Thursday, August 1, 2019

Some research on adding value post-investment

How much do VC’s help portfolio companies
  1. Respond to the “asks” in the monthly update emails
  2. Reach out proactively when they have something they can offer 
  3. A regular meeting cadence - founders will talk about how their business has been going for the last few weeks. As the VC listens, they'll ask probing questions -- both to understand the business better and to help the founder clarify their thinking -- and suggest ideas or improvements or potential intros

Ways to help

  1. Intros to prospective customers, job candidates, advisors, service providers, other investors, etc.
  2. Comparables and benchmarks for running your business, including compensation benchmarks, business benchmarks (e.g. typical churn levels or salesperson commission structures), and office space comps.
  3. Feedback on website copy, sales and marketing materials, product UI/UX, etc.
  4. General business advice, including tips for hiring execs, fundraising, choosing KPIs, and so on.
  5. Interviewing and helping to close key job candidates. Sometimes talking to a VC gives an on-the-fence VP the push they need to join a startup.
  6. High level strategic guidance. Experienced investors have watched 10+ or even 100+ companies grow (and struggle), and they can see early signs of challenges of opportunities. Sometimes the most valuable aid an investor can offer is explaining what's likely to be around the corner in 6-12 months at a time when the founder is spending most their time thinking about tomorrow or next week.

Introductions to…
  1. Potential hires.
  2. Specific customers or partners. ("Looking for an intro to a Director of Eng or higher at Foursquare.")
  3. Customers in a specific vertical. ("Looking for intros to mobile gaming companies with at least $2m in annual revenues.")
  4. Experts that could help your company. ("Looking for info on handling security questions from Fortune 500 companies.")

Comps for…

  1. Leasing office space. ("What is a typical price per employee for SoMa/downtown Palo Alto/etc?")
  2. Equity and salary grants. ("What is a typical comp package for a VP of Sales who is employee #8?")
  3. Commission structures and goals for salespeople. ("What's a good monthly sales quota for a product with our target customers and price point?")
  4. Company metrics. ("What is a good goal for my churn rate?" or "What is a typical CTR for marketing emails?")

Feedback on..

  1. Website UI, UX, copy, etc.
  2. Mobile app UI/UX.
  3. Sales decks, pitch decks, marketing materials, etc.
  4. Resumes of people you're thinking of hiring.

Advice for…

  1. How to make the most of various growth channels. ("What are some best practices for using Facebook Ads?")
  2. How to approach your next round of financing. 
  3. Which vendors to use for PR, SEO, Health/Dental benefits, etc.
  4. General company strategy: product roadmaps, expansion plans, customer segments to target, etc.

  1. Financing or exit transactions
  2. Strategic advice
  3. Teambuilding/recruiting
  4. Leveraging contacts
  5. Crisis Management

Ways to help
  1. Team Building: Designing and recruiting for a startup’s most important asset, its human capital base.
  2. Operations: Enhancing administrative, accounting, legal, and technological capabilities.
  3. Perspective: Strategy, competitive positioning, defining the target market, and scoping the product.
  4. Skill Building: Building the right skills, especially for senior management.
  5. Customer Development: Identifying and gaining access to the right customers.
  6. Analysis: How entrepreneurs measure, understand, and report the performance of their early-stage companies.
  7. Network: The cheapest and sometimes most value-added service that an investor can provide is access to his/her network, particularly to potential investors and acquirers.

  1. “The VC can become the CEO’s strategic thought partner, teasing out the key issues, challenging the major assumptions, and generally pushing the CEO to step back from the day-to-day tactical, operational activities and focus on the true value-creating decisions that need to be made”
  1. Screening candidates
  2. Pumping networks for leads
  3. Selling prospective executive 
Business Development
  1. Introductions to flagship customers, tech partners, channel partners, strategic acquirers
  2. As salespeople 

Future Financing
  1. The VC can be a helpful coach during the follow-on fund-raising process
  2. Most obvious thing a VC can do is write another check from his fund
  3. Less obvious: make intros to other investors, serve as coach during the due diligence and negotiations process