Value add or not to value add
Money is not enough.
I haven’t written here in a while, but hey I’m back!
I’ll try to post here more to reflect on my thoughts, learnings, and ideas.
I’ve recently come across this report by Forward Partners, which gave me a whole new perspective on the ‘value add or not to value add’ dilemma. “Money is not enough,” they say - I 100% agree.
Many VCs consider value add as critical to attracting the best founders. It's like a secret sauce that boosts the chances of great exits, and pulls in even more top-tier founders for the future.
It's a win-win scenario where the success of the portfolio companies directly impacts the success of the investors.
But, and there’s always a but, according to Forward Partners, 92% of VCs describe themselves as value-add investors, while 61% of founders said their value-add experience was below average.
There’s a value-add gap. But why that is the case?
Founders have very different needs
When it comes to value-add, there is no one-size-fits-all. Every challenge is unique and needs a bespoke approach from someone who has been in the trenches. However, offering these services is expensive and not scalable for VCs. What often happens is VCs try to spread this cost over multiple companies in their portfolio. Founders are invited to join a cohort or an intensive program to work with an expert(s) in a group.
While it might be fun to spend a few hours or a weekend with a bunch of founders learning about go-to-market and all things business, does it really set them up for long-term success?
Sharing knowledge is extremely useful, but we shouldn’t stop there. The main challenge is operationalising the knowledge. That’s where the tangible value-add comes in, especially in the early stages.
Value add is expensive
Having worked with Techstars, Startup Wise Guys and some VCs as a Product advisor, I can see how important it is for founders to have a support network to tap into when they need help. However, offering best-in-class value-add services costs a lot of money, and founders have to appreciate it. The reality is that not every VC has the same amount of cash as Sequoia or Andreessen Horowitz.
Having said that, there’s definitely more that VCs can do to help bridge the ‘value-add gap’. More on this in the upcoming newsletters - I promise!