Uncovering the truth about value-add

The UK's startup ecosystem is more competitive than ever before. It means that VCs have had to adapt. Many offer ‘value-add services’ to attract great businesses. To negotiate the best terms. And to drive the best outcomes. But do VCs follow through? Does it help founders to beat the odds? We wanted to explore these questions further with a detailed research project.

The More Than Money report is the first report of its kind to investigate ‘value add’. It brings together insights from over 500 founders and investors to uncover what works. What doesn’t. And crucially, what great ‘value add' services - and the future of VC could look like.

Nationally, entrepreneurship has become more admired and respected than ever before - and rightly so. Our best innovation comes out of founders who are willing to take a leap and transform an idea into a business.

In the early days, investors with an appetite for risk were few and far between and VC’s were hard to reach. Now, capital has been commoditised. Between tax breaks, 0% interest rates, the influx of operator-angels and alternative financing, cash has flooded the startup market. Founders are empowered with information and the power balance has flipped.

If you’re a VC operating in today’s market, cash alone won’t win you the best deals. Reputation helps, but value-add - the additional services and capabilities offered by venture investors in addition to money - has become the true differentiator

There's more capital in the market than ever before. To win, VCs have to provide better value to founders. It's also in our best interest, as being there to give a timely boost or acceleration when our portfolio companies need it, is not only highly rewarding but improves returns. That's the real magic of effective ‘value-add’.

‘Value add’ is attractive for a reason. The odds are stacked against founders - funding doesn't guarantee success. We’ve seen first hand at Forward that ‘value add’ applied well can build better businesses, faster than ever before and create an unfair advantage for both founders and VC’s.

But in this new ‘value-add’ world, it’s hard for founders to filter the signal from the noise - or rather the reality from the marketing.

And we noticed this in our research. Our ‘More Than Money’ report reveals that VC value-add often fails to meet founder expectations. There's a perception that value-add is a marketing gimmick and when investors fail to deliver they make that perception a reality.

At Forward, we believe that founders deserve more from their VC. We favour an ‘applied venture’ approach where our investor and Studio Teams work together with early-stage founders to greatly increase their odds of success. But this is just one of several models out there - and there’s no ‘right’ answer. The one thing that I hope we can all agree on is that no matter what shape the offer comes in, capital and capability work best, hand in hand.

Value add is a highly prized offering and when applied properly it can be an effective tool for driving growth. The More Than Money report was an interesting read. Our hope is that with this research we open a dialogue with both sides of the ecosystem - founders and VCs - to build a better understanding of ‘value-add’ - what works now and how we can build the future of VC together to drive better outcomes for everyone.

I’d like to offer a few words of thanks. Firstly, to a group of over 500 founders, VCs and industry experts who provided insight for this report - and in particular those who gave up their time to speak to us one-on-one. Second to our partners whose support have made this report possible: Joe Perkins at Landscape VC whose concept is bringing transparency to the VC sector; Marta Krupinska and Michael Cavanagh at Google whose insight and support is greatly valued; Kosta Kolev for his work referring founders to us and Andy Davis and Anika Henry whose relentless work to promote under-represented groups is a reminder to us all that we have to do better as an industry. Finally, to all in the Forward Team who have worked tirelessly to bring it all together.

Read the full report at http://forwardpartners.com/more-than-money/

Nic has worked in venture capital for almost 20 years now and prior to founding Forward Partners in June 2013, was a Partner at leading venture capital firm Draper Esprit.

He has worked and invested in London and Silicon Valley, leading over 80 investments and enjoying a number of successful exits including buy.at (acquired by AOL for $125m) and Zeus Technology (acquired by Riverbed for $140m).

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