Why Platform Teams are Redefining VC

As the VC landscape becomes increasingly competitive, firms are seeking ways to differentiate themselves and provide value beyond capital. I was introduced to the “how” when I attended the VC Platform Conference in April of 2023.

At the time, the opening atmosphere was what I’d describe as “cautiously optimistic” given the correction the tech industry was experiencing in a post-ZIRP era. This too was on the heels of the historic SVB bank run & collapse.

Coincidentally, that same a weekend, a cinematic moment of push notifications pinging every iPhone at once with headlines of the inevitable downfall of First Republic Bank , another tech startup banking pillar (seized officially by the FDIC on May 1st, 2023), caused a dark cloud of unease to settle over the attendees. Strange times, indeed.

Fast forward a couple of years, and we’re on the cusp of “we’re so back” as the Fed announces a long-awaited rate cut. The expectation is that the dry powder that had been burning a hole in VCs pockets will finally find a home in a booming tech (*ahem,* AI) market.

So throw the word “cautious” out the window and let’s focus on the “optimistic” part.

I’ve come to really appreciate & respect the talent & platform community because of how genuinely committed & invested (not just monetarily) the partners are in their portcos’ success. There’s often a long-held belief that founders & investors are at odds; i.e. vision vs. valuation or ideals vs. returns. But platform shuns this notion.

Platform strays away from that debatable tenet with former operators or people-leaders who understand the nuances of building the infrastructure of a scaling startup. They recognize the advantage of building relationships in the startup ecosystem, and create value not only for their portfolio but for their network as well. Now, how they partner with founders is becoming a staple in a firm’s identity.

To quantify the impact these teams are having on startup success, leaders of the VC Platform community built the The Power of Platform report. Let’s dive in.

Why it matters: Platform teams are emerging as a key differentiator and driver of fund performance. A Platform Partner is dedicated to providing non-financial support to their firm’s portfolio companies. Traditionally, their role is to enhance the success and growth of these startups by leveraging the firm’s resources, networks, and expertise.

They have two primary focuses:

Pre-Investment:

• Marketing - firm branding, content creation, PR, and creative.
• Community - cultivating & engaging a community of advisors through events or digital that contributes to brand and firm deal flow.
• Investment Operations - investor relations/enablement, data driven sourcing, and investment efficiency.

Post-investment:

• Talent - recruiting, hiring, culture, DEI, and people efforts.
• Business Development - relationships with entities that actively partner with portcos, GTM advisory, or potential acquirers.
• ESG (Environmental, Social, and Governance) - measurement, reporting, and improvement of these sustainability practices.

By the numbers: The study categorizes firms into three platform categories: No Platform, Moderate Platform, and Significant Platform. It analyzes fund performance across vintage years, fund sizes, and platform focus areas (pre-investment vs. post-investment). These are the major stats that jumped out at me:

• In 2000, only 25.8% of firms had Moderate or Significant Platform teams. By 2022, this number rose to 52.8%.
• For 2010-2019 vintage funds, those with Significant Platform outperformed No Platform funds by 1,100 basis points in Net IRR and 0.5x in TVPI.
• Large funds ($500M+) with a post-investment platform focus saw the highest returns, with a Net IRR of 40.6%, outperforming No Platform funds by 2,300 basis points.
• In 2022, non-investment professionals account for 37.6% of the core team of a firm, up from 27.1% in 2000, while platform growth specifically has outpaced other categories like finance & HR and investors.

The impact: Platform teams are showing a measurable positive effect on fund returns across various fund sizes and vintages. Their influence is particularly strong in more recent years as the function has matured and become more specialized. See below:

Yes, but: The study notes that while platform investment correlates with better performance, it's not a guarantee of success. Factors like fund size and market conditions also play significant roles in fund performance.

For the record, I believe heavily in the platform function and consider it incredibly valuable. As a contrarian exercise, I could see a couple arguments against it becoming a major funnel for fund resources:

1. Innovation Paradox - if all platform teams end up providing similar advice and resources, do we risk homogeneity across the startup ecosystem? Maintaining a diversity of thought & approach is important.
2. Founder Dependency - the platform team is not an extension of the startup team they support. If a founder starts lean on them in such a way, it could reduce the effectiveness of the team as a whole, spending extra time/effort focused on one particular group vs. the portfolio holistically.

Platform has shown to be impactful at VC firms of all sizes and maturity levels, with small and early-stage investors gaining value from pre-investment Platform efforts that define their brands and improve their awareness amongst entrepreneurs. -?Dale Chang, Operating Partner at Scale Venture Partners

The takeaway: As competition for deals intensifies and founders seek more than just funding, VCs will likely continue to invest in and expand their platform capabilities. This trend is expected to further professionalize the platform function and potentially reshape the VC industry landscape. The most successful VCs of the future may not be those with just the largest platform teams, but those who can navigate the complex dynamics of partnering with and empowering founders to build sustainable companies.

This post inspired by the work The VC Platform , led by Executive Director, Joshua Goodfield . Special shoutout to Cory Bolotsky & Dale Chang who led the research on the attached report.

Check out the full report here: VC Platform Community Power of Platform.

Thank you for reading and joining on this journey with me!

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?? Quick about me:

I’m Cris Cafiero, and for nearly a decade, I’ve collaborated with founders, CFOs, and people leaders of early-stage, venture-backed startups. As an ex-Zenefits, ex-ADP, and now Business Consultant for Sequoia, I help startups build scalable people management infrastructure and maximize their people investment through compensation & benefits strategies.

Based in LA, I share my life with my wife and our two dogs. I’m into NBA drama, Marvel, reading, video games, computer-building, real estate investing, and lifelong learning.

I care about helping startups build a thoughtful, people-first culture and hope you find the topic as interesting as I do.

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