Sep 3, 2022

Why are more and more VC firms turning to Platforms to support their startups?

“VC Platform” is a term that more VC firms are using to help grow startups and platform tools are beginning to emerge in the investment world. We take a look at some of the biggest themes in the VC Platform world and why this is becoming an important theme. 

Over the past few years more and more VC firms have begun to use platform tools and there are even now entire networking groups (like VC platform) to help support the people that are given titles like “Head of Platform” “Director of Platform” and “Head of VC Platform” These people are tasked with creating as much value as possible for portfolio companies within the VC firm.

Founders need help - but sometimes won’t ask, especially if they feel like a VC firm is judging them. 

Being a founder is difficult at the best of times and can be heartbreaking at the worst of times - and it's very lonely at the top. Founders need resources to be able to reach out to each other, support each other and provide help. this is why VC platforms need to become a resource for founders to be able to share ideas, best practices and know who to connect with when they're having a business problem. We know from experience that founders are very open to helping other founders, especially within the portfolio community. 90% of founders just don't know who to reach out to or who to ask a question and will keep things inside until it's too late. Often they won't reach out to the VC firm, for fear that the firm will know too much about something bad happening in their business. This can be really tricky for a founder when they we need help but they're too afraid to reach out to the VC firm to ask for it. One way that this can can be overcome is by providing a list of all the founders, what they're building and make it as easy as possible for founder's to reach out to each other without the VC firm interfering too much.

Why enabling communication is super important in a VC Platform community.

I wanted to talk about one of the most important aspects of a community in VC, which is enabling communications between founders. What does this mean to ‘create a community and why has it become more important over the last number of years? For years now VC and PE firms have talked about adding value to their portfolios, - that they don't want just to write a check and then walk away, they want to add lots of value to help their companies succeed. A great example of this is the work that Andreessen Horowitz is doing, and the evidence behind this is the huge number of people  (over 500) they employ to support their companies. This is on the extreme side as most Venture Capital firms can't afford to hire huge numbers of people. However, there are lots of things that VC firms can do to guide their portfolio companies along the right path towards a successful exit, especially when it comes to communications. 

Being a founder is a lonely job - make it easier on founders by giving them ways to connect with each other. 

 One of the easiest things that a venture capital firm can do is to ensure that the founders are able to connect with each other and give them tools to ask questions easily and quickly. This can be done fairly easily using a slack channel and we are seeing more and more VC funds using Slack as a way to help founders communicate. Founders are naturally curious and want to help each other and having a slack channel is a great way to help founders connect, ask questions, and voice concerns. They won't be as open as they would be on a private channel as they might  feel like the VC firm is listening in but that's something that you can't control. Our advice is to make it as easy as possible for founders to know each other, and be able to connect.

The other way is by encouraging your founders to attend events.  This is harder as people have gotten used to staying at home and working away from the office and even though events are starting to pick up again, people have gotten used to doing things virtually. As much as you might like your founders to attend lots of events, usually one or two events a year is the best that you can do. Our advice here is to do smaller more intimate events where founders can connect with each other and share best practices in smaller subgroups.

Having a private Facebook group is a quick and easy way to connect your founders together. The platform has been used by many groups to create private networks of people who want to share best practices and connect with each other. Facebook is a great platform for this and can be used successfully. Nearly everybody has a Facebook account and Facebook makes it super easy to get messages. If Founders want to connect to each other they can instant message and take it offline.

There are some tools out there that can help connect founders with each other, one of them being Mobilize which is like a mini internal Facebook group and some of the larger funds are using this to help their portfolio companies. The downside to this is that some founders just don't have the time to login to multiple platforms and check on things.

Bonding over similar issues/cases/business problems 

One thing that founders have lots of questions about is vendor selection. We see a lot of questions about which tools other founders are using, and why a particular founder chose a vendor. Founders ask a lot of questions about tools, software, and services and these keep coming up again and again. There is a lot of uncertainty around choosing a tool or software vendor and sometimes just being able to speak to appear is really important for the founding member of a team. The last thing that the founder wants to do is spend thousands of dollars on software that is just not a good fit for their business. Having a deal on a piece of software is good but what's much more important is finding the right software to grow their business and if they find it's a good fit, having a deal is a cherry on top. Platforms like proven can really help with the selection process and getting access to deals is something that we know a lot about.

At the end of the day, founders need help in lots of ways. The best way to ensure founders get the information they need is to enable communication channels between each other. Just make it as simple as possible for founders to know each company is, what they do and make it simple for people to be able to reach out to each other and this will encourage lots of cross communication and pollination of ideas between founders.

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