Venture capital isn’t just about making deals. Once you convince an entrepreneur to take your money, then you have to figure out how best to support her or him, whether it’s by helping to hire talent, land customers or providing personal coaching.
Offering value-add services to start-ups and founders became a critical way for managers to differentiate themselves from their peers during the bull market. Compared with prior years, the nominations for this year’s Rising Stars list included more people who work on platforms. We chose six platform/talent stars to appear on our final list of 40, up from just two last year.
“It’s become table stakes to offer these services,” Annie Shapiro, vice-president of platform at New York’s Inspired Capital, tells Venture Capital Journal. Shapiro also sits on the board of the VC Platform Global Community, which includes representatives of 800 VC firms in more than 40 countries.
“Twenty percent of community members work for funds with under $100 million in AUM, so this is not just reserved for mega-funds that have larger budgets and large teams,” she says.
Community members’ biggest responsibilities are in marketing, operations, community building, talent and business development. With talent, for example, “there’s a new expectation among founders that best-in-class [venture] firms will be able to hire critical folks on their team over the course of building their business,” Shapiro says.
Those core functions have grown exponentially year over year since VC Platform Global Community’s launch in 2016. That’s reflected in more than 1,000 applications received this year, of which about 400 became members. This past year the community became a 501(c)6, which is a nonprofit trade association.
“The idea now is thinking about VC platforms as a trade,” and elevating the role, as more people enter this career path for the first time, says Shapiro. Among other functions, the community provides an online forum where members can share ideas and recommendations.
Most “platform functions” focus on supporting start-ups’ growth and success. More recently, though, some venture managers have been focusing not only on these but also on how to ensure the success of founders and their team members as people.
When Cristina Apple Georgoulakis was accepted into Seven Seven Six’s operator-in-residence program, she didn’t like the lopsided power dynamic between VC managers and founders in the industry. She created the Founder Outcomes program to ensure founders get the resources they need not only to develop in their roles but also to help with their personal development.
“Founders need to uplevel very quickly if they want to get to their next raise in funding,” notes Georgoulakis, who appears on VCJ’s 2023 Rising Stars list.
Those who haven’t managed a team before are in need of management training, for example. “We know there’s biases in who gets money,” Georgoulakis says. “But once you’re in a firm, there’s also a bias as to who gets resources and opportunities. Quick judgments are made about who will sink and who will swim.”
A key aspect of Portland-based Rogue Venture Partners’ commitment to its founders’ success has been using some of its management fee to offer founders personal financial coaching and a small family stipend. Managing partner Caroline Lewis wants to align incentives and create intentional cultures – something she finds largely missing in the venture industry.
In addition to contributing part of its management fees, Rogue plans to put up to 10 percent of its carry from its second fund (which is targeting $30 million) toward the wellbeing of its founders, who are mostly women. Lewis is sensitive to the heightened anxiety that comes with being a leader and building a firm. “If we can help mitigate mental, financial and familial challenges, [founders will] be able to bring their whole selves to their work and be more successful,” she says.
Palo Alto-based Felicis Ventures also prioritizes helping start-ups create durable cultures. For all of their tech expertise, product intuition and go-to-market savvy, many founders have comparatively little understanding of how to develop talent and operations for the future, says Dasha Maggio, partner and head of the firm’s Founder Success program.
One of Felicis’s operating partners with extensive recruiting experience helps founders consider how to build a high-performing culture that “provides for thoughtful scaling” of their teams, Maggio says.
As part of the founder development pledge that Felicis launched in 2018, founders get an additional 1 percent of the amount invested in their start-up to put toward personal coaching or wellness resources.
One CEO was intrigued but didn’t know how to invest in himself, Maggio recalls. “I helped him find the coach he ultimately ended up working with. After a few months, for him that coaching experience was transformational and led him to invest in coaching for his leadership team.” The CEO also organized a weekend coach-facilitated peer circle for other founders in his network that were in earlier stages of their journeys.
Personal vs company success
Mental health at work became a bigger priority during covid amid the added pressures of isolation and working remotely. San Francisco-based Builders VC is among a handful of firms that recognized it even before the pandemic. For more than six years, it has had a venture partner with a doctorate in counseling on staff, Johnny LaLonde. He works at B2, the start-up studio through which Builders provides value-add services to its founders.
Keeping these services separate from the VC firm’s fundraising activity is how Builders founding partner Jim Kim ensures that communications between founders and staffers like LaLonde remain confidential. B2 studio services are funded with the management fee Builders collects from founders.
“Having that separation enables true collaboration between the studio team member and a founder,” without fear of the VC firm intruding to weigh in on any business matters that may arise during discussions, Kim tells VCJ.
In addition to mental health counseling, B2 provides leadership coaching from a former Navy SEAL team leader and data analytics training by a specialist who helps teams early on understand the importance of proper data collection procedures and the insights they can generate.
Managing a team working remotely highlights the need for expanded leadership skills.
“The social side of being a leader has grown in importance and changed,” while the skills founders call upon to manage the technical side of their companies have remained largely the same, Kim notes. “New needs have arisen as a result of a different work environment and stressors outside of work.”
The core of Cathay Innovation’s value proposition is the strategic partnerships it fosters between some of its corporate investors and certain portfolio companies. Cathay, based in San Francisco, is a multistage fund that backs start-ups across the world with an eye toward sustainability.
After getting to understand their corporate partners’ and founders’ business goals, Cathay’s investment and business development teams identify potential symbiotic relationships and opportunities for collaboration, says Denis Barrier, Cathay’s co-founder and CEO.
Cathay’s partnerships have also been a source of in-house expertise. Its chief impact officer, Matthieu van der Elst, who previously founded Michelin’s corporate venture arm, helps some start-ups in the materials and mobility spaces better understand and develop sustainable innovative technologies and new business models to fuel their growth.
Recruiting talent has long been a way that VC managers have helped their portfolio companies, but some firms are now taking that up a notch or two. Icon Ventures, a Palo Alto-based investor in start-ups focused on security, consumer/SaaS, data and AI, and digital health, is making it easier to recruit engineering and other talent from other parts of the world as companies scale, including by helping some incorporate in Canada.
Between an aging tech workforce (30 percent is expected to retire over the next 10-15 years) and slow growth in the number of US students graduating with relevant degrees, the search for tech talent has gotten much more competitive, says Armand Obreja, Icon’s Toronto-based talent manager for Canada, who appears on this year’s Rising Stars list.
Opening offices in Canada expands the tech talent pool for the US companies that wouldn’t otherwise consider hiring there, he notes.
Toronto and Vancouver are among the North American cities that added the largest number of high-tech software and service jobs between 2020 and 2022, according to a recent CBRE report.
Icon helps start-ups make the right connections, find their first hires and incorporate in Canada, providing advice on legal matters, tax credits and which universities to scout for talent, Obreja says.
New York’s AF Ventures helps its portfolio companies hire for open positions in sales/marketing and manufacturing. Its companies all develop consumer products ranging from food and beverage to beauty, health and wellness and pet care. This year, AF’s start-ups posted more than 200 jobs to the jobs board it created, says COO Alex Wolf, who appears on this year’s Rising Stars list.
Posted jobs also filter through to the much larger network of an organization that AF partners with, focused on the consumer products industry, which attracts more than 200,000 job candidates and 700,000 monthly page views. “It helps get the word out,” Wolf notes.
AF also encourages cross collaborations within the portfolio, which were especially helpful early in the pandemic. In March and April 2020, some of AF’s start-ups asked retailers to check with their sales representatives about whether there were opportunities to get fellow portfolio companies’ products on other retailers’ empty shelves.
The value-add proposition for firms such as New York’s Revere Partners is baked into their specific industry experience. Founder and managing partner Jeremy Krell is a dentist with a broad network of oral health connections. He backs start-ups aiming to make that field more efficient and better equipped to serve patients’ and other stakeholders’ needs. Revere has so far invested in 28 start-ups that are innovating regenerative materials, payment systems and other aspects of the dental industry.
The founders of oral health tech companies “want a VC who can speak in both languages and understand the industry,” Krell tells VCJ.
Revere can also bring co-investors from the oral health industry into deals with start-ups that facilitate a founder’s go-to-market and risk mitigation strategies, Krell adds. “All of a sudden we have some 900-plus [dental] practices that theoretically could use these things,” provide expertise to help start-ups reach real scale in manufacturing and expedite adoption.
The platforms VCs provide for founding teams to share knowledge with each other are especially useful to start-ups in isolated or undercapitalized regions without much of a local community to tap into. When covid hit, it became all the more critical for start-ups even in larger metropolitan areas as in-person gatherings were largely shut down.
During the pandemic, Cathay developed a digital platform and app to help its start-ups’ teams share insights and track opportunities. Introductions over webinars, Zoom calls and small topic-driven events have enabled those in the buy-now-pay-later space at various levels of development and in different regions to benefit from each other’s experiences, Barrier notes.
Lewis at Rogue convenes founders over Zoom calls and hits a prompt allowing them to join different breakout rooms without joining any of them herself, “so they feel they have more freedom to share,” she says.
She also hosts “non-agenda offsites” in places such as Utah’s Deer Valley ski resort that enable founders to engage with each other if they want or go for a hike and enjoy their personal space. Showing up for dinners and other activities is optional.
The co-founders of one of her start-ups who came to the offsite early told Lewis afterwards it was the first time since launching that they had a chance to be together just as friends.
The increasing specialization of platform services and greater attention to intentional culture building and entrepreneurs’ personal wellbeing may signal a tipping point in the maturation of VC as an industry.
Shapiro of Inspired Capital cites job titles such as “head of founder community” among the VC Platform Global Community’s membership as evidence that VCs are taking a more holistic approach to managing their portfolios.
The goal is to “have an outsized impact and value of idea sharing across the portfolios, so each company is not learning its own lessons in a silo but can take shortcuts to supercharge their journeys based on the broader knowledge of the firm,” she says.