What to consider before building your VC platform strategy
In the past six months alone, I have had 5+ first-time fund managers reach out and ask,
“Is platform something we should consider? What would it look like for our fund?”
Obviously, there is no “one size fits all” solution — platform (or one of its many synonyms — our community is still emerging, so there are no standard job definitions/titles) will differ firm-to-firm. However, there are three main considerations to think about when building a VC platform:
- Your investment strategy
- Your goals
- Your partnership
As these three factors vary widely between firms, it is important to build something bespoke to your strengths. Let’s take a dive into these considerations.
This encapsulates the many different ways you invest as a fund:
- Stage/sector focus: For platform to truly work, large clusters of your portfolio should share commonality in stage and (ideally) sector. Your portfolio companies will be facing very similar challenges, so a platform from which to draw knowledge will be valuable.
The Frontline portfolio is largely pre-seed/seed B2B SaaS companies — so our platform initiatives and events are closely aligned with their journeys and, thus, more tangibly useful to founders.
- Size of portfolio: I believe that there is a certain critical mass needed to make a community-focused platform work. With too little members in your portfolio, inertia can kill an initiative.
I joined the Frontline team with just 12 companies in our portfolio. We found it difficult to get true “community” initiatives active in the early days (i.e. a Slack team with cross-company functions as channels) — 12 just wasn’t enough to garner proper engagement.
- Investment pace: How often will a new member enter your portfolio? Have you reached a regularity in investment pace that there is constant fresh knowledge entering the pool? This ties back to portfolio size, as it ensures that there is a frequent “refresh” of the peer-to-peer sharing community.
- Assets under management (thanks to Federico at Paua Ventures for pointing this out): Platform is really tough to do well without at least one full-time employee and dedicated resources. Depending on your strategy’s level of involvement, this could end up being a large, cross-disciplinary team. It would be tough for a fund below €30–40M to carve out a budget meaningful enough to build a sustainable platform.
- Geographic focus: Do you have city clusters in your portfolio? While not the best friend of scale, offline events and meetups really do strengthen the online — so geographic clusters can be very effective.
The Frontline portfolio is largely concentrated in Dublin and London, as a result of our collective backgrounds and networks. It thus becomes easier to execute regular workshops and events around these company clusters.
It is important to understand your goals for platform within the funnel of the VC deal life:
There are many factors that contribute to which stage you want to focus on. These can include:
- what you deem is the most time-urgent
- the competitiveness of your funding ecosystem
- partners’ natural proclivities
- what moves the needle for your fund right now
- the availability of experienced, “have done it before” talent in the ecosystem
- and many more
After determining your stage focus within the VC deal life funnel, you can start to craft your platform’s goals and strategy. Here are some examples:
Goal: Increasing and better qualifying potential deals
Goal: Building out robust syndicate networks to help companies raise downstream funding
Stage: Product-market fit
Goal: Shortening learning curves through peer-to-peer learning
Goal: Helping in a more programmatic way around scale challenges (i.e. hiring, executive coaching, etc.)
Goal: Increasing M&A conversations and activity
Obviously, there is a ton of overlap with platform activities (many will bleed across multiple stages of the funnel), but I find it helpful to initially focus on one. Broadly, I find that the best VC platforms focus on either: dealflow (“winning deals”) or product-market fit/growth (“accelerating companies”).
This is definitely the most important factor. There are two pieces to consider with the partnership:
As Dan Kozikowski of FirstMark puts it so well, partner buy-in is the foundation of a successful VC platform. Culture at VC firms are partner-driven — and so will your values, priorities, and goals for platform. Without partner buy-in (which means high ambition, strong mindshare, and dedicated resources), platform is, at best, ineffective and, at worst, wasteful to your portfolio’s time.
Partners should clearly recognise and understand the huge potential value in platform. They need to be advocates to your founders for platform to truly be top-of-mind for the portfolio. I’ve seen platform fail when 1) there are not enough resources allocated to build anything meaningful, and 2) it is an afterthought at the GP level.
I was very lucky, as platform is one of the founding pillars of Frontline and continues to be of high priority — I was the first non-partner hire in 2014, run a weekly platform meeting with the partnership, and am allocated €100K+ a year to platform initiatives.
Great, so the partnership is fully onboard with the potential power of platform. What’s next, in terms of execution?
Take a step back and 1) consider what the partners are already good at, and 2) bring scale and infrastructure around that.
- Maybe she is a super-connector with an impressive corporate background — then platform becomes focused on making useful BD intros at the right time or building impactful advisory relationships.
- Maybe he is a vocal thought leader with a strong personal blog and brand — perhaps then, platform is uniquely content-driven.
- Maybe she is an ex-operator with function-specific expertise — then maybe platform is about accelerating legal, financial, or operational learning curves.
- Maybe he is a lifelong VC with multiple exits under his belt — then platform can concentrate on filling fundraising rounds with Tier 1, value-add investors.
To try and change what is already your partnership’s value-add could potentially be fruitless. Fred Wilson and Mark Suster are amazing at what they do — but not every GP can or wants to blog/Snap weekly. This can turn into a waste of time that could be more effectively allocated elsewhere. Understanding partner DNA and amplifying their core strengths makes platform really powerful in a bespoke way.
When it comes to approaching what “platform” means at your fund, you need to have both a clear understanding of your investment strategy and an honest partner-level discussion around goals and existing value-add activities.
It is at the intersection of these three streams that you will find your platform strategy emerge.