10 things VCs can do to differentiate themselves and provide more value to potential investments – based on feedback from dozens of entrepreneurs. This is the second part of the Entrepreneur’s Wish List.
Entrepreneurs use a variety of fundraising sources when looking for many. Depending on the stage of the company, sources may range from FFF (Friends, Family and Fools), angel investors, incubators, startup competitions, grants, crowd funding and off course, VC (though often a last resort in the earliest stages). Despite the VC’s obvious disadvantage in the early stages, marketing and differentiation of venture capital funds is limited today. So what makes one VC fund be better perceived than others?
Earlier this month, VC Cafe published the Entrepreneur’s wish list from VCs, a collection of things that VCs can do to better serve their ‘customers’. In this part, we will cover a list of things venture capital funds can do, to better represent themselves, create differentiation and better serve their portfolio companies and potential investments.
Below is a list of 10 action items for VCs seeking differentiation and added value:
- Create a blog and keep it updated – blogs are useful if they are updated and honest. It’s important to take a stand and share your opinion with entrepreneurs. Fred Wilson and Chris Dixon are two examples of how maintaining a blog can build trust and send a clear message. Also, the clear benefit of Fred Wilson’s blog is the comment section. This is a huge source of feedback for Fred. On the flip side, how many of the VCs don’t even have a blog?
- One entrepreneur suggested to emphasize short and sweet posts and not all deal driven coaching. Mark Suster has been doing a great job on this front in his blog and as a guest author on Techcrunch.
- Be a data source – the data flow between a VC and a startup doesn’t have to be one-sided. VCs should aim to provide comprehensive data to their portcos on industry benchmarks, burn rates, market research, competitive analysis, etc.
- Regardless of if you plan on investing in a startup, honest feedback is important. Imagine what feedback your fund would get in Thefunded.com if you provided entrepreneurs with a one pager feedback after a pitch?
- Recommendations – several entrepreneurs mentioned they would love to see VCs publicly give more reccomendations on services they trust and events they get a lot out of. Not going to invest, no problem – provide value by giving a few helpful tips at the end of each meeting.
- Facilitate networking – host monthly or bi monthly roundtables for your companies and entrepreneurs. Create events around guests arriving from abroad or experts in a vertical area. When is the last time you got all your CEOs or CTOs together? Can they teach each other something? Be the facilitator of informal meet-ups.
- Emphasis on the “right” networking not just group drinks in your office twice a year. A few entrepreneurs mentioned that most introductions they get from the VCs are meant to help the VC, not the portco – don’t abuse or mask ‘networking’.
- Tweet – many people didn’t care/agree with this, but still think it’s important, from both a presence point of view and for participating in a community, since your teams and potential investments are probably there too. Have nothing to tweet about? what about all those portfolio companies?
- Benchmark – Use the information from all your investments to give entrepreneurs data about salaries, price for marketing, etc. Index Ventures recently did a survey amongst all its portfolio companies on the tools they use regularly. The same can be done on the HR front and on other startup related services.
- Nominate and alert startups of award competitions, trade events etc – winning an award, however small can really boost morale for an early stage startup – show them they can win!
- Be a mentor – the pressures entrepreneurs face go beyond the professional, financial of technical levels. They are often overworked and entrepreneurs could use a hand sometimes. Mentorship can come in all kind of flavors, and the level of necessity also depends on experience (both of the VC and of the entrepreneur).
- Make the transition/translation from cool tech to cultural asset– help show how the tech can play a wider and compelling role in people’s lives so it moves beyond niche and fad to mass and everyday. Brand agencies can help with this.
- Your website is your brand – How many VC websites are simply boring, corporate looking pages? Without knowing a fund or a partner personally, the website is the main point of information for an entrepreneur looking for investment. Few funds have got vaguely right (like Sequoia, Index and Accel) but there’s still lots to improve. SUBMIT BUSINESS PLAN should be visible, and FREE RESOURCES would be a nice addition, don’t you think?
- Teach – we all love learning – it makes us better in what we do and enriches our day to day jobs. A great differentiator for VCs is the opportunity to get closer to the values provided by incubators – share what you know and use your network of mentors to teach entrepreneurs sales, marketing, scalability and all the skills they could use to make a startup into a large company. Partnering with a business school shouldn’t be out of the question….
In a nutshell, marketing, or client relations of VC funds are one of their weakest spots, and an area where incubators like Y Combinator and Techstars are kicking ass today. Venture Capital funds are brands too, and unfortunately for them, they are leaving a lot of value on the table.