If All You’re Getting From Your VC Is Money, You’re Both Losing Out
European investors are now hyped up about something called ‘VC as a platform’. Investment Director Pauliina Martikainen of Maki.vc reveals what the best European VCs have to offer and how to get it from them.
Piece originally published at European-focused startup media Soaked by Slush: IF ALL YOU’RE GETTING FROM YOUR VC IS MONEY, YOU’RE BOTH LOSING OUT.
As a founder, you’re used to trying to impress VCs — working to get that warm introduction to your ideal investor, perfecting your pitch, scouring for data, scouring for even more data, all the while balancing between appearing highly confident in your vision while showcasing your coachability. And this is only the work that goes into attracting the investment in the first place.
But guess what? The tables have turned, and it’s no longer only the founders that need to work hard to impress their investors with new gimmicks. With growing volumes and alternative forms of early-stage financing available, European VC firms are increasingly focused on offering their founders a highly productized service bundle, including facilitating collaboration between their portfolio companies and an external network. VC is becoming a service industry, and the founder is the customer.
ENTER VC AS A PLATFORM — THE NEW HYGIENE BAR FOR EUROPEAN VCS
Venture capital is a service business, and in a service business you try to measure input versus output, increasingly, because you want to get better deal flow. Because at the end of the day it’s all about what deals you are being referred to, and into what you can get in. And my view is that we are definitely moving into a little bit more service industry. — Investor, Stockholm
So, VC as a platform. “Oh no, here we go again, — yet another buzz word from the holy grail of VC clichés” — but hang in there, as I think this one’s worth hearing out to all European startups.
VC as a platform = The services and activities that VC firms offer in addition to capital and one-on-one partner time to source new investments and support companies.
To understand the core of this platform phenomenon that every investor seems to talk about, I sat down with 15 leading European VC firms from Berlin, London, Helsinki, Stockholm and Paris to discuss how the new platform approach has affected their day to day work with startups.
So what’s new in this platform approach? The fact that platform VCs are working hard to scale the reach and impact of their value-add. When I sat down the 15 top tier investors, they described ways in which the VC firms they represent are making an effort to provide their support for portfolio companies in a more structured and productized way. Needless to say, all VCs acknowledged that an investor’s time is limited. Thus, many also spoke about expanding their help beyond the typical one-on-one relationship between the lead investor and company CEO by encouraging all founders and operators across portfolio to cooperate:
We have 3–10 people in our fund that can help portfolio companies. But if we manage to involve people from all portfolio companies we suddenly have a network of hundreds of people who can be of help to each other, so the power of network kicks in. — Investor, Stockholm
WHAT TO EXPECT FROM A VC WITH A PLATFORM APPROACH? 8 TYPES OF SERVICES
Based on my discussions with the VCs, the most typical services a VC platform offers companies seem to fall under eight intertwined categories: online platforms, events and workshops, peer groups, expert relationships, corporate relationships, service provides relationship, talent and other expertise as a service, and finally, content and PR.
1. ONLINE PLATFORMS
Anything from email lists, Google Groups, and Slack channels to fully customized online platforms with detailed resources and a community of contributors to support founders.
2. EVENTS AND WORKSHOPS
Can be formal or informal events such as workshops, CEO summits, and portfolio days.
3. PEER GROUPS
These are functional or otherwise highly curated communication groups for founders to facilitate knowledge sharing around a niche topic..
4. EXPERT RELATIONSHIPS
Advisors, experts, mentors — the ones who are there to lend their helping hand.
5. CORPORATE RELATIONSHIPS
Strategic relations with corporates key reps can take founders a long way.
6. SERVICE PROVIDER RELATIONSHIPS
Rated, best in class service providers are recommended to portfolio companies, often with discounts.
7. TALENT & OTHER EXPERTISE AS A SERVICE
This so-called internal consulting can be all about talent, finance, marketing, strategy, to name a few.
8. CONTENT & PR
On an external level it’s focused on brand building: mainly written articles, blogs & podcasts. Internally its content for the portfolio to share the best practices.
Online platforms, events and workshops, and peer groups all aim to increase collaboration among portfolio companies. As different entrepreneurs are prone to face the same, repetitive challenges, knowledge-sharing across the entire portfolio can help companies learn faster, avoid typical mistakes, and give and receive emotional support:
Every six weeks I organize an engineering breakfast. So, I invite all the engineers and get someone to have a short presentation, so like gamification presentation for 20 minutes. — That’s just a case of meeting each other and then discussing, and hopefully, they connect later. — Investor, Berlin
A lot of it is just about spending time together. We organize a portfolio dinner once a month, it’s always held in some of our team member’s home. And there’s no big agenda there, we just gather together, and it’s very informal. We are quite open about it and say that it’s a strategic thing, yet more of a nice-to-have. And you never know who you’ll meet. — Investor, London
Not only might VCs aspire to facilitate collaboration between founders, but some also leverage their external network — expert, corporate and service provider relationships — for the benefit of their portfolio companies.
We have listed all service providers like recommended lawyers, recommended recruiters, recommended personal coaches, recommended accountants on our CRM. I’d say I spent a day in a week making intros to these kinds of people. — Investor, London
We also organize events for the ecosystem so that it does not have to be only people from our portfolio companies but also just people with a company, people we think are going to be a good fit together, so that they get to know each other, can share learnings. — Investor, London
Finally, the most invested VCs may even expand their in-house expertiseto support portfolio companies, hiring people for dedicated platform roles or strengthening their team with functional expertise:
One way to differentiate is to promise a crazy amount of services. Hard-core professionals can help portfolio companies for example in financials, recruiting and marketing, those are the three most typical functions. — Investor, Helsinki
TAKE THIS CHECKLIST TO MEET YOUR INVESTOR
Now you know what’s on the table when you hear the words ‘VC as a platform’ — but how to actually go about finding a VC that walks the talk?
As an investor, I’ve met with hundreds of founders, and there are some questions they just too rarely ask me. Here’s a list of ones I’d really love to hear.
FOUNDER’S CHECKLIST: 6 QUESTIONS TO ASK YOUR (POTENTIAL) INVESTOR TO GET MORE FROM THEM
- What kind of support can my company expect to get from this VC firm after investment? How does the VC firm’s offer match this?
- Who from the VC firm will work with us after the investment? Who from our own company should be in touch with the VC?
- Are there relevant connections in this VC firm’s external network that I could benefit from?
- With whom (company or founder) on your current portfolio could I have synergies with?
- Who is the platform manager and what is her or his background? Get to know them — they should be the ones that know who’s who in the portfolio or external network.
- Ask yourself: Do I enjoy collaboration and sharing knowledge with others? Am I willing to contribute my own time to helping others?
And when to ask these questions? It’s okay to challenge a VC both when you first meet and throughout the partnership. It’s not only the entrepreneur’s job to grow and develop, we need to do it too.
EUROPEAN VCS ARE ONLY JUST FIGURING OUT THE PLATFORM APPROACH
I know what you’re thinking here: Isn’t this whole fancy ‘platform approach’ just another marketing gimmick?
You wouldn’t be the first to ask: based on the discussions I had, most European VCs are only just beginning to figure out how they could most effectively expand their offering to founders, given the characteristics of the VC firm and its portfolio companies — and even more so the characteristics of the individuals participating in this cooperation.
Personally, I’m a firm believer in this mutually beneficial relationship, as long as all parties are truly invested in it. At best, leveraging the collective and working closely with more knowledgeable people can generate new ideas and create tangible results faster — and at the least it encourages founders to set the bar higher for their VCs.
So my message to all founders out there: challenge us.
Originally published at Soaked by Slush. Hungry for more? Check out my thesis on which this piece is based on.
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I’m always happy to engage in discussion around the world of VC, so feel free to reach out.
Author: Pauliina Martikainen is an early-stage VC investor at Maki.vc, investing in deep tech and brand driven companies. pauliina@maki.vc, @PauliinaMar
