In this article, Anish Srivastava, CEO of Vinaj Ventures, discusses the opportunity for investors to increase the odds of success for their portfolio companies by offering robust, customized support to founders. Check out the article to learn about the two business areas Anish sees as the biggest opportunities for investors to support.
Nurturing an early-stage startup from pre-seed or seed funding to scale can be exciting and rewarding for the investment partner, particularly if the support involves more than just access to capital and the investor’s Rolodex. A high percentage of startups unfortunately fail for a number of reasons. This is why support beyond capital is even more important for early stage companies.
There’s an opportunity that goes beyond the traditional models of support and that add real value to the investor-startup partnership. While there are already a number of support mechanisms for early-stage founders and entrepreneurs, many of these are informal and temporal. Angel investors can offer valuable introductions and some advice, but many don’t have the time or industry specific knowledge to help the startup.
There are programmatic support systems for early-stage startups, such as incubators and accelerators. Accelerator programs tend to run three-six months and have a set curriculum that covers a wide range of topics. These can include:
While some of the curzriculum can be helpful to the entrepreneur, much of it is generic and may not be customized to address the specifics of the individual startup. Accelerators will introduce founders to mentors, who in turn will give the founder a one-time mentoring session typically held to 30 minutes. There is limited time for a mentor to understand what the startup does, so there’s not as much depth to the advice as there could be. Interactions tend to be fragmented, and the advice given is high level. This doesn’t mean that accelerators don’t offer value; on the contrary, they provide a great deal of value for startups during the 3-6 month programs. But startups require a lot more support in the early years.
Institutional investors also offer value – in the capital they invest, the reputation they bring and the role that they play on the board. This is especially true in the later stages of a startup, when the startup has a number of valuable board members. In the pre-seed and seed stage, this is not the case. In addition, few institutional investors operate like Andreessen Horowitz, which has a large team and programs that are designed to provide operational support to their portfolio companies.
There is a gap in the market – around the support that founders need and what is actually readily available. Early-stage startups require various levels of support during the different stages of growth or when challenges pop up. It may encompass talent acquisition, business development, product roadmap, product market fit, growing pains, marketing, regulatory or legal issues.
For example, two months in, the founder may be having a problem finding the best talent that can fit the culture and growth plan of the company. Three months in, the startup may be struggling with its product roadmap and market fit and how to pivot. Six-12 months later, the struggle may be with how to position the startup to attract new investors. Of all of the challenges, two important ones to a startup’s growth are hiring the right talent and acquiring customers.
There is an opportunity for investors to fill in the gap, offering the right support at the different stages of a startup’s journey. This begins with establishing a support system of experts and partners that are with the startup from inception and follow its progress over a longer period of time.
While the end goal is the same – to help startups gain product market fit and to grow – this additional support can help accelerate the learnings of the entrepreneur and increase their probability of success.
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