Venture capital platforms can seem quite mystical for outsiders or new fund managers who aren't acquainted with the benefits of having a robust post-investment strategy for portfolio companies. And although the concept of platform isn't something new in the venture capital industry, it has evolved and become integral in the VC ecosystem, which is why in this post, we want to demystify some of that unknown and share with you the impactful role platforms play in the VC ecosystem.
In a typical venture capital firm, you have the investment team, the deal team, the partners, the principles, and the associates. With all these different teams to manage, it can be challenging to streamline communication, facilitate collaboration and leverage better networking opportunities to drive growth for the portfolio companies post-investment.
For a long time, the post-investment experience for startup founders was pretty anti-climactic because, sure, they got the funds they needed to drive their dreams forward, but getting funds was just the beginning of a long, arduous journey. Many founders craved yet lacked additional support and infrastructure.
That led to confusion, overwhelm, frustration, time, and resource mismanagement to figure out what works and what doesn't in the current marketplace. Everything from who to hire, which vendors to trust, what tech stack to invest in, and much more.
The fund managers that were smart enough to create resources that could support founders to resolve these issues faster started witnessing a high impact on their portfolio's performance. And despite the rudimentary resources of the time, this was the birthplace of the earlier concept of a VC platform. What was missing however, was a strong platform strategy.
Over the past six years, more and more venture capital funds have upgraded their post investment support. With the introduction of formalized post investment support, the need to hire platform leaders continues to grow. Some of the facilities many firms are making available for their portfolio companies include recruiting and talent acquisition, mentorship, helping to outsource vendors, and facilitating cross-sharing within their portfolio network. Let's take a deeper look at what some of these mean and their impact on a startup.
Hiring the right talent is mission-critical for a newly launched startup with some money to spend. Investors have backed your dream, and you need to prove the risk was worthwhile. The first hire is integral to your growth and success, but finding the best operations team is no easy feat. Many founders say hiring their first twenty employees proved more challenging than fundraising.
If you're the fund manager looking to get the most out of your investment, it might be helpful to leverage your firm's resources to assist the new company. Perhaps you already have a superstar team member with a track record of scouting great talent. Wouldn't it be great if the young companies in your portfolio gained access to this team member?
Or maybe you are the superstar with a knack for spotting great hires. In that case, extending this prowess to the startups, your firm has already invested in becomes a value-add for your firm and the startups.
This is just one example of many that VC firms can build on as they design their platform. But let's keep going and look at a few more.
Ask any young founder or co founder what frustrates them the most in those early kick-off days, and they'll share a laundry list of things among which you're likely to hear their confusion about which technology solutions or vendors to work with. Should we go with HubSpot or Salesforce? Which price points are more favorable for our team? Could we get a better deal? These are great questions to ask. But often, getting to the right answer is time-consuming.
Now imagine being able to create a self-sustaining virtual (in-house) marketplace that could facilitate conversations with vendors for your startups? Better still, could you negotiate ahead of time so every new company your firm invests in gets the best deal possible?
Let's take it a step further.
If your firm has a track record and portfolio companies that have successfully grown to Series B and C, they've got experience on what works and what doesn't. That kind of practical know-how is priceless to an early-start business.
What if there was an automated way for your successful startups to pass on practical knowledge to the new additions? Just imagine how much time, energy, resources, and frustration you'd save your new founders. And all that is likely to reflect on their bottom line.
All these examples fall under the purview of a VC platform. Post investment support can facilitate talent, business development, content sharing, communications, community building and marketing assistance. The management of such responsibilities typically fall to the platform team.
Today, a fund gets to decide how robust they want its startup ecosystem to be. And the best part is there are turnkey solutions that enable you to build a powerful VC platform with just a few clicks.
The head of the platform is mainly concerned with answering the question -
What can our firm do for our portfolio companies once the investment comes through?
Depending on the philosophy and policies of the VC firm, the platform team engage in a variety of things, including helping to outsource and negotiate the best deals for their startups, developing community, fostering a global network, organizing thought leadership, and brain trust around founders to ensure they continue to excel past the fundraising phase.
We've worked with venture capital firms that want a platform solution that enables them to build systems and productivity tools to surround the fund with operational excellence. There are also those looking to develop internal and external networking events to help their startups receive continued mentorship from existing later-stage portfolios within their firm's ecosystem.
Can a VC platform facilitate any and all of these things? Absolutely.
There are many different types of venture capital, each with unique needs, USPs, and business models. So it's perfectly fine if you realize that the best support a VC platform can have for your startup ecosystem is to heavily focus on events or assisting with marketing for the fund and educating the founders on the same.
For other firms, it can be more about recruiting and helping founders nurture the best talent. The most important thing is to ensure whatever solutions your VC platform offers the founders, there's a direct, measurable impact.
Here's an insightful perspective when thinking about the role a VC platform can play within your ecosystem and the portfolio companies you support. The most value a platform can bring is to keep all the systems you already have in place, leveraging the network (internal and external) that your fund has created over time, and building on top of them.
That means thinking about business development, collaborating with interesting partners, nourishing your trusted partner network, and any other programs or initiatives your firm is involved with. By bringing all these moving parts into the fold, it's easier to manage and measure the impact of your activities above and beyond the basics.
In spite of these challenges, and regardless of what the 2024 economic temperature and marketplace volatility have in store for the business world, your firm can take proactive steps to address them and greatly improve the overall efficiency, compliance, and cost-effectiveness of the vendor relationships your firm and portfolio companies deal with.
There are many ways your private equity firm can improve vendor relationships. From setting clear KPIs to implementing vendor management software, the right strategies can help you make informed decisions and rise above the competition in a changing market.