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Most people think of a venture capitalist as an investor who provides capital to startups in exchange for equity. But that is only partially true. Venture capitalists are usually looking for a high return on investment. However, it will be difficult to achieve these high returns without mentoring the founders, sharing knowledge, capital and experience – and even providing spiritual support.
Below, I’ll highlight nine ways an early-stage venture capitalist should help startup founders after closing the deal, and these points are exactly what separates a great investor from a mediocre one:
Related: What I learned from the world’s biggest venture capitalist
1. Sharing mistakes
Those VCs who are entrepreneurs and seasoned doers themselves bring their valuable experience and problem-solving skills that they possess after years of overcoming obstacles in their own startups. But what’s even more important is that while founders focus on just one startup, venture capitalists have invested in dozens, so they can inform founders about the mistakes they’ve made in the past and the lessons they’ve learned from them. mistake They can help founders avoid similar situations. So, keep in mind that founders become stronger when surrounded by other entrepreneurs from the VC’s portfolio.
2. Visibility and credibility
If you’re a VC-backed startup, that means someone trusts you with their money. It is a credibility criterion. Furthermore, if you are a VC-backed B2B software startup for your business clients, the fact that you have already raised money will mean that you are sustainable enough to fulfill the contract and you have enough runway. It’s also a good sign for banks if founders want to borrow — and it goes without saying that founders appear on the radar of growth-stage VC firms. They often observe the success of their peers’ portfolio companies. That’s exactly the kind of visibility entrepreneurs need.
3. Industry expertise
Most venture capital firms have their funds with an industry focus: B2B SaaS, MedTech, Creative Economy, etc. This means that the VC team has seen hundreds of tech companies, and they have likely previously worked in the field where every founder is currently building their startup. So they have a lot of knowledge to pass on to founders. At our venture capital firm, for example, we have data-driven systems to track industry benchmarks. Founders should not underestimate the benefits they can gain from such expertise.
Related: 9 Top Venture Capitalists Share Their Best Advice for Entrepreneurs
4. Board meetings
Having a seat on the board of a startup is a common practice for early-stage VCs. Most BoD meetings are held once a quarter, where the founder shares metrics, results and financial forecasts for the future. These sessions help with both operational issues and creating strategic plans—and experienced VCs often offer sage advice on all of them.
External venture capital members provide third-party evaluations of startups. They often ask questions and critically examine your plans, work and execution. It is important for founders to listen to people who are interested in their growth but are not involved in the day-to-day operations. The VC waits for the growth of the startup and thus thinks strategically, that’s why the VC could be the best advisor to open the founder’s eyes to some big actions and not make a small problem a big deal.
6. Financial models, PR and HR
Founders don’t always know how to get advice from potential CMOs or Sales Managers. They can ask their VC firm’s partner if he or she has any honest reviews 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 partner and they will help. And when founders have a press link, but are too small to hire a PR specialist – bingo! – PR specialist VC can help. It’s what we call an “entrepreneur-friendly VC firm.”
Related: How-To: Choosing the Right Venture Capitalist for Your Startup
In the early stages of any startup, founders are in a vulnerable position and need guidance to avoid fatal mistakes, not waste time on useless actions, and grow their business. A VC won’t teach you how to run your business, but a VC can be a partner to brainstorm a strategic question or give some pointers on decision-making or scaling, for example. Systematic 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 in such meetings.
8. Spiritual support
It’s always good to know someone believes in you. Sometimes a VC can act like a therapist – if founders feel they can’t be vulnerable with their customers or even their colleagues, the investor who was once in the same boat could be the right person for the founder to shout SOS to when they need support. Most VCs are experienced managers and decision makers, and they really know how to motivate entrepreneurs.
9. Contacts, networks and promotions
By leveraging their contacts, an investor may be able to open more doors to build strategic partnerships. A network of investors can help partner with other startups, and they can boost user acquisition marketing strategies, for example through cross-promotion, various referral programs, as well as guest blogging and integration into partner newsletters. Moreover, early stage VCs are always the ones interested in getting later rounds. They introduce founders to more investors and help with growth, expansion and funding.
Whether a VC will help founders on their path to becoming a unicorn or instead be a hindrance may not be obvious after just two or three calls or meetings. Founders should always do some reverse due diligence and talk to a few portfolio companies to find out if the VC they’re interested in is one that would do all of the above.