As a venture capitalist, you want to help your portfolio companies succeed, but you also want to respect their autonomy and vision. How can you provide startup support without micromanaging? In this article, you will learn some tips and best practices to balance your involvement and influence as a VC.
Before you invest in a startup, you should communicate your expectations and goals for the partnership. This includes your role, responsibilities, rights, and resources as a VC, as well as the startup's milestones, metrics, and reporting requirements. By setting clear expectations upfront, you can avoid misunderstandings and conflicts later on, and establish a foundation of trust and transparency.
I don't think this has been defined quite enough between founders and VCs. VC's expect: - clear communication from founders - clear milestones, metrics, monthly/quarterly reports provided on time - if founders need help with resources, intros, etc. ask early and don't be afraid to communicate negative news It's important to set clear expectations but also to stick to what is outlined to avoid feeling micromanaged. If a founder says an update will be provided 1st week of the month, make sure to send out the investor update. Don't create a relationship where you need to be chased for items because it will create a sour relationship where the VC loses trust
One of the most valuable ways you can support your portfolio companies is by providing feedback and advice based on your experience and expertise. You can do this by scheduling regular check-ins, attending board meetings, and being available for ad-hoc questions. However, you should also respect the startup's decision-making authority and avoid imposing your opinions or preferences. Instead, you should offer constructive criticism, suggest alternatives, and share insights and best practices from other startups.
It's important to make clear early on that you're (hopefully) available for ad hoc meetings and will not be reactive or judgmental. We can only help our port-co's if they tell us openly and proactively what problems they are having and trust us to support rather than judge/react poorly.
Another way you can support your portfolio companies is by connecting them to relevant resources that can help them grow and scale. This could include introducing them to potential customers, partners, mentors, or hires, or providing access to tools, platforms, or networks. You can also leverage your own portfolio to create synergies and collaborations among your startups. However, you should not force or pressure your portfolio companies to use or accept any resource that they do not need or want.
Here you can provide value by creating a ressources ??portfolio?? for your startups. This can be under several forms, you can have mentors, corporate contacts, databases, office space and other things for your startups. For instance, at Super Capital we leverage the knowledge of our LPs that are mainly Business Angels to help our startups. That way we can connect them to the LPs with the right expertise and insure a good follow up on the project.
As a VC, you have a fiduciary duty to monitor the performance and progress of your portfolio companies. You can do this by reviewing their financial statements, key performance indicators, and updates, and by conducting due diligence and audits. However, you should not micromanage their operations or interfere with their day-to-day activities. Instead, you should use the data and information to assess their strengths, weaknesses, opportunities, and risks, and to provide guidance and support accordingly.
Many investors are not holding their startups to expectations until it’s too late. CVCs tend to be more relaxed until bad habits become endemic and then run the risk of terminating a beleaguered startup too early due to a wrong diagnosis. Clear expectations need to be set up and discussions need to be very detailed in order to fully contextualised the discussion. Unfortunately problem solving at startups cannot be taken at 35,00ft (high level), it must be gritty - right the level where the rubber touches the road.
One of the most rewarding aspects of being a VC is celebrating the achievements and successes of your portfolio companies. You can do this by acknowledging their milestones, praising their efforts, and sharing their stories. You can also provide incentives, rewards, or recognition for their achievements, such as bonuses, referrals, or media exposure. By celebrating their achievements, you can boost their morale, motivation, and loyalty, and strengthen your relationship with them.
Finally, you can support your portfolio companies by learning from their challenges and failures. You can do this by listening to their feedback, understanding their pain points, and empathizing with their struggles. You can also help them overcome their challenges by providing emotional support, crisis management, or contingency plans. By learning from their challenges, you can improve your own skills, knowledge, and judgment as a VC, and help your portfolio companies grow and recover.
In my experience, especially within crypto: - VCs are here to provide mentorship, experience, empathy, and also strategic help on how to navigate situations. - A lot of founders in web3 tend to be a bit younger and less experienced so they rely on having senior advisors and VCs to help teach from experience. This is proven to be critical at points as a strategic value add as an investor. Startups want to know that you're going to be available or at least responsive when they need you, and not just some 'spray and pray' type of investment where you can't deliver on actually helping portfolio companies when they call on you. You see this a lot with web3 VCs which has made startups a lot more wary of who they let in the cap table.
Hand them the playbook, connect them to top resources, and ensure they have the capital to execute. Then, get out of the way and have them come back to check in, report their progress, and tweak what needs to be modified.
Demonstrate trust, respect, and confidence in startup founders' abilities by leading by example and showing faith in their decision-making capabilities. I lead by example in my interactions with startup founders, demonstrating trust and confidence in their abilities to make informed decisions. By modelling a hands-off yet supportive approach, I encourage founders to take ownership of their projects and excel without micromanagement. Recognize and celebrate the achievements and milestones of startup teams, reinforcing their sense of accomplishment and motivation to succeed. I make it a point to celebrate the successes of startup teams, whether it's reaching a funding milestone, launching a new product, or securing a key partnership.