How VC and private equity funds can launch portfolio-acceleration platforms

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I’ve recently advised a number of emerging venture capital funds that are struggling to determine the most effective steps they can take to support their portfolio companies.

Almost every private equity and venture capital investor now advertises that they have a platform to support their portfolio companies. The popularity of the model can be judged by the fact that the U.S. VC Platform community has grown approximately 120 percent in the last three years. Similarly, its European counterpart, the EU VC Platform, has tripled in the same period.

However, most of us don’t have the budget of an Andreessen Horowitz to support almost every major need of emerging companies. You could spend an unlimited budget on all possible company-building resources. “You can’t pick a platform strategy that’s unique, but you can pick a platform strategy that your firm can uniquely execute,” noted Maria Palma of REE Ventures.

I propose here a framework for prioritizing your platform buildout. Once you have assembled the right core team, I recommend prioritizing as follows:

First, meet with your portfolio company management. As an agenda for each meeting, I suggest:

  •  How can we most add value, in addition to helping with financing? (This is an open-ended query and the most important question.)
  • What are your fundraising goals?
  • What is the profile of people whom you are most interested in meeting?
  • From which service providers have you received the most value?

In a presentation at the 4th Annual VC Platform Summit, Nick Kim, Crosscut Ventures’ head of platform, shared their platform development methodology, which he viewed as an exercise in product development.

“Firms should match services to the stage-specific needs of companies,” Dan Kozikowski, partner and head of platform for FirstMark Capital, told me. “For example, recruiting writ large is useful at all stages of development. But things like vendor introductions are only needle-movers at the earliest stages. Similarly, customer introductions are invaluable in the early days, but become less valuable once a company has a fully formed go-to-market function.”

Then, pluck the low-hanging fruit: easy, low-cost, and highly scalable infrastructure. This typically includes:

  • Relationships with relevant service providers in your vertical, often with pre-negotiated discounts: coaches, lawyers, accountants, common software vendors, consultants. Generally, I suggest exploring BuiltFirst, Clutch, FundedBuy, Rocketplace and/or SpotSource. For negotiation with providers, consider Buyer. Alpaca VC shares their Master Agency List.
  • A well-organized library of best practices for founders in your vertical, which you can share as appropriate. First Search, Startup School and OneValley Passport are examples of comprehensive founder resources from investors. Ask Anything aggregates resources from all the VCs. I have developed a founder curriculum on my blog.
  • Relationships with venture partners, entrepreneurs in residence and other non-salaried personnel who can help your companies. Explore a roadmap of your options in working with outside talent.
  • Organize events in your vertical. Particularly when events are all-virtual, this is an easy and low-cost way to build trusted relationships with the leaders in your space.

I recommend building a strong internal tech stack to handle the deluge of requests for help you’ll get from companies as you scale. “The biggest investment of resources with our tech platform relates to the capturing and maintenance of data on our huge portfolio of 1,100-plus evolving tech companies,” Jeff Pomeranz, partner at Right Side Capital, said.

“For instance, tracking ‘months-of-runway’ combined with the month-over-month change to that metric allows us to rapidly identify companies that may be distressed. Adding full lifecycle data and industry exposure tags to that, across such a large number of companies, often enables us to see trends ahead of the market, such as retail decimation a few years ago.” Investigate ways to use technology and analytics to make better investments.

Beyond these steps, I suggest you apply a two-part test:

This content was originally published HERE

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