It’s becoming increasingly clear to me how tough it is to maintain strong portfolio management habits at a large venture firm. As I spend the majority of my time focusing on the bird’s-eye view of the happenings in our portfolio and directing our value add efforts, I’m always brainstorming ways to improve.
A few weeks ago, I drew up a sketch (below) called the “Value Add Cycle”. It highlights a framework about how VCs should be collecting and analyzing information about the needs of their portfolio companies and using those insights to provide support.
To begin the process, data collection needs to become top of mind. The first question many ask is where to track the information? Some VCs like to use Streak, Salesforce, Affinity, among others, but the key is to find a system that can be the single source of truth and capture all of the information across multiple formats (email, board decks, forms, notes, etc.). This means avoiding the temptation to use your inbox or Google Sheets to collect the data.
After establishing which CRM you’re going to use, it’s key to develop a process of how you’re going to be capturing the information of what’s happening at your companies. One way of doing this is by creating a questionnaire to fill out after each meaningful interaction with a founder. The questionnaire should cover much of a typical VC/founder conversation including updates on what’s going well, top challenges, where they need the most support, burn rate, HR, and a general snapshot of how things are going.
By capturing this information over time, you’ll be able to create dashboards that will help you view your portfolio’s health from the bird’s eye view and see how they are performing and where they need support.
After capturing the data, it becomes easy to unlock patterns about best practices to share with your portfolio companies. Often times, VCs have gut feelings about how to navigate a particular problem. By using this framework, you’ll be able to share these insights using more than just your gut feeling.
Some examples of insights that you could unlock include (not an exhaustive list):
When it comes to turning those insights to actions, the goal is to determine where the highest value impact could be made for the greatest number of portfolio companies at that specific time.
Specifically for investors with large portfolios, I’ve found that it helps to batch companies together that are experiencing similar ups and downs. For example: If you have a meaningful number of companies going after a specific vertical, develop relationships with potential customers in that vertical and then facilitate your introductions in batches. Or perhaps if you have a number of companies ramping up their sales team headcount, arrange a Pitch Assist workshop to help them boost their skills.
These are just a few high level examples. My next post will dive into other creative ways to help your portfolio companies grow.
While some will argue that the best way to provide value is to “be in the trenches with companies”, this approach doesn’t work when you have a portfolio of hundreds of companies. Unless you have dozens of partners or employees, it’s not scalable.
At the end of the day, providing value is about getting quick wins. If you truly want to add value to your companies, you need to always keep their needs at heart (data collection), understand where your companies need the most support (data insights), and ultimately use those insights to leverage your experience and network to support your companies (value add activities).
Finally, it’s great to provide value, but if you don’t follow up on the impact it’s worthless. Following up is the single most important thing to do after providing some sort of value. Why? It helps you know your own value and, more importantly, it ensures that your founders know your value. Today, there’s a major disconnect between investors and founders about perceived value vs. real value so it’s crucial to communicate what you’re working on towards helping your companies reach their next milestone.
Hi! I’m Jordan, and I work in VC in Israel. There’s a lot happening in the VC/startup scene and I figured I’d post my observations here. All opinions above are my own. Feel free to follow on Twitter: @jordanodinsky.