Beyond the capital injection

The venture capital landscape has reached an inflection point where active involvement is no longer optional but essential for competitive returns. While firms with significant platform investments achieve 11% higher net IRR and 0.5x better TVPI compared to firms without active support infrastructure, a stark reality persists: 92% of VCs describe themselves as "value-add investors," only 39% of founders rate their VC support as above average.

This disconnect reveals a fundamental misunderstanding of what active investing actually means. The professionalization of venture capital has reached an inflection point where active involvement is no longer optional but essential for competitive returns. The data is compelling: For 2010-2019 vintage funds, the performance gap is striking. Active platform firms achieved a 33.2% net IRR with a 2.8x TVPI, while firms without platform teams generated only a 22.2% net IRR with a 2.3x TVPI.

The urgency becomes clear when considering the high failure rates of startups. The harsh reality of startup investing—with 90% of startups failing overall and 75% of venture-backed companies never returning cash to investors—makes the case for active involvement even more compelling. Startups fail primarily due to a lack of market need (42%), insufficient capital (29%), and team issues (23%)—all areas where active investors provide critical support.

However, true active investing extends far beyond the buzzword-laden positioning that dominates the industry. In venture capital, the definition of "active" extends far beyond mere financial transactions. It signifies a profound, hands-on operational and strategic partnership with founders, collaboratively building and scaling companies from their nascent stages.

BAT VC's active investing framework - The five-pillar approach

For BAT VC, "active investing" fundamentally reframes the traditional venture capital engagement model. Rather than treating value-add as a post-investment consideration, our active approach begins at the first meeting with the founder and continues as an integral component of our investment evaluation process. This methodology ensures that by the time we make an investment decision, we possess a granular understanding of where the founder might need support, the associated risks, sensitivity analysis, and quantified impact projections with or without BAT VC's active intervention.

This approach addresses the critical disconnect in the venture industry where, as research shows, VCs report making weekly contact three times more often than founders report receiving it, and where 65% of founders say VCs "tried but missed the mark" on delivering beyond cash investment. By conducting this assessment upfront, we avoid the common pitfall of promising generic "value-add" without understanding the specific needs of founders or our capability to deliver meaningful impact.

BAT VC's active investing methodology is built on five interconnected pillars that address the most critical failure points in early-stage companies:

Intellectual: Strategic & operational depth

A core strength lies in the deep industry knowledge and domain expertise possessed by the fund's principals. We have direct, relevant industry experiences and have cultivated profound sector or domain expertise in AI, Fintech, and Enterprise software. This extends to pattern recognition, meaning that the fund does not merely react to problems as they arise; instead, it anticipates them based on past scenarios and challenges encountered, often referred to as having "seen the movie" before.

Relationship: Activated networks, not just access

Unlike the vague "network access" promised by many VCs, BAT VC focuses on network activation. The fund's network is not merely a collection of contacts; it functions as a vetted ecosystem. An introduction from a reputable operator carries inherent trust and credibility, acting as a "force multiplier" for the startup's own business development and hiring efforts. Since all three founders have managed large PnLs, they share their deep understanding of the budget cycles, budget owners, and the right approach and timing to have a sales conversation.

Operational: Hands-on PMF acceleration

The fund provides targeted advice on product development and strategic experimentation, assisting founders in identifying the right ICP, understanding the most critical problem areas to address, prioritizing features based on customer feedback and data analytics, and aligning product development with both short-term value creation and long-term business goals. This includes systematic PMF acceleration through structured methodologies and positioning them to secure growth capital for scaling.

The US-India strategic advantage

BAT VC's unique positioning leverages cross-border opportunities that create capital-efficient businesses. The numbers are staggering: Engineering talent: 5-10x cheaper in India, Customer acquisition: 20x less expensive, Overall operations: 3-5x cost advantage. This isn't about outsourcing—it's about building hybrid companies that leverage India's talent and cost advantages while accessing US market premiums and India market expansions

The Role of enablers: Maximizing active investment impact by building “with” the founder

Recognizing the bandwidth-ownership trade-off

This strategic choice highlights a critical "bandwidth-ownership trade-off" in our engagement. Deep active involvement inherently demands significant time and resources per company. BAT VC addresses this through a focused portfolio approach and specialized team structure.

The fund recognizes that effective active investing requires enablers—specialized team members who can provide domain expertise across different functional areas. We leverage our advisory council and connections in industries when situation demands for an expert analysis or PoV.

Not one size fits all: Tailored support based on need assessment

A critical aspect of BAT VC's approach is recognizing that active support must be tailored to each company's specific needs and our team’s actual expertise. Founders' actual priorities during the product-market fit journey differ significantly from what we assume. Their top needs include fundraising support (39%), customer introductions (63% of US founders want this), founder coaching and emotional support (17%), and hiring help (14%).

We avoid the common trap where 47% of founders felt their VCs lacked enough industry-specific knowledge to add real value, and 65% said VCs "tried but missed the mark" on delivering beyond the cash investment.

Clear communication and expectation setting: It's all about the communications “stupid”

The most critical misalignment involves speed and responsiveness. Founders rank speed as their third most important priority when choosing investors, while VCs rank it dead last. BAT VC addresses this through explicit communication protocols and response time commitments.

The fund establishes clear expectations by:

• Conducting thorough capability assessments during due diligence
• Mapping founder needs against team expertise
• Setting explicit timelines and communication protocols
• Acknowledging areas where external specialists are needed

The fund tracks several Key Performance Indicators (KPIs) to assess the effectiveness of its active support, including founder satisfaction & engagement metrics, talent placement & retention rates, PMF acceleration metrics, network leverage & business development wins, and operational efficiency gains.

This systematic measurement approach ensures that BAT VC's active investing remains effective and responsive to the needs of its portfolio companies, avoiding the common pitfall where VCs assume their value-add without validating the founders' perceptions.