Hey VCs Listen Up: Entrepreneurs are Talking

by on July 17, 2014

Some VCs are notorious for being on top of their companies and demanding data-driven results in regards to knowing the market, hitting financials or tracking KPIs on product engagement. We decided to hold ourselves to the same standard and learn more about our market, the entrepreneur, through a data driven exercise.

We recently sent a short survey to the CEOs and Founders of our +50 portfolio companies, both past and present, and were encouraged to see the majority of them respond. While we didn’t initially intend to share the results publicly, upon review we decided that the data would be valuable to publish and provide a picture of what to expect when working with us. Here’s what we found:

Partners have more sway than the firm, but they’re both important 

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When evaluating VC firms, more entrepreneurs indicated they were more drawn to specific partners as opposed to the firm as a whole, but there are twice as many entrepreneurs who take both into equal consideration. VC firms are built on the personalities of its partners and we work very closely with our portfolio companies, so it’s important to have a good cultural fit. An entrepreneur should approach bringing on a VC no differently than recruiting an individual to the senior management team.

“The whole is greater than the sum of its parts” – Aristotle

Aristotle captures it pretty accurately. VC firms are built on the expertise, backgrounds and personalities of its partners, but what we achieve together is greater than what we could achieve individually. For example, the reach of our combined networks is quite expansive across North America. It’s important to have strong partners in a fund, but the dynamic way they work together will influence your company beyond the involvement of a single Partner.

Yes, money is important, but it’s not the only thing

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When it came to value, we asked entrepreneurs to rate a series of items on a scale of one to five: money, network, ability to attract other VCs, board participation, strategic advice and portfolio events/community. Predictably, money was identified as the most valuable offering a VC could provide our entrepreneurs, but on par with that, was the network. Overall, each item was valued and reflects the changing nature and expectations on the venture capital industry. No longer are the days of the VCs having all the power and entrepreneurs crawling in to their gold-plated Sand Hill Road offices begging for capital. VCs need to provide more than cash.

This point was further driven home by some of the qualitative responses we received. A trend that emerged was in the area of hiring, talent-sourcing and recruitment. The right team is critical to getting a startup off the ground or a company to scale and this is an area we are giving some focus as we continue to build our business. We are not believers in just throwing job postings on our website, but rather want to find an approach that empowers our companies to attract top talent. Feed a man a fish… you know the saying.

Find a second or third degree connection – personal intros are the best you can get

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Just like any business, sourcing opportunities is a key element in driving success. We always believed that the highest quality entrepreneurs we have met and are privileged to work with come through relationships and not traditional marketing or attending events. The data strongly supported this.

We were also pleasantly surprised to see quantifiable evidence that we are getting out there and initiating contact with startups we are eager to work with. In a competitive environment you can’t afford to sit back and expect opportunities to come to you.

We also believe that our entrepreneurs and the co-investors we work with can be our biggest advocates if we over-deliver. As a younger fund it takes some time to build this reputation, but we are beginning to see exciting results based on the opportunities our entrepreneurs and co-investors are sharing with us.

What can we do better?

We asked portfolio CEOs and founders to rate, on a scale of 1 to 10, the likeliness that they would recommend iNovia to another entrepreneur. This question was designed to uncover a light version of our own Net Promoter Score (NPS). We are big supporters of NPS and advocate it throughout our portfolio companies. It is simply a measurement to understand the quality of a product or service. A score over 50 is considered great and necessary for word-of-mouth adoption to occur.

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An area that we were told we can improve in is making the administration and reporting that comes with taking a VC investment as seamless as possible. This is something we are currently working to further improve. We are also eager to continue working on providing additional value in the areas cited as important in the above survey results, with a big focus on attracting talent and resources.

And while we continue to invest time and effort hosting CTO and Marketing sessions, CEO summits and unique partnership networking events, the above feedback gives us a good snapshot on where we stand, what we can do better and what we need to focus on. That’s important because we work in a dynamic market and need to be able to quickly adapt to the needs and expectations of the top entrepreneurs building the next generation of exciting technology companies.