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6 Steps for VCs to Better Support Their Portfolio Companies

Kison Patel
Kison Patel

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

CEO and Founder of M&A Science and FirmRoom

Venture capital firms (VC) play a crucial role in the success of their portfolio companies. If investors expect their port-cos to hit a home run, they must provide more than just cash to build a thriving business.

As most investors can attest to, a VC's greatest value is no longer the checks they write.

VCs can provide strategic guidance, operational support, and their network to help early-stage startups grow and succeed.

This article will go over 6 ways venture capital firms can better support early-stage portfolio companies.

1. Build Strong Relationships with Your Portfolio Companies

As an early-stage venture capital investor, be ready to roll up your sleeves and get your hands dirty.

By creating a positive and productive working relationship with your portfolio companies and their founding teams, you can add the most value and earn your spot as a mentor and trusted advisor to the founding team. To do this, you and your team need to take the time to build relationships with the company stakeholders and understand what their main challenges are.

There is a fine line between working with the portfolio companies and meddling.

We recommend you provide advice and be a cheerleader and a mentor, not the decider. That is the job of the founder and CEO. To foster a healthy and successful working relationship with your port-cos, you and the founding team should understand the relationship dynamics from the get-go.

2. Offer Access to Resources

Other than funding, access to resources is one of the most important ways to add value to  portfolio companies. "Resources" can take many forms, from a relatively hands-off approach to a very dynamic hands-on approach.

The best resource you can provide a portfolio companies is your firm's network. An introduction to a new customer, key hire, or  new investor can positively affect the trajectory of a portfolio company and mark the difference between an ok investment and a home run.

As a VC, your job is to provide founders with impactful value-add connections to take their companies to the next level.

Below is how you can leverage your network to help your portfolio companies scale and grow.

3. Making Customer Introductions

Early-stage companies need revenue, and introducing them to potential customers can add tremendous enterprise value to the company, thereby increasing the value of your stake in the company.

To unlock the power of your firm's relationship network to help portfolio companies find customers, you need a relationship intelligence CRM, like 4Degrees, that gathers all the information and work experience of your firm's network to help you answer this question in just a few minutes, "Who in our team knows a senior executive at X company that we can introduce to our portfolio company?"

4. Help Obtain Additional Finance

A crucial job of an early-stage investor (Seed, Series A, etc.) is to assist their portfolio companies in raising additional funding. Due to the collaborative nature of the VC ecosystem, you can easily share your best deals with other firms and make the necessary introductions.

By facilitating introductions to other funding sources, the founding teams now have more time to run their company and build their business instead of lining up meetings and introductions with additional investors.

Access to your firm's entire relationship network under one roof allows teams to easily filter by investment stages, area of focus, and other parameters to find the right investor to introduce to your portfolio company.

For example, if you need to see all the Series B investors in your firm's network that invest in Martech SaaS, you can do it in a few seconds instead of emailing and asking your colleagues.

5. Help Companies Find and Hire the Right Talent

Execution is everything, and having the right people on board is vital for the success of every early-stage venture.

As an investor, you don't only provide a list of names to your portfolio CEOs. Instead, you should make meaningful introductions to high-quality talent in various disciplines, from engineering to marketing to finance.

When working with early-stage companies, you can add even more value by offering support with the hiring process; this includes everything from advising teams on how to assess candidates to helping them develop compensation packages to attract the best talent.

If your firm does not have a dedicated platform team, leverage your network to introduce companies to potential candidates or recruiters specializing in what they need. By leveraging relationship intelligence, you can find that elusive product manager with experience in NLP that your portfolio company needs to get to the next level.

It's just as simple as running a search on 4Degrees to see who on your team is connected to said PM and can make an introduction.

6. Create a Community

As an investor working closely with a group of early-stage portfolio companies with the same goal of growing and scaling up, you are in a great position to build a vibrant community.

By devoting the necessary time and resources to fostering a community, you will provide your firms with a layer of support and resources they can tap into and learn from each other.

The form your community takes will vary depending on multiple factors; for example, you can have a founder community where all the founders meet a few times a year at an offsite to network, listen to guest speakers and learn from each other. By facilitating these peer-to-peer connections among your portfolio companies, you can set yourself apart from other VCs that don't focus on the ever-more important community and platform aspect of VCs.

The key to a successful community strategy is focus, so we recommend starting small and building your community based on feedback from your portfolio companies. The goal is to provide value to the portfolio companies, so flexibility and iteration are crucial when building a community.

Writing a check cannot propel early-stage companies to the land of unicorns. As a venture capital investor, finding ways to offer value to portfolio companies to increase their odds of success is your job. By having access to a relationship intelligence platform, you will punch above your weight by introducing your portfolio companies to the right people at the right time.

To discover how you can empower your portfolio companies and provide them with more value, click here to schedule a demo of 4Degrees.

This article was written by Alex Fish from 4Degrees.

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