Capturing the Value of Ecosystem Professionals
Maven Network by āltitude
At āltitude, we aim to create better access, earlier.
As we think and operate in ecosystem layers, we started productising our dealflow to access all the incredible people that are under the radar or outside the typical hunting grounds of venture capitalists.
// Productising Dealflow
Our journey started with a focus on experienced angels through a selected Fellowship Program. Consisting of 10 hand-picked super angels, 10 serial entrepreneurs, and 10 emerging solo-, nano-, and micro GPs, all of them are undisclosed — for many reasons. They are an integral part of our closed trusted network of people we highly appreciate. All of them are brilliant at searching for deals.
At the end of last year, we successfully launched our first dealflow product Open Angel (openangel.tech) to supercharge angels with EUR 100K tickets, where they retain the full carry upside of our ticket. As we were building Open Angel, we aimed to gain access to the vast longtail of semi-professional angels to co-invest in their best deals with them, while creating alignment for all stakeholders — the startup founder, the angel, and us (read more here).
Some weeks later we launched our second product Trojan Network for investment professionals to send us their rejected deals, which dropped out of the funnel for some reason. The premise was that the anti-portfolio of a VC fund is at least as strong as its actual portfolio. We believe that one fund’s rejection can be another fund’s triumph (read more here).
After launching these two products, we assumed that we would have unlocked the high-potential dealflow channels already. However, there was one group of people that worked extensively with early-stage founders but weren’t going to invest in companies. It takes a village to raise a start-up, especially in the first months and years.
That village consists of freelancers and ecosytem service providers that are often the first to work with startups, but whose job it is not to invest in them. This led us to create the Maven Network.
These are the ecosystem layers we identified and the associated value-add, we aim to create for the stakeholders involved.
// Where do VC Deals actually come from?
First things first. Our mental journey started by thinking about where venture capital dealflow is coming from. We summarised how we saw the world of warm and cold dealflow, neglecting push dealflow for simplicity reasons.
Venture capitalists may hold several beliefs but the two of them are most prevalent:
Belief #1 Warm inbound from a trusted network is more relevant than cold inbound.
Belief #2 The deal quality of cold inbound is way lower, compared to warm inbound.
Well, let’s start with belief #1
64% of all startup decks received by a venture capitalist are cold inbound deals — no surprise, we guess. But only 7% of all deals reviewed by the respective investment committee come from this source — what a significant drop. Furthermore, only 6% of investments that actually receive funding are cold inbound deals. It translates into a 1.19% chance of getting to an investment committee and a 0.38% chance of receiving funding.
Warm inbound dealflow only represents 26% of all received startup decks. Though, 83% of all deals reviewed by the respective investment investment committee are coming from warm inbound. Finally, 81% of all executed deals receiving investments are coming from warm inbound. This translates into a 26% chance of getting to an investment committee and once there, a 4.6% chance of receiving funding.
So yes, one may assume that warm dealflow is more relevant than cold dealflow in terms of conversion from receiving a deal, until receiving funding.
Belief #2 — took us by surprise.
Assuming that the vast majority of venture backed startups were financed through a warm inbound, one would naturally assume that these deals also have a higher likelihood of success , right?
Research shows that cold and warm inbound deals perform relatively similar in terms of success and failure. Warm inbound deals indeed have a 2% chance to perform better.
However, something caught our attention — the actual size of success. The cold inbound companies outperformed the warm inbound companies in terms of overall exit size, they yielded a 16.2% higher ROI (!) and they required 18% less capital to do so.
So why do cold inbound deals have such a bad reputation anyway? And why do venture capitalists rely so heavily on only their trusted network of other venture capitals, angels or founders? We don’t know, but what we know is that we want to create an unbiased high quality dealflow that isn’t solely based on “who you know” but “best idea wins”.
// That’s why we created the Maven Network
The landscape of early-stage service providers and freelancers seems to be unlimited and startup success is debatable without them.
We aim to work with outstanding and well respected service providers and freelancers from branding and marketing professionals over business and personal development coaches, operational freelancers such as CFO/ CSO / SMO as a service, lawyers and notaries, tax and accounting firms, software developers to UI and UX designers and many more.
The Maven Network is all about maximising the value of ecosystem professionals working closely with early-stage founders helping them to turn their startups from metaphoric caterpillars to butterflies.
Maven Networks is not a one-way street — we seek to give and take, by creating mutual benefits for all stakeholders.
// What kind of deals are we looking for with the maven network?
(i) In general, we look for pre-screened deals from (tech) ecosystem providers and freelancers.
(ii) We prefer early-stage pre-seed and seed deals from Europe and UK per se.
(iii) We love B2B, as this is part of our core investment thesis, especially for lead tickets.
(iv) Software is our home turf, we prefer software first deals over hardware deals.
// How do service providers and freelancers qualify ?
(i) We handpick all providers, based on our experience with them and their trustworthiness.
(ii) With consent they simply share relevant dealflow from their clients / partners and close networks with us.
(iii)We prefer to work with nice people, at all times — we love building meaningful networks.
// Why do service providers and freelancers want to work with us?
(i) It is another value-adding service connecting their clients to qualified early-stage VCs, like us.
(ii) We add them to our startup / angel community and refer new clients from our portfolio to them.
(iii) We will offer a financial kicker for every investment opportunity, which we end up executing (as long as we have not seen it before).
(iv) We invite them to our regular community events, granting them access to our network.
// What happens after we have received a deal?
(i) We will screen and review your deal — like any other deal we are looking at, very diligently.
(ii) In case we like the deal, we would be pleased to get to learn more about the deal, after their intro.
(iii) Depending on the ticket size and our position as (Co-) lead or follower, we drive the process.