As the new year unfolds, many firms find themselves in the midst of offsite season—a time dedicated to retrospectives, resolutions, strategic planning, and of course, team bonding. At Sapphire Partners, we recently wrapped our own offsite, where we spent significant time discussing one of the core pillars of our work: investment processes.

Limited Partners occupy a unique space; we’re in the endlessly fascinating position of evaluating other firms’ investment processes while also running and managing our own (meta, I know). Given the diversity of team structures, styles and strategies, there’s no one-size-fits-all approach. However, we’re always gathering insights that resonate across different contexts – both for our managers and for us. So, in an effort to practice what we preach, we’re sharing some process-related insights that are top of mind for our team this year.

Consistency is Key in Analysis

All good investing is a combination of qualitative and quantitative analysis. While it’s easy to see how bias enters the equation on the qualitative side, we’ve found it’s equally present in the numbers. Data can always be massaged or retrofitted to support a preconceived notion or match a particular narrative. 

To combat this, we run a core set of standard analyses for the opportunities we evaluate. Examples include performance by sector, stage, and geography; our “baseball” analysis, which breaks the portfolio down into singles (1x – 3x), doubles (3x – 5x), triples (5x – 10x), and home runs (10x+); and entry valuation and initial ownership by year. We believe this keeps our team intellectually honest, allows for comparability across opportunities, and helps us see how metrics are trending over time. Some of our peers even avoid commentary on quantitative analyses in a deliberate effort to collect unbiased reactions from the team. This acknowledges that team members may have different interpretations of the same data, which can lead to fascinating discussions and a deeper understanding of the opportunity. 

Standardization and consistency are also worth keeping in mind on the qualitative side. While it’s impractical to ask every GP or founder the same questions in the same way every time, we have to acknowledge that differences in the way we ask questions affect the answers. A more standard and direct approach may encourage well-rehearsed or streamlined responses, while an open-ended and conversational style might surface deeper, more candid insights.

One habit I’m personally trying to break in due diligence conversations with managers is “leading the witness.” Occasionally, I find myself suggesting answers to my own questions, perhaps assuming this will be less confrontational (or lead to the answer I’m hoping for).  While individual styles will naturally vary, it’s worth being intentional about how meetings are run to ensure a consistent experience—one that gives every manager or founder a fair shot without sacrificing authentic conversation.

Healthy Dissent Takes Practice

In venture capital, decision-making frameworks tend to be more conviction-driven vs consensus-driven. Conviction models allow one person to champion a deal without requiring approval from other partners. Conversely, consensus models require all (or the majority of) partners to approve a deal. Conviction-driven models are popular in venture capital because outlier opportunities are often non-consensus at the time of investment. Many of history’s best ideas seemed crazy at the time… Just ask our industry colleague Mike Maples, Jr. who was recently on our Origins Podcast discussing pattern-breaking founders with insane ideas – a la Justin Kan’s “certifiably insane” business idea of watching other people play video games on the internet, which evolved into Twitch

A less-discussed benefit of conviction models is that they, in theory, encourage dissent. In a unanimous decision-making framework, one contradictory opinion can torpedo a deal, raising the bar for criticism to a nearly impossible height. In a conviction model, all team members can feel free to speak their minds, as the deal can still go through if the champion feels strongly enough. 

While we prefer a conviction-driven model for our team, we’ve learned that this alone is not enough to encourage dissent—it has to be baked into our firm’s culture. If the team perceives that a deal will get done regardless of whether they voice concerns, the incentive to speak up is very low. Why rock the boat, potentially inviting extra criticism the next time you bring your own investment to the Investment Committee (“IC”) if the deal is going through either way? 

Encouraging healthy dissent requires intentional practice. Leaders need to demonstrate that they value truth-telling over the comfort of agreement. Team members need to feel safe to brainstorm out loud, challenge the status quo, and navigate disagreements together. This kind of psychological safety doesn’t happen by accident—it’s built over time through repeated, deliberate efforts. If open debate isn’t occurring naturally, consider carving out dedicated time for these discussions or appointing a devil’s advocate. The more teams practice disagreeing constructively, the more trust they build, ultimately creating a culture in which every voice is heard and the best ideas thrive.

Voting Procedures

Many investment teams vote on deals as a way of quantifying sentiment across the team. We’ve always felt it is important for all investment team members to vote, not just those on the investment committee. For our team, we vote on a scale of 1 to 5, with 1 being strongly in favor and 5 being strongly against. We don’t allow team members to vote 3, forcing them to lean in favor or against.

Over time, we’ve observed that the order in which people vote matters as it may affect the votes of those who follow. Starting with the most junior team members and ending with the most senior helps a bit – to the point above, we want to ensure all team members feel safe to speak their truth and are uninfluenced by their directs – but we’re experimenting with other methods to ensure we’re collecting truly unbiased views. 

One strategy we’ve seen be successful elsewhere is to collect votes in advance. Team members review the materials before IC and submit their votes to the facilitator (preferably a non-investment team member). The votes are then made public during IC, and each team member supports their position. Some of our managers even use online tools (or have built their own) to collect blind votes and track them over time. This preserves the integrity of each individual’s vote while still requiring each person to back up their position. While small things like voting procedures may seem inconsequential, we’ve found that a firm’s chosen process can reveal a great deal about its culture and values.

Recognize Your Passes

Feedback cycles are long in venture capital, and for LPs, they’re even longer. We likely won’t know if the investment decisions we make today are truly good decisions for about a decade. As infallible humans, it can be hard to prioritize long-term results over near-term incentives when the result is so far removed from the decision. This can be especially hard if praise and recognition from colleagues follow investments made while wise passes go virtually unnoticed. 

To make matters harder, venture capital is deeply relationship-driven. It can be difficult to say no, especially to folks you know well. Ask any LP what their worst day was professionally, and you’re likely to get a story about an extremely difficult pass on an existing manager. GPs may experience the same thing when it comes to follow-on decisions. On the flip side, people generally respond well to being offered money, exacerbating what might already be a strong ‘yes’ bias in our industry. Personally, I’m constantly battling a barrage of creative rationalizations my brain concocts to avoid difficult conversations turning down an opportunity.

At Sapphire, we’re looking for ways to combat these biases by acknowledging difficult passes as much as celebrating new investments. It helps to remember that the successful outcome of an investment process is not making a deal; it’s making the right decision. An investment process is less like an assembly line, spitting out new deals, and more like a sorting machine placing each opportunity into a “yes” or “no” bucket. Establishing a culture that rewards and recognizes team members for making sound decisions, regardless of the bucket, is a powerful way of keeping everyone focused on long-term success.  

It’s hard to overstate the importance of an intentional investment process, and given we look for this in the firms with whom we partner – we feel it’s just as important for us to demonstrate what we advocate. A well-structured process supports the team’s strategy, reflects the firm’s values, and sets expectations for new team members. Processes should be rigid enough to reduce bias and ensure consistency, but flexible enough to not stifle creativity. We experiment with our process often and continue to learn from the many thoughtful investment processes we are privileged to observe as LPs.