Entrepreneurs should view their investors as part of the team that can help bring resources to your company. While some investors are more ‘hands on’ than others, some VC’s will remain passive unless you have a specific ask. Having a well-diversified investor base, with multiple VCs on your cap-table can be the difference between success and failure in raising follow on rounds.
Resources and networks from 10 micro-VCs will far exceed one large VC. Both in terms of reach, but access to other resources as well. When done well, access to other portfolio companies in each micro-VC’s fund can create massive amounts of value.
As Venture Capital firms perform due diligence on companies. CEO’s should also do research with the same vigor to learn more about their investors.
Investors will be happy to answer questions such as, time it takes to make a decision, investment amount, follow on strategy, type of involvement with management team, level of communication expected, and return expectations.
Having quality VCs with nationwide access on your cap table can attract the right investors to your company and be a leading indicator of success.
Here are some key areas venture capital firms can help early-stage companies other than just capital:
A benefit of having an established VC on your cap table is that there can be synergies between other companies in their portfolio. A commonality in customer base can initiate cross selling opportunities.
Often times corporations sponsor startup events co-hosted by VCs to encourage entrepreneurship. Such events could be a good way to connect with relevant innovation teams to pitch your product.
An important part for customer introductions to work is understanding the needs of your customer. Large companies tend to disclose their strategic vision or focus areas for the next year/quarter or decade in some cases, for example look at Google’s AI first vision policy. Knowing that your customer is looking for a product like yours makes it easier for VCs and advisors to connect you.
Most VCs have an extensive network of talent from some of their past portfolio companies to people that are looking to work for the next exciting thing. VCs also have an extensive rolladex of service providers such as part-time CFOs, offshore technical teams and hiring agencies that can help you setup a robust team.
So, don’t be shy when asking for help from your VC investors.
Investors writing a larger check will be more involved with the company, these are usually lead investors that serve on the board and also help the company in an advisory role.
Minor investors such a Micro VCs could also play an outsized role in some cases, especially when these investors invest in specific industries or if lead partners in your deal has a specific industry experience and skill set.
Most investors would be happy to help, if you have a very specific ask and if they are in a position to help. Our recommendation is to err on the side of caution and ask all your investors for help, if they can help they will, if not they will let you know.
Most VCs thrive on syndicating deals with other VCs, as this helps them gauge investment interest and helps putting more investors around the table to help an emerging startup. Especially in undercapitalized markets (markets outside of SF, New York and Boston), this has lead to a very collaborative environment among VCs. This tends to shorten the time for fundraising and outreach as VCs tend to organically share their best deals with other similar minded VCs, which means the CEO has more time to run their companies.
Having a well networked VC as an investor/lead investor can be a huge benefit when the company needs more capital and new investors intros. This is an important aspect that founders have to focus when they are looking to raise larger and larger subsequent rounds to fuel the company’s growth.
In the startup world, keeping the company alive and making payroll is vital, so building your investor base is important for the long-term sustainability of your company.