What Kind of Value Do VCs Add?
This lesson is part of our course “What Do VCs Do”, the first one in our Investing Track. If you haven’t purchased this track yet, you are viewing it for free as a sample.
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The problem with measuring value-add is that it’s mostly subjective. How much does a piece of advice weight? Or an introduction?
To clarify the issue, we compared what Founders say VCs bring to them with what VCs declare they spend the most time on.
What Founders say VCs bring them
In a 2001 study that remains relevant to this day, an entrepreneur-come-VC asked entrepreneurs to rate how their investors were doing on a range of value-add elements.
What VCs think they bring Founders
Let’s now compare these findings with a 2016 study asking c.900 VCs based in the US what they thought they brought to the table.
The percentages below represent what VCs say they do with portfolio companies:
- Financing, Advice, and Introduction: 70%
- Strategic Focus: 87%
- Hire employees: 46%
- Operational guidance: 65%
The apparent discrepancy is that, while VCs declare they spend time providing operational guidance, they score poorly on that item with Founders.
What is the most impacting value you bring startups in your portfolio?
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👀 Sources and Additional Material
- Dotzler, F. (2001). What Do Venture Capitalists Really Do , and Where Do They Learn to Do It ? The Journal of Private Equity, Winter.
- Gompers, P. A., Gornall, W., Kaplan, S. N., & Strebulaev, I. A. (2016). How Do Venture Capitalists Make Decisions?