I’ve written about how traditional VCs add value before. However, there’s a trend I did not to mentioned: top VC firms are now going one step further to help entrepreneurs. They are becoming more entrenched in portfolio startups’ operations, having a bigger support role in their daily lives.
Traditional VC partners have been supporting their entrepreneurs with their network for a long time, helping them get access to corporate clients, potential business partners, and naturally, at a later stage, acquirers. They also have been helping with recruiting, mainly by supplying a brand for a startup (e.g., working for a Sequoia-backed venture is cool), but also by sharing job opportunities on their website.
VCs are now taking ple to t ups and leverage on their internal knowledge. For example, when it comes to recruitment, some VCs are not only putting job offers for portfolio companies in their websites, they are taking a more hands-on approach in the recruitment process. Google Ventures is an example of this. On top of helping portfolio startups with recruiting sourcing, they also have a custom approach that includes specific recruitment workshops and training. Another example of a VC firm helping their portfolio companies with recruitment is Kleiner Perkins, that created specific internship programs (i.e., KPCB Fellows), to try to match promising engineers and designers with startups they invested in.
Some VCs are now further supporting their portfolio companies with market research, validation and trends. This is happening since VCs are already trying to analyze the market for validation and adjustment on their own investment thesis, and thus part of that information is easily sharable and useful to portfolio companies. Additionally, with several startups in more or less the same field, specific market information is interesting to more than one company. First Round Capital even has “Venture Concierge” to answer questions that require one-off research.
VCs are also taking one step further by supporting their portfolio companies during the execution stage. For example, First Round Capital has a platform for entrepreneurs within their community, that includes ratings and reviews for common service providers such as accountants, lawyers and PR Consultants. According to their website, they already have over 500 providers and 1000 review on their platform. Sequoia, on the other hand, is helping their portfolio companies to expand internationally, by leveraging on their offices around the world, from Israel to China. Google Ventures is probably the VC firm that has the most services to support their startups during execution. I believe they were the first doing this, by having a team of engineers helping startups to scale. In more recent times, Google Ventures created the Design Studio team to help their portfolio ventures with product and website design.
In the end, why are we seeing these trends for added value services? I think this is mainly a combination of two factors. The first is the ongoing search for differentiation factors that VC firms go through. This becomes more relevant for competitive deals with top entrepreneurs. The second factor that contributes to this trend is the fact that some of these VCs are entrepreneurs themselves, and continue to naturally rethink their business (i.e., Venture Capital), in order to better serve their clients (i.e., the entrepreneurs). There is an enabler for this trend: the available cash at VC firms with big funds to manage, thanks to management fees.
Chris Dixon has hinted at this trend before, and elaborated on this topic again this Monday, as he confirmed he’ll be departing to the West Coast to join Andreessen Horowitz. As an outsider, this move makes a lot of sense for both parties, as the former is known for being hands-on, and the latter for having a supportive culture regarding their portfolio companies and the startup community in general. I think it also fits the overall trend in the market, regarding VCs becoming increasingly contributive to their startups.