The value-add venture capital firms need to accelerate market success

 

The value-add venture capital firms need to accelerate market success

The venture capital ecosystem is more competitive than ever before. Smaller local investors are increasingly competing against big money from Silicon Valley, New York and Singapore, along with a growing number of hedge funds, angel investors, and other power players.

The bottom line?

If you’re a VC operating in today’s market, a big cheque alone won’t win you the best deals.

Reputation and a great track record helps, but it’s the additional services and capabilities offered by venture investors that have become the true differentiator.

After all, the odds are stacked against founders. Industry statistics show that somewhere between 65% to 75% of VC-backed startups fail, proving that funding alone doesn’t guarantee success.

That’s why value add has become more than a ‘nice to have’ - it’s table stakes.

But not all value-add services are created equal. In research by UK firm Forward Partners, almost half (49%) of founders reported that value-add had no impact on their business at all.

So, if VCs are going to truly make an impact, value-add should be results-driven, and focused on driving clear outcomes.

You need to help founders achieve product-market fit faster.

We’ve seen first hand at Propel that a key area VCs can add value to their company portfolio is through accelerating to achieve product-market fit, faster.

But how do you offer this when you don’t have your own army of developers and product managers on hand to deploy to the startup?

That’s where a product strategy development partner offers a key advantage.

Let’s be clear - we’re not talking about a team of product developers. While product developers will build the product to spec, that’s where their services usually end.

They won’t continue to test and utilise customer insights and feedback throughout the development process, which means the product won’t necessarily be the right fit for the users or market.

Nor will they work shoulder-to-shoulder with you to seek out process and cost efficiencies to get the product to market faster, meaning you might miss out on the market opportunity altogether.

Another big drawback of outsourcing your product development team or augmenting your team with more developers is that you wind up with more people to manage, which means a bigger drain on investment and time. If you double the delivery team, you also have to double the leadership team, which places strain on existing internal delivery leadership.

Your leaders will be saddled with more people to onboard and manage, and it takes time for the people added to actually be productive. There is also the issue of how outsourcing or augmenting your product development team affects quality.

None of this is adding value to your company portfolio - it’s adding risk.

The solution is in choosing a strategic development partner.

You don’t need your portfolio companies to burn precious cash by permanently scaling their product leadership to temporarily accelerate their roadmap. Working with a strategic development partner, like Propel, gives your portfolio company instant access to the appropriate product and technology leaders and delivery team with the capability to deliver - without placing undue management burden on the existing leaders in the business today.

At Propel, we hit the ground running with leaders and teams that are already well-structured and performing. We work autonomously within the business, giving the business full visibility and control without taking up valuable managerial bandwidth.

Most importantly, our specially assembled team of product and delivery practitioners do more than develop products. Propel teams guide the business through the development cycle, focusing on building the right product to capture market opportunities quickly. Because our team is there through every stage, unlike an outsourced team of product developers, we can stay close to customer feedback so there’s never a risk of missing the market fit with unnecessary features and wasted development.

So, you can add real value to your company portfolio and, most importantly, maximise the value of your investment, faster.

Are you a VC looking to create better value add?

If you are a VC who wants to help your portfolio company to capture a clear market opportunity, or if you would like some help with technology or product due diligence for a target company, contact our founders Ben or Paul from Propel Ventures to find out how we can work together.