Why the best deals are the ones no one agrees on

This article summarizes an episode of VC10X’s video series featuring Neil Sequeira, co-founder of Defy.

Neil Sequeira, co-founder of Defy/ Photo credit: Defy

Most venture capital firms seek consensus to minimize risk. Neil Sequeira, co-founder of the early-stage VC firm Defy, embraces the opposite. He argues that the deals generating the most heated arguments are the ones that yield the highest returns.

Securing these contentious deals requires a relationship-driven framework for making decisions, acquiring equity, and deploying capital when the rest of the market panics.

Building responsible partnerships

This decision framework begins with team size. While large funds add committees to manage risk—often removing personal accountability—early-stage investing requires making choices with limited data.

“At larger platforms [structured decision making] is necessary… it evolves into an investment committee that makes final decisions,” Sequeira notes. However, he believes this structure is often fatal to early-stage investing.

Small teams force investors to face facts
Generating significant returns requires targeting companies through a small but highly aligned partnership that makes decisions collectively.

“We really believe a small partnership is the best way to do early stage venture capital,” he argues. “The most contentious deals are the ones that end up doing the best.”

Rethinking speed in investing

Operating with a tight group also changes how a firm handles pacing. While the tech sector rewards rapid spending, rushing a review is often just disguised panic. A small partnership allows investors to move quickly without skipping due diligence.

“Speed is much easier when you have everyone in one room,” Sequeira says. While larger firms can move fast on smaller seed checks, smaller teams do so more consistently and with deeper alignment.

To avoid market frenzy, Defy hunts for proprietary deals where time is an advantage. Approximately 75% of the firm’s deals are proprietary, involving founders known to the partners for a long time. These arrangements don’t require a frantic pace because the relationship is already established.

Getting this access often means writing the business plan before the company even exists. This “from scratch” approach helps educate the investing partners and prepares the firm to find the right founder to execute the plan.

Changing investment plans for AI

This measured pace is crucial as AI alters how startups raise money. Investors must adapt funding models to match technical teams that generate revenue with minimal staff.

To align with this new reality, strategies are shifting in several key ways:

Buying shares in unusual ways

Focusing on a founder’s character

Spotting bad advice and signs of failure