Competitive capital — VC must be more than money
by Hege Tollerud, Head of Community
I am a few months into my (quite) new job at Brighteye Ventures. We invest in edtech, or as we say “companies that help people learn and grow.” We are London-based, with a portfolio of 23 companies in 8 countries in Europe, USA and Israel. I would claim that my learning curve is steep not only because I’m new to this space. The world of VC in general is developing and changing fast. I’d almost describe it as a shift of power. From investors being hard to approach and difficult to win over, to investors increasingly having to make ourselves accessible and attractive by actively adding value to startups on several levels beyond money.
With funding becoming more accessible, money is increasingly becoming “just” money. The competition to get a cheque in with the most promising startups is getting fiercer by the day. Rounds can, in the most extreme cases, be oversubscribed even before a company is formally founded. Investors hence need to leverage and differentiate on additional and other levels than cash. This is where I am supposed to contribute. The VC platform role, building a strong community for support, sharing and learning for the portfolio (and potential new investments) is a role that is becoming key at funds, globally.
From Nice to have to Must have
So, what is this platform? I am not talking about platform as in tech platform, but as the support platform for the investment team and portfolio. Technology is part of this package, through solutions available to facilitate and ease communication and collaboration. And I can promise that there are enough tech platforms around — testing and considering digital tools designed to make our lives more efficient is a full-time job in itself. A lot of the tools are brilliant and really make a difference. The balance between adding value and asking busy founders to log in to another platform is very fine, however. I have added the expression YAP — or Yet Another Platform — to my vocabulary…
The platform I am talking about can contain a lot, but overall it is the set of activities and initiatives VC funds are providing and facilitating outside the direct investment process. Portfolio support in the shape of direct and easy access to the investment team and other experts and resources, including inter-portfolio, for advice and coaching on growth in every way. Like access to talent and further fundraising opportunities, insight and analysis. At Brighteye, we have a dedicated Head of Research, a clear platform role. Branding and profiling are other important elements of the platform offer. Not to mention network. What “money” has access to the people and knowledge you and your company would like to be associated with?
Platform services are changing from being partners (only) tasks kicking in post investment to becoming table stakes, an important part of what the VC bring to the table to attract the hottest startups. Platform is becoming a central and integrated part of the investment strategy. A value add that is part of the deal, that can contribute to winning the deal, even. The platform must be provided, just as much as the money. No longer as a nice to have on the side, but a real competitive advantage. For the investor.
We like to call it smart capital. In learning technology, where Brighteye are active, the market, and with it, competition, is growing as a consequence of the Covid 19 pandemic. More people use digital learning resources, more suppliers enter the market with new products, and more investment is pouring in, also from more generalist funds, who so far have not exactly been running after edtech founders. This is something we welcome. We really want to see growth in the industry, both new companies and more investors. Brighteye will manage to stay in the competition for the best with the expertise and experience we have in this space, and by establishing an even stronger platform and community. Just to put a bit of pressure on myself…
A venture capital fund is, of course, meant to make return on investment. We are after all managing people’s money. But making a cash return is best done through success for our portfolio companies. And the platform focus is here to stay for that reason exactly. To contribute to success and growth.
One question emerging is if the relevance of platform may be strengthening the case for venture as early investment models? Will it be less risk involved in letting the capitalists buy into more control of your startup? Will the threshold for starting the VC conversation and asking for advice get lower? Do founders dare embarking on the journey earlier, before every pitch and presentation is polished and perfect?
It may also help that founders are increasingly becoming startup investors, with success. They are living proof that they know what they are doing and can add a lot of value though theirs experiences, knowledge and networks. A solid platform can mean that investors are more accessible and available for less formal talks. An approach that is also helping investment team source opportunities. Win-win, or what?
I may have arrived at the party late. I have been facilitating arenas for collaboration for years. Connecting people and building and maintaining communities for sharing knowledge, experience and networks across the startup ecosystem. But I have not been working directly in the field of VC. And I am overwhelmed. By the revelation that VC platform is such a defined area of profession, with so many people dedicated to providing the best platforms for support and community. And, not surprising, really, an overwhelming culture for sharing any kind of helpful content, advice and contacts — shout-out and huge thanks to the VC Platform global community. And, I think the VC platform party has just started. I like a good party and I am very happy to have joined this one!
This story was first published in Norwegian on Shifter, on 26.03.21.