You’re a first-time founder and you have just raised an early-stage round with anchor investors. Now, how will you make the most of your hat table?
Venture capitalists often talk about “adding value” to their company’s portfolio corporations, but it might probably be difficult for entrepreneurs to grasp what this implies in practice.
As a talent and portfolio partner in Northern zoneI spend most of my time supporting founders and their teams, beyond capital injection. Investors might be an extraordinary resource covering operational and strategic areas at various stages of financing.
Some founders could also be understandably hesitant to ask investors for guidance, introductions, or help with problems, but VCs want you and your organization to succeed. So push them to assist move the needle.
Scaling the team
At various stages of growth, founders spend a large portion of their time on people-related topics, and investors who have seen how corporations manage these scenarios can suggest best practices for scaling a team and implementing appropriate organizational structures.
One sec employment rates proceed to say nodemand for top talent stays high, and early-stage teams still must be creative when recruiting. Hiring key senior staff at an early stage can transform your corporation.
Leveraging your investor network to source the best candidates might be fruitful when hiring for key positions or tailoring the form of profiles you will have to rent. In particular, to draw talent from later-stage corporations, startups can turn to their sponsors to not only offer candidate suggestions but also strengthen their employer brand.
That said, a VC should teach you the best way to acquire talent, not do it solely for you. It’s also essential that the startup doesn’t change into a “networking club,” and founders should rely on investor expertise to implement key diversity initiatives that may attract a broader pool of potential employees.
However, hiring is only one side of the talent coin. Upskilling recent employees requires a significant period of time and capital, so founders should be sure that there is no significant lack of their most beneficial resource: people. Investors can provide guidance on the company’s offering in terms of economic packages, corresponding to worker remuneration and stock ownership programs.
With salary increases decrease by 14% since last 12 months, VC can assist implement cost-effective worker retention initiatives that are in line with market trends. For example, startups that have implemented effective learning and development programs and mental health policies experience greater worker loyalty.
Opening customers’ doors
Similarly, VCs might be highly influential in opening doors to potential key accounts and discovering potential partnerships through their portfolio and the broader ecosystem. In the early stages, these conversations will also be helpful in finding product-market fit and developing product iterations with the right design partners.
The best founders are not afraid of this and even make the investors on their table compete to create some friendly competition. Praise in regular investor updates also helps VCs roll up their sleeves and provide specific information.
Help in preparing for the next round of financing
VCs might be extremely helpful to founders preparing for their next round of fundraising, especially those that have no prior experience at this stage of development. VCs know their industry well, so they can assist prepare appropriate materials and reach the right investors.
And not only in private: Your cap table might be your biggest advocates when expanding the reach of an announced round of financing or recent product, and senior marketing people should look to investors to strengthen their brand and narrative.
Offering support to founders through the ups and downs
Founders are often looking for mentorship and practical knowledge, and their leaderboard is a excellent spot to learn from business founders who can act as advisors and sometimes sparring partners as the company grows.
However, there is often a greater barrier to tackling topics related to private development and well-being. Being a founder might be exhausting and lonely, but giving back can have a huge impact. While founders could also be reluctant to open up about personal matters for fear of perceived weakness, investors are normally well-prepared to supply support. One example we implement at Northzone is founder exchange circles, which permit our portfolio to lean on each other for personal development and advice.
Turning the table with hats
The responsibility should not rest solely with startups: the entire enterprise capital industry may very well be more proactive in promoting portfolio corporations.
However, by confidently in search of support and guidance, founders can gain tremendous value from their investors beyond just capital. And given what VCs can offer them in a raise, founders could find themselves in a position where the cap table is even stronger in the long term.