What Makes Valor Tick: A Unique Blend of Partnership, Risk, and Operations Expertise
Taking stock of the past.
We've learned a lot over the course of the past 24 years, during which we grew from a deal team of one to a 35-person team lead by seven partners across the country.
We wanted to make sure we weren't just documenting those learnings — but adjusting our business and practices based on what we'd learned.
So a few months ago, we took a crucial step to make sure we were organizing our entire firm around those learnings: We applied the lean business planning — the practices we've used to help many portfolio companies grow better and faster — to Valor itself. This allowed us to clearly define our customer, the role of our Limited Partners, our business, and our product.
We applied these definitions strictly to Fund IV as follows:
The customer. We defined our “customer” as the company in which we invest. Our product must provide substantial value to this customer in a differentiated way. If we build an excellent product, then the best companies will seek Valor and want our firm as their partner.
The partners. We defined our Limited Partners simply as our “partners.” This means complete alignment of incentives and goals between our partners and the G.P. Going into Fund IV, we removed any potential misalignments between partner returns and ours as G.P. We took the approach that anything that was not subject to a 100% offset was a misalignment between our G.P. and the partners. We also carefully selected investors in Fund IV who were fully aligned with Valor on our investment mission (including the investment of the time and resources required to properly execute on our Operational Growth product).
The business. We defined our “business” as investing in technology and technology enabled companies with a focus on the consumer, services, and engineered products sectors. We believe we can add value to these companies operationally as they scale. As an investment requirement, we must believe that these companies have the potential to make the world better and satisfy our investment parameters. Our challenge is to select the best companies to apply our resources. Our goal is to become the best in the world at serving our "customers.” If we become truly excellent, then the very best companies will always want us as partners. Ultimately, we want to become the imprimatur of success for any company in which we invest.
The product. Our “product” is Operational Growth. This is a unique combination of risk taking and operational skills that allow us to select and support great companies while delivering superior investment results. We focus our risking taking on finding, understanding, and capturing asymmetric risk in our investments. We focus our operations support in three core product areas: growth, lean process improvement, and data science. Our professionals are challenged to continually evolve and drive these products to provide maximum value to our companies.
Today, we work together in teams to generate investment ideas, execute investments, add operational value as our companies scale, and manage the portfolio around our areas of expertise. Our investment process is stable and undergoing continuous improvement to refine how we understand and capture asymmetric risk. Our operations group continues to scale while adding new capabilities—including, notably, data science. We integrated an early-stage allocation into Fund IV, thus solving the R&D duration matching problem. This allows us to provide a full stack solution to the companies we chose to serve as they scale.
Grounding in the present.
Valor is on its way to becoming a truly unique private investment firm. Today, we think three factors drive our present-day success.
We are thoughtful risk takers.
We are valuable operators.
We are good partners.
We are risk takers. We are entrepreneurs, capital allocators, and investors. Each of these encompasses a different aspect of risk taking. Risk taking requires an understanding of how to process complexity, and at times chaos, to make courageous decisions in the face of uncertainty to capture opportunities others do not see. It often manifests itself when one stands alone against consensus and commonly held views.
We are operators. We build great businesses and understand how to scale and enhance productivity by optimizing systems and people. We have reduced a hundred plus years of firm-wide operating experience to drive improvement in three verticals: Growth, Lean, and Data Science. Underlying these capacities are a high standard of excellence, tenacity, and the courage to make hard decisions and follow through with them. We understand intuitively the value of resilience to benefit from the chaos in the world, and the need for focused execution to drive results. When justified and required, we will do whatever it takes to help our "customers” achieve their goals.
We are partners. Being a great partner means you understand and align the needs of both parties and execute on these needs in keeping with our core values of Integrity, Humility, Excellence, and Responsibility. We have applied the principle of partnership to each of the three core constituents of our business: our professionals, our companies, and our Limited Partners. We have spent significant time defining what it means to be a great partner to each of these constituents and we measure ourselves against this standard.
Looking toward the future.
Valor's core attributes allow us to build a unique product that can add value to the world in a differentiated way. We are in a position to redefine what it means to be a great investment firm.
These principles will help us get there:
We operate our firm as we would operate a company. We have the same expectations of ourselves that we require from the companies in which we invest.
We build systems and aggregate talent that maximize our unique product attributes.
We meld our unique product with our passions to serve companies that we believe fundamentally make the world better. If we serve those customers well, then they will realize their full potential — which, in turn, brings greater purpose to our work.
Valor is, at its core, a platform that enables talented and creative people to follow their passions through investing and supporting companies that we all believe make the world a better place. The future of our business is rooted in our past: investing in technology and technology-enabled companies focusing our ideas on investments in the consumer, services, and engineered products sectors where we believe we can add value to our companies operationally as they scale.