Jul 11, 2023

From Overwhelm to Optimization: vendor management best practices in venture capital

As a VC head of platform, you are no stranger to the challenges of managing a diverse network of vendors and partners. We get it, formalized post investment support is no easy feat and includes handling aspects that up until recently were left to the founders.

Yet as our founder, Phil McNamara often says, the hardest and most overwhelming experience while launching his first startup in Silicon Valley was knowing whom to trust and which services to prioritize. If only he'd belonged to a community where industry experts could openly share lessons learned and recommend the right tools and vendors, perhaps his initial experience wouldn't have been as traumatic.

We cannot change his past, but we can certaintly support you in creating a better experience for your portcos.

Now that you've committed to your platform strategy, it's time to develop a structure that can streamline vendor relationships.

So we invite you to imagine a world where you don't have to juggle contracts, monitor performance, etc, constantly. A world where vendor management is no longer a daunting task but a catalyst for success. 

As you navigate the intricate web of vendors and partners in the dynamic venture capital ecosystem, it's time to unlock the power of effective vendor management.

In this article, we will explore the best practices that will transform you and your founders' experiences from overwhelmed to optimized. So, fasten your seatbelts and get ready to revolutionize your vendor management game!

Why vendor management is often a headache for VC operations and founders:

Vendor management often feels like a daunting task due to several factors. For founders, it comes down to this basic fact: They are new to the game and don't know whom to trust or which is the better deal. Figuring out the tools, service provides and suppliers is usually a guessing game which typically leads to frustration, time wastage and poor decision making.

For the platform team, the headache is more complex. Let's look at a few of the many reasons that lead to the biggest frustration.

Complex Vendor Ecosystem: VC firms typically work with a wide range of vendors across various industries and services. Managing multiple vendors with different contracts, requirements, and performance metrics can quickly become overwhelming and challenging to track effectively.

High Volume of Vendors: The platform team works with numerous portfolio companies, each with its own set of vendors. This translates into a high volume of vendor relationships to manage simultaneously, making it difficult to allocate sufficient time and resources to each vendor.

Diverse Vendor Requirements: Vendors within the VC ecosystem can have diverse requirements based on the specific needs of portfolio companies. Coordinating and aligning these requirements while ensuring they comply with the firm's objectives and strategies can be a complex task.

Ongoing Due Diligence: VC operations require continuous due diligence to ensure that vendors meet the firm's standards and maintain a high level of performance. Conducting regular reviews and evaluations, monitoring vendor compliance, and identifying potential risks demand constant attention and effort.

Risk Mitigation: The VC world is inherently risky. Effective vendor management plays a vital role in mitigating some of these risks. Ensuring that vendors maintain appropriate security measures, data protection protocols, and compliance with regulations can be a significant concern for VC operations managers.

Time Sensitivity: When dealing with third party service providers, timing is always a factor. Onboarding vendors, negotiating contracts, or addressing performance issues needs to happen fast and efficiently. But time constraints can often lead to rushed decisions or inadequate due diligence, increasing the risk of suboptimal vendor selections.

Portfolio Company Alignment: The head of platform is often responsible for ensuring that vendors not only meet the needs of the VC firm but also align with the requirements and goals of portfolio companies. This necessitates effective communication, coordination, and relationship management between the vendor, VC firm, and portfolio companies.

Scaling Challenges: VC firms often experience rapid growth and may need to onboard new portfolio companies and vendors. Managing this growth while maintaining effective vendor relationships, evaluating new vendors, and negotiating contracts can pose significant challenges for VC operations managers.

All these factors can make it hard for the VC platform to provide the most value, especially if there's no strategy and systems supporting the vendor management relationship.

Proven tips to manage your vendor relationships

#1: Streamline Vendor Selection: Handpick Your Allies

Business development is more than just client engagement. It's also about selecting vendors that align with your vision. Imagine assembling a team of partners who not only meet your specific needs but also share your values and objectives. Start by clearly defining your vendor requirements, from legal services to technology solutions. Conduct thorough due diligence, seeking references and insights from existing clients.

#2: Contracts: The Cornerstone of Clarity

Contracts are more than just pieces of paper; they are the building blocks of trust and accountability. Define the scope of work, deliverables, timelines, and performance metrics with precision. Transparent contracts eliminate ambiguity and set the stage for effective collaboration. With crystal-clear agreements, you can confidently hold vendors accountable for their commitments and ensure your expectations are met.

#3: Monitor Performance: Unleash the Power of Data

Tracking vendor performance is the fuel that drives optimization. Define key performance indicators (KPIs) aligned with your objectives and regularly review vendor performance against these metrics. Use data-driven insights to fuel constructive feedback and continuous improvement. By nurturing open communication channels, you can address concerns and maintain a positive working relationship, driving success on both sides.

#4: Collaborative Partnerships: Forge Strong Bonds

Let's shift gears and explore the immense value of collaborative partnerships. Build relationships based on trust, transparency, and mutual respect. Encourage knowledge sharing and innovation by tapping into vendors' expertise. Imagine the possibilities when you leverage their insights, emerging trends, and innovative solutions. Together, you can unlock new opportunities and drive strategic growth.

#5: Risk Mitigation: Safeguard Your Operations

In the ever-evolving business landscape, risk mitigation is paramount. Identify potential risks associated with vendor dependencies, such as data breaches or supply chain disruptions. Establish backup plans and contingency measures to ensure business continuity. By addressing risks proactively, you protect your operations and minimize potential downtime.


The venture capital industry has taken a giant leap toward this new wave of investing where it's not just money that matters. Gaining that competitive edge by offering support to solve problems that founders often struggle with has become the new ideal we all strive to achieve.

As head of platform, you hold an important position in reaching this goal. Innovative companies need more than just capital, they need your expertise and relationship building prowess so they can focus on growth and hitting the revenue targets that will keep all stakeholders happy.

The more strategic you are at ensuring your platform serves and solves for issues like suppliers and tech stack solutions, the better the return on investment for your platform. Want to see how we at Proven are helping platform roles streamline their third party service providers? Learn more here.

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