Portfolio Acceleration Platforms for VC & Private Equity

Supporting Portfolio Companies: A Framework for Venture Capital Funds

Many new venture capital funds are currently evaluating the most impactful strategies for assisting the companies they invest in.

The trend of venture capital and private equity firms offering support platforms for their portfolio companies is rapidly growing. The U.S. VC Platform community has experienced roughly 120% growth over the past three years, while the EU VC Platform has seen a tripling in size during the same timeframe.

Strategic Platform Development

While extensive support is valuable, not all firms possess the resources of a firm like Andreessen Horowitz. A limitless budget for company-building resources is possible, but not always practical. As Maria Palma of REE Ventures points out, a unique platform strategy isn’t necessarily about what you offer, but rather what your firm can uniquely deliver.

A prioritized framework for platform development is essential. After assembling a capable core team, focus should be directed as follows:

First, engage directly with the leadership of your portfolio companies. Each meeting’s agenda should include:

How can our firm provide the greatest value beyond financial investment? (This open-ended question is paramount.)
What are your specific objectives regarding future fundraising efforts?
What types of individuals are you most keen to connect with?
Which service providers have proven most beneficial to your operations?

Matching Services to Company Needs

Nick Kim, head of platform at Crosscut Ventures, approaches platform development as a product development exercise, as shared at the 4th Annual VC Platform Summit.

Dan Kozikowski, partner and head of platform for FirstMark Capital, emphasizes aligning services with a company’s stage of growth. Recruiting is consistently valuable, but vendor introductions are most impactful in the early stages. Customer introductions are highly beneficial initially, but their value diminishes as a company establishes a robust go-to-market strategy.

Leveraging Low-Hanging Fruit

Begin by implementing easily accessible, cost-effective, and scalable infrastructure. This often encompasses:

Relationships with key service providers within your industry, potentially including negotiated discounts. Consider resources like BuiltFirst, Clutch, FundedBuy, Rocketplace, SpotSource, and Buyer. Alpaca VC also provides a Master Agency List.
A curated library of best practices for founders in your sector, readily available for sharing. Examples include First Search, Startup School, OneValley Passport, and Ask Anything. Founder curricula can also be developed internally.
Connections with venture partners, entrepreneurs in residence, and other non-salaried experts who can offer guidance. A roadmap for engaging external talent is recommended.
Organizing events focused on your industry. Virtual events provide a cost-effective method for building trust and relationships with industry leaders.

A robust internal tech stack is crucial for managing the increasing volume of requests for assistance as your platform expands. Jeff Pomeranz, partner at Right Side Capital, highlights the importance of data capture and maintenance for a portfolio of over 1,100 companies.

“Tracking metrics like ‘months of runway’ and analyzing month-over-month changes allows for rapid identification of companies facing challenges,” Pomeranz explains. “Integrating lifecycle data and industry exposure tags enables proactive trend identification, such as anticipating shifts in the retail landscape.” Utilizing technology and analytics can lead to more informed investment decisions.

A Two-Part Test for Platform Services

Apply the following criteria to evaluate potential platform services:

Platform Impact: Does the service’s effectiveness increase by being offered through your platform? For instance, a dedicated SEO consultant would likely deliver similar results regardless of whether they work for the investor or directly for a company. Recruiting, however, benefits from the VC firm’s brand recognition, leading to a more positive response from potential candidates.
Scalability: Can the service be scaled to accommodate portfolio growth? While a highly skilled designer could be valuable, their services are inherently non-scalable, requiring additional hires as the portfolio expands.

Examples of Scalable and Impactful Services

Consider these examples of services that meet both criteria:

Bootcamps: Facilitate peer-to-peer learning and simultaneous information sharing. Real Ventures hosts a bi-annual founder camp for recently funded companies, led by Real Ventures partners. “Founder Camp provides a scalable way for our founders to understand our best practices,” says Janet Bannister, managing partner at Real Ventures.
Fundraising Support: First Round Capital has dedicated resources to assist companies in refining their pitch and securing funding. Resources include guidance on marketing to investors, financial model formatting, and pre-pitch checklists.
Recruiting: Investors with dedicated recruiting teams often achieve greater success in attracting candidates due to their established brands. Internal recruiters also possess valuable portfolio knowledge for talent allocation. Investors can even position their firm as offering a career path across multiple portfolio companies. Welsh, Carson, Anderson & Stowe reports that 60% of their portfolio companies benefit from repeat management.
Customer Development: Establishing relationships with innovation groups within the Global 2,000 can generate leads for portfolio companies targeting large enterprises. Andreessen Horowitz’s Executive Briefing Center and FirstMark Platform’s extensive event network are examples of this approach.
Celebrity Endorsements: Leveraging relationships with celebrities can amplify a company’s message through social media.

Addressing the Need for Specialized Expertise Within Venture Capital

Most venture capital firms highlight their industry and functional knowledge when attracting investments. However, portfolio companies frequently require specialized knowledge that the firm doesn’t possess internally. There are four primary methods to provide this support, ranked from most to least expensive.

Methods for Providing Domain Expertise

In-house, Brand-Name Guru: Recruiting a highly recognized expert.
In-house Functional Specialists: Hiring specialists, often former executives from portfolio companies.
Expert Networks: Utilizing established expert networks for client access.
On-Call Domain Expert Network: Building a network of experts available for brief consultations.

Each approach has distinct advantages and disadvantages, impacting cost, scalability, and proprietary value.

	Illustrative Example	Key Benefits	Potential Drawbacks
In-house, brand-name guru	John Maeda, previously a design partner at KPCB and president of the Rhode Island School of Design	Attracts deal flow and enhances firm differentiation.	These individuals are scarce, command high salaries, and often have competing commitments.
In-house functional specialists	A former marketing executive sourced from a portfolio company	Provides a dedicated, proprietary resource.	Incurs significant compensation costs and lacks scalability. They may also be generalists rather than specialists tailored to specific company needs.
Expert network access	Many VCs leverage existing expert networks. Negotiated rates may be available due to lead-generation arrangements.	Offers a superior user experience, connecting companies with precisely the right expertise.	Lacks proprietary advantage and isn’t easily marketed. Involves marginal hourly costs for each expert consultation.
On-call domain expert network	Networks like Primary Venture Partners’ Primary Expert Network and Goldman Sachs’ Chambers Street Executive Network	Minimizes costs and significantly expands the firm’s network. Experts may evolve into consultants, board members, or interim executives.	Securing an exclusive relationship can be challenging. Ongoing management is required to maintain community engagement.

Paul Bianco, CEO of Graphite Financial, explained their origins: “We began as an in-house team at ff Venture Capital, observing that early-stage startups consistently struggled with finance and accounting. We addressed this by providing these services directly.”

He continued, “Founders found the topic more engaging when it directly impacted their ability to secure funding. The capacity to effectively communicate their vision and growth potential was greatly enhanced by a strong grasp of their financial data.”

Financial Acumen and Business Confidence

Bianco emphasized the importance of confidently addressing challenges to a business model during due diligence. Furthermore, a solid understanding of finances provides founders with greater control and comfort, even outside of fundraising periods.

“We ultimately decided to spin out our team into a separate company, now Graphite. A key consideration for a fund building an internal team is the inherent limitation on the scope and depth of support they can offer with a finite number of portfolio companies.”

To further explore support options, consider a seven-part framework for assisting companies. Cory Bolotsky, co-chair of the VC Platform Global Community, presents a 10-component framework for a comprehensive VC platform strategy.

These functions encompass everything from identifying new investment opportunities to accelerating the growth of portfolio companies. Lerer Hippeau details the talent and technology needed to efficiently manage the platform function within a VC firm.

Some VCs promote their ability to identify potential buyers for their portfolio companies. While this can occur on occasion, I am skeptical of a VC’s ability to systematically achieve this. Successful VC-backed exits are typically acquisitions initiated by the buyer, not a sales process.

The Challenges of Facilitating Exits

Even well-connected VCs have limited influence over the M&A strategies of large acquirers, and a VC’s position creates a conflict of interest when promoting the sale of its own companies. Timing and exit amounts are also subject to considerable luck, making it difficult to fairly compensate an internal “M&A investment banker” for expediting an exit.

Research assistance provided by Prabhat Gusain.

Disclosure: David Teten has provided advisory services to Real Ventures and Right Side Capital, and was previously a partner at ff Venture Capital. He contributed to the development of Chambers Street Executive Network as a consultant to Goldman Sachs’ Americas Special Situations Group. He also established the platform function at both ffVC and HOF Capital.