Spend the Currency Which You Have
As a VC your core asset is the people you know; don’t hoard them, put them to work by paying it forward.
Venture Upward is a field guide for surviving, getting ahead, and succeeding as a venture capitalist. Created by David Beisel (@davidbeisel) and Rob Go (@robgo), it's written for non-partner VCs working their way through the ranks. We’re interested in your input — what other questions about VC do you want answered (anything is fair game), what feedback do you have on our writing thus far, and what potential investments should we be looking at? Feel free to share with us on this form, anonymously or not.
VCs are known for their networks. It’s one of your core assets, along with accumulated experience in pattern recognition — both about companies and the situations they find themselves in.
Your assets are valuable insomuch as they support and attract entrepreneurs. And what do entrepreneurs care about? Put simply: building a great product, assembling a world-class team, finding lucrative customers, and... not running out of money. Unless you have an operational product background as a junior VC, you’re likely not going to be able to directly help founders in creating a great product. However, you can, and should, be able to help in the latter three areas by leveraging your network.
Don’t wait for someone to ask you for help, instead, think proactively. Brainstorm how you can help a startup, either existing portfolio companies, or, even better, founders whose trust you’re earning so to bring them to the table for your firm.
First, don’t worry about perhaps not knowing potential senior people to help fill leadership roles... almost all startups are looking to fill engineering positions, and most growing ones benefit from salespeople and/or marketers early in their careers with relevant backgrounds. So when your friend is ready to start looking for their next job, it can be mutually beneficial to play the startup sherpa to help find her next gig at a startup that’s in your orbit. Better yet, you can supercharge your network of software engineers by spending time going to developer meetups that other VCs are not. It takes legwork, but will pay off in spades.
Along similar lines, often the best early customers for B2B startups are other startups. If you’re doing your job well, you already know plenty of startup founders. Nothing earns more credibility than introducing an entrepreneur to their next paying customer. Honestly, the size of the new account doesn’t matter much, as even a prospective customer intro leaves a lasting impression. For consumer-facing startups, unabashedly evangelizing a product or service within your network or on social media is a salient way to earn chits with entrepreneurs, too.
Lastly, the only way companies don’t run out of money before receiving substantial customer revenue is by raising capital. Obviously your role as a VC with the first two of the above activities in recruiting and business development is to serve the third: cultivate relationships with founders ahead of when they’ll fundraise for their next round so that you’ll be in a position to escort them through your own firm’s investment process. The best way to position yourself to win what’s likely going to be a competitive upcoming fundraising process (especially as a non-partner VC) is to act as if you’re already an investor and help the company with recruiting and customer sales.
However, more often than not, the spadework you put into helping founders doesn’t come to fruition. Sometimes it’s genuinely not a fit because of the round profile, and often the company isn’t as attractive as it first appears after conducting diligence. Quite frequently, you’re just not able to convince your senior partnership that this opportunity outstacks the others in the firm’s funnel.
Importantly, don’t let a trusted relationship with an exceptional founder fundraising expire — offer to put her in touch with other VC firms once your own firm’s process has ended. Hopefully you’re already planning your next VC career move and have been cultivating relationships with a half-dozen or so GPs at other firms as mentioned in a previous post. Think about building your own deal flow not just to funnel into your own firm, but also to funnel into those firms who you may work for in the future. Despite the fact that it clearly benefits you, it isn’t a selfish act to introduce a fundraising founder to another peer VC fund if it’s not going to be a fit for your own firm.
Your key asset as a VC is all of the people you encounter in the startup world as you’re navigating it, trying to find that special company to steer through your firm’s investment process. Systematically making those mutually beneficial connections even when it doesn’t yield immediate benefit will lay the foundation for the benefits to eventually boomerang back to you.