who care about their values and vision.