Feb 20, 2023

The Benefits Of Using a VC Platform For Startups In Your Portfolio companies

In the fierce startup environment, VC firms are challenged to come up with post investment support that offers founders a fighting chance.

This guidance is best assembled and managed through a VC platform and in this post, we'll share the main reasons most fund managers are increasingly opting to establish a platform team within their firm to oversee the development and execution of a platform strategy.

But before we jump into the why, let's align on the purpose and definition of a venture capital platform.

What is a VC Platform?

You'll often find different definitions of this term depending on context and industry. But a simple working definition that we at GetProven recommend when attempting to understand what platform means comes from Gartner's description of platform in the context of digital.

Gartner describes it as "a product that serves or enables other products or services." In other words, consider your venture capital platform as an assembly and combination of business services, technology and other products crafted to align with your business model and ecosystem to enhance other products or services.

We've written more in-depth on this if you'd like a beginner crash course. The main reason you'd want to set up such a structure is to enrich your firm and portfolio companies.

The Purpose Of Platform And How It Can Benefit Your VC Firm

The purpose of a VC platform is to fill the gaps that entrepreneurs often find challenging to navigate on their own.

When you consider how taxing it must be for founders and investment teams as they juggle priorities that range from talent, business development, content creation, go to market strategies, sales, systems and finance, it's evident there's room for value add opportunities.

That is the main purpose a VC platform serves— to offer resources and support to their portfolio companies so they can increase their chances of success in the market place.

To be clear, investing in a formalized post investment support comes at a cost but most vc firms are more than capable of developing a platform strategy that facilities a positive return on investment for all stakeholders.

It takes significant effort in time and money as well as a strong platform team to produce success. But our focus today isn't to dissect platform roles or team efficiency. It's also not intended to discuss the nitty gritty of platform management and choosing the right VC platform.

We're here to figure out whether it's worth investing in a platform in the first place. And for that, we need to approach it from the perspective of three key stakeholders namely, the entrepreneurs, the VC firm and the investors.

Are there tangible benefits to invest in a VC Platform in your fund?

From the perspective of the firm:

  • Investing in a platform increases your potential for success for the capital invested.

Why? Because most startups struggle with resources for networking and business development. Platform leaders can provide solutions to eliminate common bottlenecks.

  • Another key benefit for the funders is that by creating this centralized hub where knowledge sharing and support takes place, tracking and reporting of progress becomes easier and more transparent.

Your platform team can record and report on the key performance indicators as they develop better systems for support.

  • The ability to track and measure performance throughout the investment period (especially if it takes years to see a return) offers the investment team powerful insights for decision making in real-time.

From the perspective of the investors:

  • Greater transparency on funds and how the entrepreneur and team members allocate resources.

LPs get to see first hand how the team carries out operations, their ability to stay on track and how they run their company.

  • LPs also get insights on various business models within their portfolio companies which can help inform future investments.

It also develops more compassion and better expectations as they learn to differentiate go-to-market strategies for industry niches.

  • Developing an internal ecosystem within the firm's portfolio enables knowledge sharing across the board.
It could even attract capital and deal flow at higher levels when all members recognize the win-win scenarios that are possible. Of course the firm would always adhere to high confidentiality levels where required but for the most part, everyone stands to benefit in a co-sharing culture.

From the perspective of the startups:

The group that stands to benefit the most in the creation of a platform function is the entrepreneur and his or her team. For them, VC platforms are more than resource hubs for getting the best vendor deals.

They are also:

  • The place where the founder can receive mentorship and tactical coaching assistance when they need input on key business decisions.

Everything from marketing to making that first hire or bringing on a new hire to drive customer success for their brand. It can also be support in the form of brainstorming sessions to help them differentiate from competitors or clarifying their vision.

  • The safe house for young entrepreneurs in the portfolio to congregate and learn on lessons and inspiration from other more established and successful leaders when the inevitable frustrations and challenges arise.
  • Where founders have access to investor and partner networks that build their personal and professional growth.

At GetProven, we've witnessed the difference in performance between VC firms that offer post investment support and those that don't. That's why we're on a mission to educate all our VC partners and peers on the benefits and costs of such an investment.

Many of the responsibilities typically fall to a specific VC platform role that the fund manger appoints to over-see the execution and implementation of this value add once fundraising is over.

How many people should make up your platform team? That will depend largely on the needs of your firm. But let's share a few beginner tips to ensure you set your platform roles up for success.

How to set your VC Platform Manager up for Success

The first hire for your VC platform role will take on a managerial role and likely handle a variety of tasks from scouting vendors and suppliers that can service your portfolio companies to brokering new internal relationships.

It's a job that requires an individual who is confident enough to spin a lot plates at the same time without getting frazzled. It also requires plenty of data tracking and management to prove return on investment.

We recommend approaching this endeavour with a desire to match the right hire with the right set of tools. One of the best ways to ensure your director of platform is set up for quantifiable success is to provide them with an all in one solution that empowers them to carry out daily operations while keeping themselves and all community members accountable.

In the past, any form of support for founders was limited to an out-dated spread sheet. Today's digital first and data driven world cannot support that level of inefficiency.

So we land back on the question:

Is it worth investing in a structure that can add value to your startups post fundraising? Do the benefits outweigh the cost of the setup and development of the team needed to run smooth operations and prove return on investment?

Only you can give an honest answer.

Observe your current role, notice where the bottle necks and inefficiencies creep up and where communication breaks down between the funders and entrepreneurs. If you don't spot the need for better systems and organizational protocol to boost current startup success then a platform may not be essential for your fund.

If, however you recognize the gaps and missed opportunities or unnecessary mistakes that could have been avoided with better networking, operations and knowledge sharing, it could be time to speak with an expert on the options available for your specific VC firm.

In that case, your next best step is a complimentary consultation with one of our GetProven experts. Book at time that works for your here.

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