Key insights from our More Than Money Report launch panel.
Last week, we launched The More Than Money Report 2021. The launch event brought together insights from the report and an expert panel to discuss its findings and their opinions. Read on to hear our highlights from the event and insights from our panelists.
The More Than Money report is the first of its kind to investigate ‘value add’. It brings together insights from over 500 founders and investors to uncover what works and what doesn’t. Do VCs offer value-add? Do they follow through? And crucially, does the value-add offered match what founders are looking for?
At the heart of the report is the finding that though many founders want more than money - and most VCs stating that they offer it - 92% in fact - 3 out of 5 of founders feel duped by what they receive. Read on to hear what our panel thought of those results or skip straight to the report to dig into more insights.
Our expert panel was led by Nic Brisbourne, CEO at Forward Partners. A former founding partner at Draper Esprit, he started Forward to give more founders their shot at success by investing earlier and supporting their growth through specialist services. He was joined by:
Claudia Harris, CEO of Makers - Europe's original coding bootcamp which has now trained over 2000 software engineers in the UK.Prior to joining Makers, Claudia spent 5 years as CEO of the Careers and Enterprise Company, and many before that as a partner at McKinsey.
Joe Perkins is founder of Landscape VC. A platform pegged by TechCrunch as the ‘glassdoor for VC’ he’s bringing transparency to the funding conversation by empowering founders to rate their investors.
Marta Krupinska, Head of Google For Startups. Marta works with high potential tech startups, with a particular focus on social impact tech and diverse founders, providing founders in the UK and EMEA with the best of Google's resources.
Rory Stirling is a partner at Connect Ventures, a product-focused, seed stage venture capital firm based in London and investing across Europe. Connect investments include: Citymapper, Typeform, Soldo, Truelayer and Curve.
Q: Do investors need to be experts in the sectors they invest in?
Report results uncovered that 47% of founders believed their investors had little to no knowledge of the sectors they are investing in. Specialisation has frequently been surfaced by interviewees as key to the value that a VC can provide. Here are a few key thoughts from our panel.
Claudia: There are 3 areas where value-add can really make a difference: Pattern recognition; Alignment and Pace. Talking about pattern recognition, there are many things that VC sees, day in day out that an early founder perhaps is only going to encounter once or twice in their career. And so why wouldn't you take advantage of that expertise? On this, I do think that specialisation is really helpful. Once you couple that there could be a very strong business alignment with the VCs invested in your success. They know your business really well, it should be a really potent combination for value-add.
Marta: It's an interesting one to just find that balance both as an entrepreneur and as an investor. Where does an entrepreneur need guidance, mentorship and a shoulder to lean on and when do they need an actual service? It’s sometimes either one or the other. We have seen that sometimes a VC is trying to force their support with pressing a hiring a certain service only based on their own investment. As a founder, we would like to feel that there is still a control for us over our company but we also welcome guidance and assistance from the VC.
Q: Do value-add services served always add value, or can it have a negative impact?
Rory: Value is a spectrum - it can run from negative to positive and it’s not a surprise that many VCs are offering a variety of value-add services. Choosing the right VC and value-add will be down to the founders. They will have the choice as to who they will raise their money from. At a basic level, founders need to be optimise their choice for investors who don’t destroy value. Avoiding the destruction of value is alignment going into deals, alignment around risk, vision and values. Do you trust them to make the decisions for your company? But VCs don’t make all the difference - 99.9% of the value creation comes from the founders.
Joe: At Landscape VC, we continuously see live insights from founders. One of our score factors is Beyond Money and at the moment it’s one of the lowest across the platform. From the reviews we can see 3 key trends that founders mention: help to get customers; help with key hires; and being emotionally supportive. From a negative perspective - the biggest trend almost always revolts around over promising from the VC side.
Q: How is value add leveraged by growing companies? Where does the responsibility lie for selecting services and how can companies make the best of it?
Joe: Founders at the different stages of their journey will need an approach on value-add services catered to them. For example - pre-seed companies usually need stronger emotional support as they are venturing into unknown territory whilst Series A stage companies will need more assistance hiring those key people that will help them thrive. So, the VCs will need to be more flexible to offer the right value-add at the right time.
Q: Could value-add run the risk of adverse selection?
Hoxton Venture’s Hussein Kanji mentioned in an interview for the report that he believes value add could attract founders that require extra help and might not be quite as proactive as a result. But what did our panel think?
Rory: I don’t see these two things being mutually inclusive. The founder platforms and networks led by VCs are not created to specifically seek out entrepreneurs who need the most help. A VC’s job is to try to find the most incredible founders who have ambitions and abilities to change industries. Founders, that a VC has high conviction of and believes that those abilities will allow them to create all the value in their company.
The onus in the competitive market and in the market where the odds are really stacked against the founders will be on us as investors with high accountability and ownership to do whatever we can to assist and change the odds in their direction. When they do need your help, it is great to have not just your knowledge and experience to draw on, but also an existing team of experts to turn to.
Nic: I think you're right, Rory - we all work hard to build our networks so that we're able to be of assistance to the founders. It’s not black and white though - it's not that I'm going to build a network, which means I can find that first customer for every software company. It will always be based on a question of - what does this particular entrepreneur need? Is there a match and how can we make this happen?
Q: Is there a balance investors need to strike between providing strategic advice and offering services via their platform?
Claudia: There has been a shift in modern management philosophy from negative to positive reinforcement over the last couple of decades. This has not potentially worked its way through to how a lot of VCs think about being on board and the value-add in general. Today it's more about building on strengths and providing support where needed. For a founder, that is a strong value-add that a VC can provide. Alignment in trust and values is super important in terms how we think about the partnerships with our investors at Makers. It's a really interesting one and I think it is really important in all of this that the decision making sits at the CEO.
[ In an interview with Keji from Connect Ventures, she states that coaching and support are some of the most important services they offer. As an ex-founder, would you be comfortable talking to your VC openly? ]
Marta: Openness to feedback and ability to ask for help are incredibly important. Most of the trust and most of the values come from not what works but what doesn’t work. Founders need to ask for assistance with aspects they are not sure about and don’t know how to solve. It’s a trust relationship between the founder and the VC. In most cases when something is not working, both parties know. Then it becomes about who has the guts to bring it up. I also liked the point made earlier by the panel about choosing the right investor based on value-add and relationship rather than on the name.
Nic: The culture within and between the partnership is incredibly important. It's not just about individuals, it's about the organisation. You have to be looking for the same values and a strategy alignment with the person who's going to be your company’s board.
Q: 1 in 3 founders reported that access to an investor's connections contributed to their growth. But how does it work for founders in practice?
Rory: I strongly believe that peer group support is very important - it can be an incredibly lonely place to be a founder and a CEO. The further you are on your journey, the more lonely it can get. That's why peer group support is so important. It's almost certain that the challenge you are going through at that particular moment - someone in your network has had to face this 12 months before you.
Joe: From the Landscape platform we can see that this is another area that can be improved. We have seen comments that sometimes VCs tend to over-promise and not deliver on.
Key points from the report:
- 52% of investors surveyed promote 'connections and network' but for it to work, it has to drive results.
- 30% of founders reported that VC support in helping with fundraising contributed to their growth.
- 42% of eCommerce founders cited knowledge sharing via their portfolio community as a contributor to their growth.
- 78% of B2B founders believe go to market support contributed to their growth
- 64% of B2C founders value mentoring
Q: Just 23% of VC backed founders we spoke to were female. What needs to be done to level up representation in the wider ecosystem?
Despite the small sample size, we found some interesting insights. For example, Female founders rated value add over twice as important than brand and portfolio in their investor selection. (73% vs 27%) and that female founders are asking for more focus, follow through and operational expertise from the investors.
Panel: We think we need to ask firstly why women are saying that they need value add services more than men. What are the reasons behind this? Is it because of their profile, the number of times they have succeeded in the past? The reasons why they might have been rejected prior for funding or opportunities? Or is it a lack of networks?
The Forward Team see great opportunity to dig into these insights and find ways to level up the playing field for under-represented groups in the ecosystem. Keep reading below to find out more.
Read the full The More Than Money report here http://forwardpartners.com/more-than-money/