VC value add: trends and challenges

In recent years VCs have been rushing to add value by hiring non-investors to help their portfolio companies. I touched on this subject last week when I wrote that Capitalism is being replaced by talentism. This week I want to talk a little more about what VCs are actually doing.

This is a list of the funds that are working hardest to add value beyond capital, strategic advice, and the partners’ contacts. These are just the ones I know. Please shout if you know other examples and I will update. (Note: I haven’t included accelerator programmes or incubators. They do add value, but they are different to venture funds.)

  • Andreessen Horowitz: organise executive briefings where portfolio CEOs meet senior execs at potential customers, have a large talent function to hire for their companies (and have built software to support it), have staff dedicated to helping portfolio companies network effectively
  • Google Ventures: has teams that help portfolio companies with design, engineering, recruiting, marketing and partnerships
  • First Round Capital: built a software platform to help entrepreneurs collaborate, have a talent team, run a large number of events for their portfolio
  • OpenView Partners: has teams to help their portfolio companies with recruiting and sales and marketing
  • Index Ventures: has a ‘platform team’ of nine people, key activities are organising functional support communities for their portfolio execs and running events
  • Greylock: have a data scientist who helps their portfolio
  • NextView Ventures: have a director of platform
  • True Ventures: run an undergrad programme
  • Spark Ventures: have a director of platform, primary activity seems to be events
  • Founder Collective: hired a journalist to help their portfolio with PR
  • Playfair Capital: recently hired a Facebook recruiter to hire for their portfolio
  • Balderton Capital: have a head of PR and content, a data scientist, and a talent and development analyst
  • Frontline Ventures: have a head of platform

And there’s us. Forward Partners has a team of eight to help our partners with product, design, development, customer acquisition and recruitment.

That’s the activity. The major trend is that there’s more and more of it over time.

The challenge is that it’s hard to find ways to make a difference, particularly across a large multi-sector portfolio. Jay Acunzo, director of platform at NextView Ventures recently wrote on Techcrunch:

In the last three months, every frustrated director [of platform, at a VC] I’ve met with (and there have been multiple) had the same complaint about a lack of focus confusing their work and yielding generic-sounding, ineffective projects.

As I wrote last month, focus is one way to address the challenge. We only invest in early stage ecommerce companies so there is a lot of commonality in the problems they face and we have built a team focused on those areas. OpenView partners has done something similar for expansion stage software companies. As Joe wrote in his Techcrunch post, one option for VCs with less focused investment strategies is to build sector and stage focused value add capabilities.