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Most people see a venture capitalist as an investor who provides capital to startups in exchange for equity. But that’s only partly true. Venture capitalists are typically looking for a high return on investment. However, this high return will be difficult to achieve without founders’ guidance, sharing knowledge, resources and experience – and even providing mental support.
Below I’ll highlight nine ways a budding venture capitalist should help startup founders after the deal closes, and these are exactly what sets a great investor apart from a mediocre one:
Related: What I Learned From The World’s Largest Venture Capitalist
1. Sharing mistakes
The VCs who are entrepreneurs and experienced doers bring in their valuable experiences and problem-solving skills that they possess after years of hitting hurdles in their own startups. But more importantly, while founders only focus on one startup, venture capitalists have invested in dozens so they can educate founders about the mistakes they’ve made in the past and the lessons they’ve learned from them. faults. They can help founders avoid similar situations. So keep in mind that founders get stronger when they are surrounded by other entrepreneurs from the VC’s portfolio.
2. Visibility and Credibility
If you are a VC backed startup, it means that someone is entrusting you with their money. That is a credibility criterion. In addition, if you are a VC-backed B2B software startup for your corporate clients, having already raised money means you are sustainable enough to fulfill the contract and you have plenty of starting job. This is also a good sign for banks if founders want to take out a loan – and it goes without saying that founders are on the radar of VC companies in the growth phase. They often track the successes of their peers’ portfolio companies. That’s exactly the kind of visibility entrepreneurs need.
3. Industry expertise
Most venture capital firms have their funds focused on the industry: B2B SaaS, MedTech, Creative Economy, etc. This means that the VC team has seen hundreds of tech companies and most likely have worked before in the field in which a given founder is currently building their startup. So they have a wealth of knowledge to pass on to founders. For example, at our venture capital firm, we have data-driven systems for monitoring industry benchmarks. Founders should not underestimate the benefits they can derive from such expertise.
Related: 9 Top Venture Capitalists Share Their Best Advice for Entrepreneurs
4. Executive Board meetings
Having a seat on a startup’s board of directors is common practice for budding VCs. Most board meetings are held quarterly, where the founding team shares statistics, results and financial forecasts for the future. Those meetings help with operational issues as well as strategic planning – and experienced VCs often provide wise advice on all of these.
Venture capital team members, who are outsiders, provide an external evaluation of startups. They often ask questions and take a critical look at your plans, work and implementation. It’s important for founders to listen to people who are interested in their growth, but not involved in day-to-day operations. The VC is waiting for the growth of the startup and thus thinks strategically, that’s why a VC could be the best advisor to open the founder’s eyes to some big steps and make small problems not a big problem.
6. Financial Modelling, PR and HR
Founders don’t always know how to get recommendations about their potential CMO or Chief of Sales. They can ask their VC firm’s partner if he or she has any honest assessments in their professional network about the candidate. Let’s say a founder has questions about building a financial model. Who should they ask? I bet 99% of founders can go to their VC firm’s associate and they will help. And when founders have a news spin, but are too small to hire a PR specialist – bingo! — the VC PR expert can help. That’s what we call ‘an australiabusinessblog.com-friendly VC firm’.
Related: The How-To: Choosing the Right Venture Capitalist for Your Startup
In the early stages of a startup, founders are in a vulnerable position and need guidance to avoid fatal mistakes, waste time on futile actions, and scale their business. A VC does not teach you how to do your business, but a VC can be a partner to brainstorm about a strategic question or give tips on, for example, decision-making or scaling up. Systematic peer-to-peer meetings with constructive feedback are crucial for most entrepreneurs, even serial ones. Investors provide this support and share insights by investing their time and resources during such sessions.
8. Spiritual Support
It’s always good to know that someone believes in you. Sometimes a VC can work as a therapist – if founders feel like they can’t be vulnerable to their clients or even to their co-workers, the investor who was once in the same boat might just be the right person for the founder to call out SOS when they need support. Most VCs are experienced managers and decision makers, and they really know how to encourage entrepreneurs.
9. Contacts, Networks and Intros
By leveraging their contacts, an investor may be able to open more doors for building strategic partnerships. An investor’s network can help partner with other startups, and they can strengthen user acquisition marketing strategy, for example through cross promotions, various referral programs, as well as guest blogging and integrations in partner newsletters. In addition, early stage VCs are always the ones interested in later rounds. They introduce founders to more investors and help with growth, expansion and financing.
Whether a VC will help founders on their way to becoming a unicorn or just an obstacle could not become clear after just two or three phone calls or meetings. Founders should always do reverse due diligence and talk to different portfolio companies to find out if the VC they are interested in is one who would do anything from the list above.