Communities to support VC ecosystem
To bring the most value to its startups, VCs not only invest in them but also help them build strategical growth to speed up success rate.
Welcome to the 60th edition.
In the past few years, communities have been booming, even for venture capitalists (VCs). They're not just about investing money anymore; they're also creating communities for the startups they invest in.
This has become a smart business move for VCs, affecting both how they run their own organisations and how they invest their money.
To speed up the growth of their startups & increase their success rate.
Bring more value to their portfolio companies by connecting them with each other.
It helps them improve the deal flow and lead portfolio companies to success.
“We want to build long-term relationships with the managers in whom we invest and provide them with meaningful value. In short, become one of those LPs that we would like to have as our own investors,” said Diego Recondo, partner and co-managing director of All Iron Ventures.
Community tools to shape the ecosystem
Communities play a crucial role in constructing an entire ecosystem that bolsters the growth of entrepreneurs globally and contributing to a thriving tech environment.
The problem is that startups face challenges every day, & for venture capitalists (VCs), it can be tough to provide guidance to all their portfolio companies simultaneously. Using internal or external collaboration tools can facilitate quicker sharing of resources and advice.
There are obvious tools like Slack & Discord for building communities, but software such as Meltingspot, Tribe, and Circle offer more features and customizable ways to boost user engagement, retention, and overall value.
Helping with:
Relevant deal flow
International investors base
Build its own database of designers, coders, and executives, which helps the portfolio startups hire the best talents.
An acceleration program, during which startups are surrounded by mentors and exposed to an unrivalled network of corporate partners, investors, and alumni. Provide entrepreneurs with the training, tools, mentorship, & network to cultivate a community of ambitious entrepreneurs.
Providing educational programs for aspiring entrepreneurs
Facilitating meaningful connections with mentors & fellow founders
Exclusive founder dinners and events to build connections and knowledge.
Strategic mentoring to help with fundraising.
First Round, which runs a 10-person “platform team,” is a shining example of this community-centric mentality. “First Round is all about community. When you visit our office, you'll see huge posters where the word ‘portfolio’ is crossed out in favour of ‘community,’” explained Camille Ricketts of First Round Capital.
Read More: Raising funds for your side project 💰
Key areas where VCs can focus in community building:
Building relationships: Startups need more than just money, so when needed be ready to roll up your sleeves & get your hands dirty. By creating a positive and productive working relationship with portfolio companies & understanding what are their main challenges, VCs can add most value and earn spots as a mentor or trusted advisor at an early stage.
Introduce startups to additional investments: A crucial job of an early-stage investor is to assist their portfolio companies in raising additional funding when required (Seed, Series A, B, etc.). Due to the nature of the VC ecosystem they can easily share great deals with other firms and make necessary introductions. Which helps startups move focus and time to run their companies instead of lining up to cold introductions.
Introduce to customers: Early-stage companies need revenue rolling and introduction to potential customers - which can increase the value of the company. If you look at how Clubhouse built its early customer base through community-network efforts, you can see how effective it was for its early growth (but it still has its downfall).
Find and hire the right talent: Having right people on board is vital for the success of every early-stage venture. As an investor, you don’t only provide a list of your portfolio CEOs, you also connect with a team with high-quality talents in various disciplines, from engineering to marketing to finance. This does not limit to advising them on developing right compensation packages & benefits.
Communities should be lead by purpose
Otherwise, it takes no time to turn them into Zombies.
I’ve seen and been part of VC communities which were really elevated in the beginning but after a while were already dead. It's a tale of two extremes, showcasing the highs and lows of community-building.
But here's the kicker: the goal shouldn’t be to expand in numbers but to spark meaningful discussions and connections. Think quality over quantity. After all, what good is a crowd if it's all noise and no substance?
Recognise those who collaborate & lift others up. Set the tone at the top by modelling transparent feedback and asking for input.
Without proper gatekeeping, many communities after a while devolve into pitching spam and cheap marketing deals unless there are stringent referral criteria or active monitoring (which can be onerous). It's like attending a party where everyone's shouting their elevator pitches, drowning out any chance for meaningful dialogue.
Once the mandatory element of online gatherings vanished, we see it getting more & more difficult to capture the attention of folks.
Simply attending a firm's occasional events or bringing in investments now and then doesn't automatically make someone part of the firm's community. For a community to thrive, it's essential to have consistent activities and structures in place. This ensures that every member feels valued and understands their importance to the community.
“We have found that while entrepreneurs are moving fast, building companies and teams, it’s hard for them to find the time to grab coffee with the CEO next door and ask about their best practices. We hold these evenings to proactively start these conversations and help everyone learn faster and gain a valuable new peer group.” - First Round Capital
As venture capitalists delve deeper into building communities, important questions arise. What happens when every VC has their own community, removing its competitive edge? Will there be confusion if companies receive funding from multiple VCs with their own communities? How can they effectively expand their community initiatives? Despite these uncertainties, one thing is for sure: community now plays a significant role in the VC landscape.
Thanks for reading! Until next time!
Ritika 👋
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