99% of Investment Committees (ICs) at VC funds are ineffective.

However, building an effective IC structure can make or break a VC fund. Much has been written about this topic. Yet why do so many VCs get it so wrong?

Here are the 3 steps to running an effective IC:

Preparation - Preparation is critical before any IC. Members need to have reviewed the pitch deck and ideally, if a memo is available, the memo. Usually the better the preparation the more productive the IC. However, it is important to note that when preparing for the IC to not to attend it with a closed mind. Preparation should include building strong arguments, a strong investment case and not to confirm ones beliefs.

Challenging - Michael Robbins, who’s been coaching people in business and sports for over 20 years, wrote that two conditions need to prevail if you want to maintain a high performing team: compassion and challenge. Particularly, challenging each other is critical to running a successful IC to ensure that all aspects are considered when making an investment decision.

Voting structure - Determining the right voting structure is key to ensuring that the right deals are advanced in an IC. Using the “majority wins” structure shouldn’t always be the default. There are many other voting structures and it’s important to carefully consider which one is the most appropriate depending on the VC fund.