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Five portfolio management tips from venture capital veterans

Venture capital is often referred to as an apprenticeship business because so much important learning comes from day-to-day experiences. Yet, as an article published by the Business Development Bank of Canada (BDC) explains, you can shortcut the learning process by learning from experts: “Your learning curve can be shorter—and your results better—if you learn from pros who’ve already mastered key … ... read more

Startups Venture Capital

How to Empower Your Portfolio Companies For Success, According to Top VCs

By Rebecca Hinds
How to Empower Your Portfolio Companies For Success, According to Top VCs

VCs can add value to their portfolio companies in a multitude of ways. The most promising and successful VCs offer value-added services that are as impactful as monetary injections.

According to TechStars, one of the most important gifts a VC can bestow on its portfolio companies is a lucrative network.

"Venture capitalists tend to be networking machines. Their success often depends on it, and the day to day reality of their work means that they meet up to 10 new people every day...As an entrepreneur, you should exploit this network unashamedly".

We recently sat down with a managing partner at a premier Silicon Valley-based VC firm. We discussed the benefits and importance of VCs leveraging their extensive networks for the benefit of their portfolio companies.

Top VCs emphasize five key types of relationships:

  • Introductions to prospective customers
  • Introductions to thought leaders and industry experts
  • Introductions to potential co-founders
  • Introductions to other VCs (who might partake in future funding rounds)
  • Introductions to potential new talent

VCs must actively consider and prioritize proper “network hygiene”. There are two aspects of network hygiene: network maintenance and network growth.

First, VCs should actively maintain (and, ideally, continually strengthen) their existing relationships. By tracking the frequency, recency, and strength of one’s interactions with network contacts, VCs are primed to effectively maintain key relationships.

Second, VCs should strive to develop new network connections. Organizing community meet-ups and networking events and actively reaching out to existing relationships for introductions new contacts are both effective network growth tactics.

It’s also prudent for both VCs and portfolio companies to track the status of key network relationships. Top performing VCs go the extra mile. They actively monitor the stage and maturity of their portfolio companies’ relationships and networks.

If a portfolio company is engaging with a potential customer, for example, they’ll track and monitor what stage they are in the conversation (e.g., initial conversation, demo, contract evaluation).

The most successful VCs proactively think about how they can leverage their network to the benefit of their portfolio companies. Jalak Jobanputra, founding partner at FuturePerfect Ventures, explains, "In the back of my mind, I'm always thinking of introductions...Even if I'm not in meetings I'm thinking of how I can help the company.”

Relationship building is a two-way street. In addition to VCs thinking judiciously about which of their network connections can benefit portfolio companies, portfolio companies must also actively reach out to VCs and solicit warm introductions.

Tools such as Affinity can be invaluable. By forming an Alliance with investors, portfolio companies can easily identify promising potential customers, co-founders, hires, and other third parties and determine which VC partner is best able to facilitate an introduction.

In the context of networking, several VCs highlight a critical limitation of traditional CRM systems. Most CRMs are built to facilitate transactions, rather than relationships. Traditional CRMs are primarily focused on building pipelines and funnels and on “getting to point X”.

Meaningful relationships are far more complicated. They should not be viewed as transactions. CRM systems that move from a transaction-focus to a relationship-focus are the foundation for building long-term relationships and powerful networks. The objective is not one of getting to one fixed endpoint. Relationships are enduring, fueled by trust and dependent upon nurturing.

Startups Venture Capital