Leveraging the collective: the origins and future of VC communities
At Frontline Ventures, we are wholly committed to “community”— the portfolio of entrepreneurs we have invested in, the larger European tech context from which we were born, and the LPs who fuel our journey.
We are not the only ones — many VC firms around the world have embraced this idea. “Community” within the context of venture capital is taking off, and early-stage funds are realising that immense value can be added by creating a network of companies.
In this piece, I will examine the trends leading up to this explosion of VC communities, its dot-com era origins, the precedents currently set in the US/Europe, and why Frontline Ventures is investing in “platform.”
tl;dr: Community/platform feeds back into every aspect of venture capital — accelerating portfolio companies’ progress, increasing the chances of a favorable exit, improving qualified dealflow, and boosting brand perception in the entrepreneurial ecosystem.
- The ability to write a check is no longer the sole differentiator between funding sources. Startups want more.
It is easier than ever for startups to do just that — start up. From crowdfunding, government grants, and accelerators/incubators to friends & family, university programs, and angels, there is a growing wealth of funding resources. For an early-stage entrepreneur, a VC being able to write him/her a check is no longer the sole option.
- Value-add from partners cannot scale as the portfolio grows.
Every firm boasts about its ability to “add value,” but as the portfolio grows, it becomes more and more difficult for partners to scale their help. Their limited time and resources become the very barrier to adding value to investees.
- Startups need to shorten their learning curves.
Ideas are a commodity and execution is everything — “speed of experience” can no longer cut it (particularly in the case of international founders). First-time entrepreneurs must accelerate their learning in able to succeed in an increasingly crowded and competitive global market.
- It’s an international game now.
VC portfolios are becoming more geographically diverse. Facilitating interactions between companies can no longer be limited to city-wide happy hours — the Internet is the best way to scale those conversations between founders in different sectors, countries, and cultures.
Why invest in a VC portfolio community?
As a fund’s portfolio grows, so does its collective knowledge.
Yet, VCs often find that companies — particularly seed-stage startups run by first-time entrepreneurs — are building in silos. This concept of the platform community breaks those down, creating a safe online and offline space for companies to share their experiences, stories, and failures.
This peer-to-peer network compounds each company’s individual learnings, leveraging that value for the collective. It also provides an interesting dataset from which incredibly useful insights can be extracted from — insights that feed back into the community, as well as better inform future investment decisions.
The State of Affairs
It is important to understand the origins of the “VC community.” During the dot-com boom, Kleiner Perkins pioneered this idea of technology “keiretsu”— the Japanese concept of a network of companies linked together for mutual benefit. The advent of widespread Internet use made it easier for companies to share and partner up.
Nowadays, keiretsu has been reincarnated and embraced by progressive VC firms in the twenty-first century — in a variety of ways.
Perhaps most notable is First Round Capital’s impressive Platform team dedicated to building out an extensive, Quora-like Network for their CEOs and recruiting the best talent to join their portfolio’s teams.
“Anyone can build a social network, of course, but First Round’s network stands out because it is densely populated and frequently used.” — Fortune
Other firms have taken a more content-driven approach, knowing that online resources are easy to scale and disseminate. NextView’s Director of Platform and Community Jay Acunzo built The View From Seed, a valuable bank of useful guides, templates, and editorial for seed-stage startups.
Some firms are utilizing their extensive portfolios to pull data-driven insights from. Spark Capital and Union Square Ventures aggregate, anonymize, and analyze startup data so that it becomes actionable for their portfolios — i.e. salary data broken down by city, role, level, etc.
The “agency model” is also rising in popularity, employing a small army of in-house operational specialists to help companies in very specific domains. Andreessen Horowitz provides their portfolio with professional services delivered by 45+ non-partner staff members trained to assist in recruiting, business development, marketing & PR, etc.
The idea of community in European venture capital still feels very much in its infancy — with only a handful of non-investment positions throughout the continent (most of whom are in PR or recruiting functions). While the European venture market differs vastly from its American counterpart, it seems to be slower on the adoption of the VC platform.
Since my time here, I have met <5 other junior VC employees in a similar role — all amorphously encapsulating events, recruiting, community, marketing, portfolio management, and platform. Only the most progressive firms are embracing this new model; Europe has yet to truly define the concept for itself.
Where Frontline Ventures stands
My position as Head of Platform is the first of its kind in Europe, and that rings so true to what Frontline Ventures stands for: progressive thinking, entrepreneur-friendly operations, US adoption and syndication.
We are Europe’s first community-focused VC — in our investment approach, in our portfolio management, in our partner culture.
At Frontline, the concept of community is not simply an afterthought created in response to an American trend. It has always been in our firm’s blood, well before my joining the team. The idea that we are bred from our entrepreneurial community and that we are obligated to feed back into it for a healthier ecosystem was integral to Frontline’s genesis in 2012.
“We believe that Community is at the heart of what venture funds do.” — Frontline job listing, December 2013
It is truly an exciting (and intimidating!) initiative to start from scratch, but my past 6 months have testified to Europe’s vibrant entrepreneurial ecosystem and its desire for a more connected community.
Here is a taste of what we’re working on, both online and offline:
For clarification: Throughout this piece, I have used the terms “platform” and “community” interchangeably, as this concept is still new and different firms have different definitions. Within the realm of my work at Frontline, there is a distinction between the two: “platform” strictly concerns the Frontline portfolio and “community” involves the larger entrepreneur/investor/LP ecosystem.
Platform: I am building an online hub through which our founders can connect, share experiences, and question one another. We are also replicating that safe space offline, with a series of portfolio-specific programming aimed at topic-specific education. This will be complemented by content, hopefully useful as our companies expand internationally.
Community: It is Frontline’s priority to continue to support the European technology ecosystem — from providing mentorship and feedback to creating community-driven content. All of our community material will be open-source, with a central hub made accessible to the public.
Update April 2015: We’ve released our first go at a community resource for the larger European tech ecosystem. It’s called At the Front Line. Check it out and let us know what you think!
The ROI of community efforts has always been notoriously difficult to define, but here are my key objectives:
Platform: saves my companies time, becomes self-sustaining, shortens entrepreneurs’ learning curves
Community: captures European entrepreneur mindshare, amplifies Frontline’s perception, helps Frontline win deals, furthers education of the greater startup community
It is an incredibly interesting time to be in European venture right now, as many firms are learning how to best add value to a portfolio that oftentimes spans countries, cultures, languages, and markets. I believe that community & platform will become integral to most European fund operations.
Have ideas on how VCs can add more value to their portfolio? Get in touch. This is a new role and a new model in Europe that will continually evolve and adapt. We want to learn from the community as much as you will hopefully learn from us.