Investors Advocate for Founder Support - TLC (Collective Funds)

The Importance of Networks in Venture Capital

Venture capital thrives on strong networks – encompassing founders, investors, and a broad range of connections like potential customers and skilled personnel. The strength of these networks directly impacts success; identifying the ideal candidate for a role or a position in a company’s capitalization table can significantly boost a startup’s potential.

A Research-Driven Approach to VC

Casey Caruso has extensively explored this concept. Her research at Stanford utilized convolution neural network (CNN) models to assess investment choices, collaborating with three co-authors to determine how algorithms can enhance venture capital practices. This represents a convergence of her technical expertise, gained through an engineering position at Google, and her parallel investing activities with Bessemer.

The Genesis of TLC Collective

During a dinner at SPQR, a northern Italian restaurant in San Francisco’s Lower Pac Heights neighborhood, Caruso discussed investing with Lauren Stephanian, now a principal at Pantera Capital, and Terri Burns, a partner at GV. They discovered a shared ambition: leveraging technology to refine venture capital decision-making. “Our foundational training as computer scientists leads us to approach challenges in a highly pragmatic manner,” Caruso stated.

This led to collaborative efforts outside their primary roles, focused on integrating AI more effectively into the initial stages of venture investing. They aimed to identify key features from models while acknowledging the qualitative aspects inherent in the business. In 2019, they formalized their collaboration by establishing TLC Collective (representing their combined initials) as an investment base.

Investment Strategy and Portfolio

TLC Collective utilizes its partners’ combined capital to provide angel and pre-seed funding to companies founded by technically proficient individuals. To date, the group has invested in 11 companies. These include data discovery platform Select Star, the audio application Clubhouse, biology data platform Watershed, remote work manager Friday, cryptocurrency risk compliance platform TRM, and user infrastructure platform Stytch, among others.

While their investments cover diverse sectors, a common thread unites them: the technical expertise of the founding teams. “We prioritize technically strong teams because of our own technical backgrounds,” Caruso explained. Stephanian added that, despite a shared foundation, the trio possesses varied interests and skillsets.

Balancing Art and Science in Investing

Burns concentrates on consumer-focused ventures, Stephanian on fintech, enterprise solutions, and cryptocurrency, and Caruso on frontier technologies. The group continues to refine its underlying algorithm, oscillating between direct application and using it as a guiding framework. “We are striving for a balance between the analytical and intuitive aspects of investing, drawing upon our programming experience,” Caruso clarified.

Future Outlook and Growth

Currently, TLC Collective maintains a pace of approximately one investment per quarter, a rate they anticipate continuing. They are solely investing their own capital and do not currently feel compelled to explore alternative models like rolling funds or crowdfunding. “We haven’t even begun to consider a rolling fund structure,” Caruso mentioned, while noting their participation in On Deck Angels. Stephanian observed that the landscape for syndicate formation is increasingly competitive, with numerous individuals launching their own investment groups.

The firm’s investment amounts range from tens of thousands to hundreds of thousands of dollars per deal.

Building a Network for Optimized Investment

Similar to the networks that power their AI models and the connections they cultivate among their portfolio companies, TLC Collective has established a strong network among its investors. The group hopes that expanding these connections will enhance the data available to optimize their models and enable them to invest in the most promising technical founders building innovative businesses.