What do VCs actually do for portfolio companies?

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Determined

28d

Most Helpful

Usually their assistance is coming in 3 different forms (coming from a founder's perspective):

Exec hiring -- They'll interview exec candidates at the final stages, but at that point it's more of a checkbox. Where they're particularly helpful here is backchanneling to get deep references on candidates as they go through the process. We usually conduct 7-15 backchannel references on exec candidates.
Customer referrals -- Depending on your business, if you sell to other start ups or larger enterprises that overlap with a VC's network, you can get executive intros to those companies. Usually it's a line straight to the top so it's important not to burn these and use them when you're ready to spend their network capital.
Strategics/partnerships -- Similar to the customer referrals, VC partners may be connected enough to help you navigate certain organizations you may want to partner with. Again, they're not super effective here unless they have a deep understanding of that organization via direct experience or through their network. A good example of this is we have a board observer that worked at a large late stage company who runs a similar business model to us and he'll share insights on how they approached specific problems.

acardboardmonkey

26d

Perfect example as to why so many funds aren’t competitive on deals, and how specialized small funds can get involved due to their roledex

Authored by: Certified Private Equity Professional - PartnerCertified Private Equity Pro

mech60

28d

We do very little. no hiring guidance, our partners would never interview an exec for the portco. If they need an introduction, we do that. mostly partnerships and strategic help, emails and phone calls. that sort of stuff.

board roles are often observer position only. rarely would our team members spend more time working for the portco

Authored by: Certified Venture Capital Professional - Associate DirectorCertified Venture Capital Pro

Determined

28d

Are you later stage focused? When I was in late stage VC (Series B+) partners hardly did much in the form of portfolio support whereas earlier stage teams are a bit more hands on. Some seed-focused funds will even meet with founders weekly to maintain accountability.

mech60

28d

we do some seed (rare), early stage, up to round A/B
Our selection of portcos is based on management/team more than anything else, so we trust in their abilities more than other VCs. weekly meetings or anything would never happen.

at the end of the day we are betting on the startup's ability to handle almost any scenario being thrown at them. what are we supposed to do in their niche industry? not much.

Authored by: Certified Venture Capital Professional - Associate DirectorCertified Venture Capital Pro

VC_since13

27d

VC value add is highly overrated, and most don't add any meaningful value. That being said, there are 3 main areas where they can move the needle in the right direction:

1. Exec hiring: a well networked VC can help make the right intros to the right execs (CFO, Head of Product, CMO, VP Eng, etc) who ordinarily would not be easy for the founders to get.

2. Next round investor intros: VCs all know each other. We help founders get warm intros to folks at later stage funds to get them in the pipeline for the next round. We also try to bat for them with those investors, leveraging our social capital to do so.

3. Customer intros: VCs in B2B are usually well networked with founders and execs of other startups, as well as F500 execs that could be potential customers of new products. We help broker those intros to help foundres get early customers.

Authored by: Certified Venture Capital Professional - PartnerCertified Venture Capital Pro

sebastiankrtp

27d

From what I’ve seen interning at a few very different funds, it really depends on the industry the VC specializes in and their position within the firm.
Most of the time though, at least with the VC’s I spent time with, (and note: I myself am not a VC, I just happen to have witnessed many around me) essentially just constantly connect the company with others.
Some VC’s will stick to the bi-monthly google meet check up, others (especially in rapidly evolving markets) will be in constant contact, usually bringing someone from the start-up on calls with other companies that the fund is also investing in for eventual networking or cooperation.

BangarangPanda

25d

Obviously this varies from firm to firm, but VC's can do a lot for portfolio companies. The investor/board member and the platform team in ideal cases work together as a 1-2 punch.

Strategic Partnerships: Investors and their platform team help portfolio companies navigate companies and organizations they want to be partnered with. This seems to be more common with CVCs
Customer Referrals: Similar to Strategic Partnerships, investors and platform team use their network to provide warm introductions to large customers
Hiring & Scaling: A senior investor would help a lot with working with the founder to determine the ideal time to hire certain roles and the ideal background of candidates. A platform team can help portfolio companies sort through leads, determine title and compensation package, and refer to executive search firms if needed
Marketing: Through both internal and external platforms, the VC firm can facilitate different ways of publicly marketing and promoting the portfolio company. Get the founders in articles, podcasts, videos, conference panels, etc.

Items that are more exclusively in the realm of the investor/board member would likely center around fundraising and board activity

Example Scenario: Assisting with lining up the next round of funding through leveraging reputation and personal network. Can also provide founders with insight on how each potential investor operates and their reputation.
Example Scenario: An insider may open round negotiations with a low valuation and strange structures (warrants and stuff). All other insiders strongly oppose the warrants so the insider withdraws the warrants but keeps the low valuation and mentions they will not pay more. Other insiders do not push back on the low valuation due to being happy with the "clean term sheet". As a board member, you could demonstrate leadership and value to founders by putting forward a competing term sheet that raises the valuation and forces the initial lowballing insider to hike their valuation too. This is the kind of board politics that raises your profile with both the founder and other co-investors on the board.
Example Scenario: Replacing an underperforming founder. It's not pretty and generally avoided, but in rare cases investors will need to build consensus on the board and finding a resolution or replacement.
Example Scenario: Like it or not, most startups fail. Guiding a company towards termination when the writing is on the wall is a pretty informative experience.

That being said, I've seen lot of successful portfolio companies that really don't need any investor help at all. In that case it is best let our winners run, there's a such thing as over-meddling. For context, I work primarily in the Seed to Series B space.

Authored by: Certified Venture Capital Professional - Investment AnalystCertified Venture Capital Pro

Jason1982

13d

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