TRIVE's Portfolio Construction

At TRIVE, we have always focused on the Pre-Series A stage, whether investing at the seed rounds or incubating idea to pre-seed startups. Staying true to our conviction that the early stages will generate outsized returns for the risk profile, we went through this exercise to structure our fund.

Briefly, our upcoming USD40M fund would invest in 25 positive impact technology startups at the seed stage and follow on in their next round as well.

Our investment thesis:

Seed Stage + Data Driven Decision Making (or AI) + Enabling Consumer businesses + Southeast Asia

Step 1: What type of fund manager are we?

To answer this question, we need to understand the limitations of VC Fund Managers through, what I call, the VC Trilemma (very loosely modeled after the economic theory of international economics).

Simply, choose 1 of 3 options to play in:

A) Large Fund Size + Early Stage

B) Large Fund Size + Active Investor

C) Early Stage + Active Investor (Our choice)

Early Stage

Choosing to operate at the early stage is a decision to play to our experience and strengths. It also enables us to build a portfolio that is consistent with our thesis and conviction.

At the early stage, the dealflow pool is very much wider, which may not be a good thing if the investment thesis was generic. In Southeast Asia, due to differences in market dynamics and trends, it is difficult to broad stroke investment opportunities into a singular statement. However, when we do a deeper dive, we are able to spot trends that allow us to effectively capture a homogenous demographic in a fragmented market - order within chaos.

Having a specific investment thesis allows us to form specific networks that would support our efforts in deal sourcing and portfolio development. Potentially, there would be economies of scope between portfolio companies as well. We're also able to gather advisors with relevant skillsets and keep them regularly engaged to tap on their expertise - tech advisory board and impact advisory board.

Active Investor

When we say Active Investor, we mean we actively support the founders rather than making a lot of investments in a short span of time.

Our objective as an active investor is to be able to throw the entire weight of the firm behind the founders we back. At the early days, founders are still building out their teams, finding their footing as the company culture evolves and having to deal with new situations.

Step 2: Working out Fund Size

The fund size is in effect a function of a) investment sizes x b) size of portfolio constrained by c) manpower resource required to support portfolio and d) management fees as a percentage of fund size pay for manpower etc.

a) Investment Sizes

What we determined is that for a startup offering data driven solutions, seed raises tend closely between USD800K-1.5M and Series A raises span USD2M-5M. We also wanted other investors participating at the seed round to increase strategic network. Working backwards from our targeted ownership at Series A, accounting for dilution of our seed round, we arrived at our expected check sizes (allowing for varying valuations)

b) Portfolio Size

VC funds that invest at the early stage and decide to actively support the portfolio would be deploying smaller checks into a more concentrated portfolio. The fund size would be much smaller but still provide sufficient management fees to maintain an in-house talent team to support the portfolio. Additionally, a smaller portfolio size allows us to pace our investment cadance to build rapport with founders and understand how they operate.

We also have to account for the quantity and quality of deals available in the market. There's very little reason to chase after an okay deal just to meet deployment targets and hurt returns in the long run.

c & d) Resource requirement and Fees constraint

We account for market rate salaries for the team (the Partners place more weightage of perosnal economics on the performance fees), operational expenses as well as bandwidth to manage portfolio companies. As a close ended fund, we're not able to continuously increase income from management fees, so that puts a natural budget to work within. After that, compare against management fees, investment sizes and porfolio size.

At the end, we arrived at a fund size of USD40M for 25 portfolio companies

Step 3: Deal sourcing & talent searching

The final step, apart from fundraising from LPs, is to build up a pipeline of strong deals to invest in as well as begin searching for and training talent to bring onboard.

We have a variety of deal sources and for those who are still early enough, we onboard the teams onto our advisory initiative where we have fortnightly check-ins with the founders as a means to gain insight into the way they operate as well as make a decision whether to pursue the deal further. In return, we unreservedly share advice and even make introductions for the team.

Closing Thoughts

At the end of the day, a VC fund manager's fundamental responsibility is to return outsized returns for the risk taken by the capital provider. Only when incentives are aligned would the fund make sense for everyone involved. But between taking capital and returning it, we believe that backing founders to do what they dreamt to do, is the best way to create those returns.