5 Must Have Traits of the VC Leading Your Seed Round

The seed VC scene has gone through a transformation over the past 10 years. Many VCs adopted the role of being a true and active partner to early-stage founders in order to optimize the chances for success and seeing a meaningful exit.

That means taking a hands-on approach along with a thoughtful interest in a startup’s success. No more being just a capital provider, but instead, the aim being to build a true partnership between visionary founders and thoughtful investors.

2021 was a wild ride for both founders and investors, especially in the Israeli ecosystem. Now, everyone is waking up to a new reality where challenging financial times are only going to worsen, which means that the importance of a strong relationship between startup founders and their VCs is vital in today’s business environment in order to be successful.

VC is no longer a transaction business. It’s personal.

A few top funds across different investing stages who have mastered this model in the US in various forms include Andressen Horowitz, FirstMark Capital, First Round, Eniac Ventures, and Primary, to name only a few.

So, what are the key areas to this new VC model which makes these funds more favorable to founders looking to optimize their chances for success?

Let’s look at 5 traits of the new seed fund, and what it means to founders as they look for the right capital partner to grow their business:

1) Being your go-to advisor on building the business

Today’s funding environment is different, and capital is more expensive and harder to find. Working with a seed fund that is on your side is critical as market conditions are going to be challenging, and many startups, especially early-stage ones without solid fundamentals are going to struggle and not make it.

In my experience meeting with hundreds of entrepreneurs every year, being that go-to advisor is critical in earning the trust of startup founders. From helping them sort through their go-to-market strategy, hiring talent, and raising capital, to smaller (but just as important) elements such as where to incorporate and which slides make more of an impact on your deck, this helps create a bond with founders and align everyone on one mission.

We’re all in, and we’re all in it together.

Also, vouching for the company, and evangelizing for startups in the ecosystem cannot be understated.

2) Access to customers

Teaming up with a seed fund that can make intros to your first US customers is huge and cannot be overlooked. The US is not Israel, where initial customers are accessible through a founder’s personal network. Selling into large enterprises or mid-market companies is extremely challenging for everyone, even US-based startups.

Upon US market entry, access to customers serves as the lifeblood for a budding startup.

As Mark Cuban famously stated “sales cures all”, as that without sales an enterprise will fail. Oftentimes the team at a seed fund has experience, and relationships, (it can be focused on a specific industry), but in a place like New York, where it’s a much smaller ecosystem than people realize, those customers are often accessible via the fund’s relationships.

Add to that the ability of teams at a seed fund to backchannel and get real feedback on the fit of a solution, and the overall pitch, and you’re cutting a ton of time to reach product-market-fit.

3) Structuring your next funding round

Experience does play a role in venture. When you partner with a seed fund, you want to make sure they can put you in front of the next person in line, so you’re in a good position to close your next round. It’s a crucial element in building the puzzle.

There are a number of factors which can impact how successful funding rounds are structured; timing, which partner in the VC to go to, the size of the round, and how many players to have in a round, among other elements. While seed funds ultimately have a financial interest in mind, making sure founders get a fair deal that puts them in a position to be successful is good for the long-term success of a startup.

Teaming up with a seed fund that has a great VC network and a stellar reputation in the community is big, and should be on a founder’s mind when signing a TS.

4) Adding talent

Many funds now have a recruiter in house, who works with the portfolio to identify candidates to hire for key positions and help cut time in reaching the right talent. While the market is going through a transformation and more good talent becomes available, it becomes even more critical for startups to get direct access to unique talent.

Most Israeli startups need to hire marketing and sales talent in the US, which is not so easy to find. Between differences in compensation levels from Israel to cultural dynamics, many startups fail to find US talent that can gel with the team in Israel. This is where a seed fund can make miracles happen for founders and help them get to the next stage.

5) Offering a strong brand founders can identify with

Brand value is as influential as ever, especially for early-stage companies who are getting off the ground. This is particularly important for global startups which are seeking to expand into the US market, and could parlay the brand equity of a strong local seed fund.

With so much competition out there for attention, having a strong and trusted brand founders can parlay for future rounds, and use it to access potential customers can make all the difference.

Seed funds are interested in working with founders who have an audacious vision. While the venture space has become extremely crowded, early-stage VCs need to provide value (with a proven track record to back it) when partnering with the next generation of Israeli founders.

Today, it is not enough to just write a check. Seed funds need to truly align with founders from seed to growth and become their long term active and trusted partner.