I’m partner and founder of Groove, a Minneapolis-based venture capital firm. Recently, Groove hit an exciting milestone: our 100th investment. We launched our first fund in 2020 and made our first investment in January 2021, so that’s about one and a half investments a month for five and a half years.

Though our core thesis hasn’t changed, data from our early vintages is starting to reveal the inputs that most consistently lead to valuation creation and favorable outcomes. As we prepare for our next fund—and our next 50 investments—we wanted to pause, reflect, and share the most salient lessons our maturing portfolio is teaching us about how, when, and where to invest.

1) Get in early—that’s where the action is.

For small funds like Groove, and for most angels, a smaller check doesn’t do much in a larger, later-stage round. Our best work is leading pre-seed deals with Minnesota-based firms that have global ambition. The stage matters; the pre-seed phase is where a $250,000 check can meaningfully move a round.

The location matters, too. Local deals are priced roughly 50% below their Coastal counterparts, so we can buy more. Add the emergence of AI, which lets small teams do more with less, and you have the conditions to regularly find opportunities to 20X (or more) your investment.

Examples: Vertical Insure, xDot Medical, GUDEA

2) Back people who know the playbook.

Frankly, it’s a lot easier to say yes to a team with a prior exit in the same industry they’re setting out to build in. But they aren’t the only expert tacticians. There’s startup experience and there’s industry experience. Ideally, we’d have both. Forced to choose, we’d take industry expertise every time. The most compelling teams use the diligence process to educate us on their industry, proving they not only know it inside and out but have the tools, networks, and playbook to win.

Examples: Onsetto, Reema Health, Fractal

3) Contrarian investments can produce compelling results.

Many of my local venture counterparts won’t invest in medical device, hardware, or consumer products. I’ve never understood it; this region has a long history of success in those categories and is packed with expertise and potential acquirers. We keep investing in them, and I’m happy to report that a few are looking like they may lead to large, early exits.

Examples: Rorra, cLoc Medical, Mazaah

4) Your motivations really matter.

Starting a company may be the hardest thing a person ever undertakes. It’s demanding—actually, all-consuming. It stretches you mentally, personally, financially, and physically. The best-laid plans fail, and no matter how far you’ve come, there’s always another mountain in front of you. Get into a startup for the wrong reason, and you’ll quit when it gets hard. If your motivations are true, you can tolerate almost anything. We’ve backed some incredible people like that, whose purpose carries them through wall after wall on the path to the improbable.

Examples: Bloom Standard, The Coven, Pelva Health

5) Skate to where the puck is heading.

In the State of Hockey, this one should land. In practice it’s a mix of industry expertise (see above), intuition, and action. No team times the market perfectly, but being in the right place at the right time with the right model is possible for those who prepared for it. Many of our standouts are outperforming their competitors today because years ago they anticipated regulatory changes that are now reality, built proprietary datasets that now power their AI, or imagined a day post-Covid when teams would actually want to work (and eat) together.

Examples: Itiliti Health, Science On Call, Parkday

6) This is still a game of relationships.

Some of the most competitive deals never surface publicly, because the team fills the round from within its own inner circle. You want to be in that inner circle, and in as many inner circles as you can. Through my work with BETA, an early-stage accelerator for tech startups, and my time at Worrell, a global design firm focused on health care, I got to know the Founders Club, a small group of emerging health care CEOs who met monthly at our office. A decade later, those relationships became investments in Aegle, Nice Healthcare, and Current Clinic. That’s just so far; I suspect there will be more. In each case, Groove’s participation wasn’t solicited. I kept up the relationships and asked to invest when a window opened. Long-standing relationships plus a willingness to ask—that’s the most reliable way to access high-potential investments.

Examples: Aegle Capital, Nice Healthcare, Current Clinic

7) Real science and engineering (the hard stuff) is defensible.

One thing I love about investing locally is that our innovators are drawn to genuinely hard problems, the kind that are global in scope and demand proficiency across multiple disciplines. They can take longer to scale and often need more capital, but when they win, it’s winner-takes-all. We’ve made a handful of these bets. Some are ahead of schedule; all of them, if they succeed, will return our fund many times over.

Examples: Claros Technologies, Maxwell Labs, Vireo Ag

With less than 10% of our portfolio fully marked down, our failures have been few. But the ones that underperformed reveal patterns, too, which inform the adjustments we’re making to get better. Here’s what we’ve noticed across our losses.

8) Don’t hope the team will work itself out; they either have it or they don’t.

Occasionally we’re drawn to an opportunity where part of the founding team hasn’t yet committed to going full-time. In every single instance, that conversion has either never happened or taken far longer than we agreed to at the time of investment. We’ve also backed teams with the right people in the wrong seats, expecting them to spot the problem and fix it on their own. They never did. So now we invest in teams “as is,” not as we wish them to be.

9) Build, build, build, build, build, build, fail.

I’ve lived this one firsthand and still counsel our portfolio against it: spending too much time on product and not enough on commercialization is a well-worn path to failure. A product needs to be good, not perfect. If anything gets perfected, let it be the go-to-market motion. Do that well and you’ll earn all the time you need to improve the product along the way.

10) Playing it safe is a path to purgatory.

Sometimes failure isn’t a total loss or an epic crash and burn. Sometimes it’s an average outcome that had the potential to be monumental. Some teams ease off the gas once they’ve accomplished something, the thinking being that now they have more to lose. With that mindset, you might not fail, but you won’t win either. Every stage carries risk and demands sacrifice. If it were easy, someone else would have already done it.

The Next 100

A hundred investments in, the throughline is hard to miss. Our best outcomes come from getting in early, backing people who know their industry cold, having the conviction to go where others won’t, and investing in the relationships that put us in the room in the first place.

We’ll never engineer the risk out of this business, but we can keep sharpening the inputs and continue to share what we learn with our partners and portfolio companies as we make our next 100 investments.