The Question Behind Every VC Investment: Where's the Money?

When we make a venture investment, we're looking forward.

We have a view of what this company could become.

What needs to happen. What could go wrong. How big it could get. How long it might take. And ultimately, what a successful outcome could look like.

In its simplest form, we're forming a view on three things:

The probability, timing and potential size of an exit.

Let's call it PTSE™ (trademark pending 😄).

There's nothing particularly new about it. In many ways, it's what we've always invested around.

But something interesting happens after we invest.

Our attention naturally shifts to the company as it is today.

ARR. Customers. Burn. Runway. Pipeline. Hiring. Product. The next round.

We have more portfolio data than ever before. Better dashboards. Better KPI reporting.

More frequent updates.

All useful.

But the dashboard isn't the destination.

The reason those metrics matter to us as investors is what they tell us about PTSE.

A company can have a fantastic quarter without fundamentally changing the investment story.

Another can miss its numbers while achieving one milestone that materially changes where the investment could ultimately go.

A major enterprise customer may matter far beyond the revenue it generates because it validates the market.

A product delay may look worrying on the dashboard but ultimately affect timing more than outcome.

Regulatory approval could dramatically increase the probability of success overnight.

And a new financing round can create a higher headline valuation while leaving the underlying investment outlook largely unchanged.

Perhaps, then, portfolio monitoring should be about more than asking:

How is the company doing?

Maybe the more important question is:

Has what happened since we last looked changed where we believe this investment can go, how likely it is to get there, or how long it might take?

That's a subtly different way of looking at a portfolio.

The KPIs don't disappear.

Neither do board meetings, operating plans, budgets or portfolio dashboards.

They become evidence.

And milestones become particularly interesting.

Because the milestones that really matter aren't simply things the company hopes to achieve.

They're the events that change our conviction about where the investment can go.

Which brings us back to the original investment thesis.

At the moment we invest, we're not really buying today's company.

We're buying optionality on what that company might become.

The price we're prepared to pay reflects our view of those possible futures and our chances of participating in them.

So perhaps the discipline we apply before investing shouldn't disappear once the investment is made.

What did we believe? What needed to happen? What's happened since? What have we learned? Has our conviction strengthened or weakened? Has the likely path changed?

And here's the part I've found interesting.

There is already a process that, when done properly, requires us to bring much of this thinking together:

Fair value.

Not the number itself.

A 15.675% movement in a mark isn't particularly interesting.

The thinking behind the mark is.

Done properly, fair value asks us to consider what has changed in the company and what that means for the future of the investment.

The resulting mark is simply the numerical expression of that view at a particular point in time.

Maybe that's why I've started thinking about fair value differently.

Not primarily as a reporting exercise.

But as a discipline that can help keep the investment team continually focused on what mattered most on the day the cheque was written.

Or, to put it less formally:

Where's the money?

Where can this investment ultimately go?

How likely are we to get there?

And how long might it take?

That's the thinking behind PTSE.

Not a new formula. Not a new methodology. And certainly not another dashboard.

Just a simple way of keeping what we're learning about a portfolio company connected to why we invested in the first place.

Keep your eyes on the destination. Use the dashboard to understand whether you're getting there.

I'd be interested to hear how other investors think about this.

Do you explicitly tie milestones back to the original investment thesis — and which milestones genuinely change your conviction about the outcome?