Placing the Right Bets: Sancus' Framework for Venture Investing

For us, we look for what we call "long, kind, and strategic" investors. First off, we look for those with a long-term perspective and patience. We're very honest with our investors that, compared to hedge funds or other assets, VC is generally a very illiquid asset class, so patience is important.

We also look for LPs who are a cultural fit with mutual respect. While we of course want to bring financial returns, we also want to see strategic synergies. As a result, we have a number of multi-billion tech founders and prolific family offices as our LPs. Our strong network of VPs, CTOs, CIOs, and engineering leaders are our portfolio companies' customers, as well as our due diligence partners and LPs.

You have some very impressive startups in your list of portfolio companies. What makes Sancus different in terms of accessing high-quality founders and deal flow?

Lake: This is like asking Coca-Cola for their top secret recipe! Joking aside, we hold a very high standard for both deals and founders. We love founders with proven track records. In fact, our Fund I portfolio companies include six unicorn founders, including the founders of Databricks, Twitch, Freenome, and more!

There are few things that I think have solidified us as a firm that founders want to work with.

1. We deeply understand what they're building. Typically, when founders talk to VC firms, they might talk to a scout, then a partner, then a General Partner who brings in a specialist, and by the fourth meeting, the firm finally understands their technology, differentiation, mission, and vision. With us, because we are deep in the industry and network, we immediately get it. The conversation then becomes what we call "brainstorming the product roadmap" or "co-engineering the future."

2. Everyone on our investment team has been a founder and has built products in the past, so there's often an immediate connection because we truly empathize with and understand what they are going through.

3. We also bring immediate impact through critical customer introductions. Potential customers participate in our due diligence process, which not only helps us have more sophisticated due diligence but also directly connects founders with potential customers.

You actively teach at Carnegie Mellon University as an adjunct professor. How does your academic work relate to what you do at Sancus Ventures?

Lake: I love teaching. I’ve been an AI professor at Carnegie Mellon for nine years now. My role allows me to work closely with Stanford, MIT, Berkeley, and other universities that are advanced in AI research, which helps me see trends from academia's point of view.

In my courses, I focus on real-world applications, like building and tuning machine learning models for manufacturing, retail, healthcare, finance, and more. I co-teach with 10-20 industry leaders each year, including CTOs and CIOs from Fortune 500 companies, tech leaders from Google and NVIDIA, and startups working on real problems. This community of CTOs, CIOs, and startup founders helps me keep my finger on the pulse of the industry and provides a network that benefits our portfolio companies.

Given your expertise, what are some key factors that have driven to the seemingly rapid rise in AI?

Lake: I actually saw a pivoting point for AI development back in 2016. For those of us who have been operators in the machine learning space, we know that machine learning and large language models existed way before ChatGPT. What ChatGPT has been especially successful at is helping the media and everyday consumers understand how important and powerful AI can be.

I see three major pivoting moments or resources.

First is the availability of data—the explosion of digital data from smartphones, smart devices, and more massive amounts of text, video, and images for training.

Second, 2016, specifically, was a pivoting point because we saw GPUs start to really accelerate. Previously, most people understood NVIDIA as a gaming chip company or for crypto usage, but that year we started seeing AI startups creating use cases using distributed computing and parallel computing with GPUs.

The third element is algorithms. We've seen breakthroughs in reinforced learning and new methodologies to train models more efficiently. Over the last eight years, we've seen many algorithm developments on the training side, and now we're seeing more on the inference side.

What's next for Sancus Ventures as you move from Fund I to Fund II?

Lake: We'll continue building on our reputation among founders as we increase Fund II's size. The important thing isn't an arbitrary fundraising goal—it's ensuring the fund size supports our strategy and enables even better returns for investors. We're refining our approach to check sizes, ownership targets, and valuation guidelines.

Our strategy—putting in first checks and then increasing ownership by closely monitoring companies—has been described as something people haven't seen in the market before. With Fund II, we're focusing on improving investment returns through increased ownership and disciplined valuation.

Looking ahead, we expect to see continued acceleration in AI adoption, which is why we're particularly interested in bringing in strategic LPs who can serve as use case adopters and go-to-market partners for our portfolio companies.

Conclusion

For additional insights or to share the conversation with others, you can find the full conversation with Lake, including a live Q&A from the audience, below.

We’re proud to partner with Sancus Ventures as they continue to grow with each new fund. To learn more about Sancus Ventures, follow them on LinkedIn or reach out directly to Sancus at hello@sancus.vc.

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