For those who follow the startup scene closely, it can be easy to get caught up in how much money a company is raising. But where the funding comes from can be just as important as the amount, because seasoned investors have a lot more to offer.
“Money is just money,” said MATH Venture Partners Managing Director Mark Achler. “The real value-add is our experience in scaling companies.”
Achler said that while having enough capital to get off the ground is important, it’s not the only, or even necessarily the biggest, challenge startups face. We spoke with investors and staff members at five Chicago-based investor groups to learn more about the ways in which investors set their portfolio companies up for success.
1. Helping startups make early key hires
Investors watch the startup community closely, and usually have a good sense of who the seasoned operators looking for their next big project are. Chicago Ventures Marketing Associate Lindsay Knight said a key part of her role is really getting to know her firm's portfolio companies in order to understand what kinds of people they need to round out their teams.
“A mistake can be made where you only get to know the CEO,” Knight said. “There’s a lot of value in getting to know the other people on the team to have relationships with them and to either anticipate their needs, or to have a good enough relationship with them to give them an understanding of where you can step in and what you’re able to do.”
2. Making introductions to prospective partners and customers
Reputable investors are usually well-connected, and happy to draw on those connections to help their portfolio companies land deals.
“The goal is to drive as much value creation as possible,” said Chris Girgenti, managing partner at Pritzker Group Venture Capital. “One of the key drivers of value that we focus on is delivering customers and strategic relationships to our portfolio companies.”
Girgenti added that PGVC sees this function as one of its core differentiators, and has a full-time staffer who works exclusively on fostering such relationships: “Recent examples of this include introductions to a top 10 [real estate investment trust] and a Fortune 50 company, each of which translated into multi-million dollar revenue accounts for a couple of our portfolio companies,” he said.
3. Offering a hand in day-to-day operations
MATH’s Mark Achler said his firm’s partners are all former operators who aren’t afraid to get their hands dirty when they can help a portfolio company get an unfair advantage.
“Many entrepreneurs think VCs show up once a month or once a quarter to get a report,” said Achler. “Understanding where the business is at is one part, but it’s also about being the extra pair of hands when they need them.”
Achler said the ways in which MATH’s partners leverage their experience depends entirely on the company’s needs, from going on sales calls to developing business plans. At his last venture fund, Achler even stepped in as interim CEO for six months.
4. Raising visibility
As an investor focused primarily on early-stage startups, Hyde Park Angels focuses a lot of its efforts around raising the profiles of its portfolio companies. Since these younger companies often don’t have the resources to hire a PR firm, HPA runs an in-house press operation to help entrepreneurs reach potential customers and hone their messaging to future follow-on investors.
“For a lot of the venture firms that are helping with PR, the purpose is also to help companies line up their next syndicate for funding,” said Associate Manager Alida Miranda-Wolff. “General solicitation creates a lot of barriers for companies looking to complete their rounds or add on, or that are looking into visibility for the future. They can’t go out and ask for money publicly.”
5. Expanding networks
With more than 150 Notre Dame-affiliated members, IrishAngels holds its far-reaching angel investor network up as its biggest selling point to portfolio companies. The group’s members leverage their personal networks to help companies out with any challenges they’re facing.
“When we invest in a company, we assign one of our members to be the IrishAngels deal lead,” said Director Kaitlyn Doyle. “On at least a quarterly basis, the deal lead will provide a qualitative update to all IrishAngels members on the progress of the company, including any asks that the company has of our network.”
Doyle said these asks range widely, from getting in touch with potential new customers to finding board members and follow-on investors. IrishAngels also proactively meets with portfolio companies to offer support and discuss potential business connections.
Images via Shutterstock and listed investor groups.
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