Access to capital is of course an important reason many entrepreneurs seek to forge long-term relationships with VCs. And rightfully so, entrepreneurs without money are like engines without oil – they just don’t move fast enough, if at all, no matter how hard they try, which was recently discussed in depth by the Women in Venture Capital panel in San Francisco organized by Sarah Austin.
“Calmly and securely connecting entrepreneurs with customers, resources to build a team, and follow-up money is what differentiated and set apart successful VCs from the rest historically” according to Trish Costello, Founder and CEO of Portfolia, a collaborative equity investing platform. Increasingly, however, access to capital is a floor, not a ceiling, for entrepreneurs when selecting a VC. This trend is a direct result of the proliferation of alternative funding sources, such as crowdfunding and syndicates, which enable startup companies to be more selective when choosing a VC.
Also, entrepreneurs can bootstrap their ventures longer because the cost of building a prototype of a product has generally diminished, especially in the software industry. Austin, who founded a few startups, including Pop17, has been self financing her most recent startup in cognitive computing, which she plans to launch in September. According to Austin, “I don’t want to give up more equity than I absolutely have to.” Thus, today the right VC will often also be a strategic partner that can help grow the company through the VC’s unique experience, expertise, and industry connections.
For example, TimeJoy, a San Francisco-based startup that is developing a smart calendar application for overcommitted professionals to help them get to their meetings on time and on top of their game, was co-founded by Bill Reichert of Garage Technology Ventures. Reichert’s experiences not only inspired the development of the application, but his guidance during the customer and product development stages was an invaluable asset to the company. Elina Elek, TimeJoy’s co-founder and CEO, believes that being an experienced entrepreneur is a prerequisite for a successful VC. So, having a VC as a co-founder who is actively involved in building the company from the ground up has been instrumental in the conception and early stages of development of TimeJoy application.
Similarly, ChannelMeter, an online video intelligence and marketing platform based in San Francisco, worked with Stuart Peterson and Mike Harden of Artis Ventures to locate top engineering talent. Eugene Lee, ChannelMeter's co-founder and CEO, believes good investors are also outstanding matchmakers. They maintain enormous contact databases connecting founders with the people they need to scale their company with speed.
According to Costello, women entrepreneurs whose startups are often brand-focused stand to benefit the most from developing deep relationships with VCs: “VCs are well-positioned to connect entrepreneurs with influencers and industry leaders. They can also facilitate branding and other collaborations with much bigger and more prominent partners in a controlled and comfortable manner.” For example, VCs can connect startup companies with personnel at industry leading companies to help penetrate lucrative channels of commerce, gain access to valuable marketing data and studies, and obtain targeted publicity. In exchange, these established industry leaders gain valuable insight into the next wave of innovation in their industry and build early relationships with emerging companies.
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