In a recent TechCrunch article, Travis Kalanick stated that in his opinion, less than 1% of VCs are actually helpful. As quoted in the article, “His worldview on VCs is generally low, and it’s not based on just one traumatic experience. Kalanick, who has formed numerous companies across his career, warns that ‘a super high bar for a VC is “do no harm,”’ yet, in his experience, just 10% of the VCs out there are capable of meeting that bar” (Source).
While his percentages are not exact, Travis may not be completely off base in his sentiment. Some founders would argue he’s spot on, while others would say he’s insane. I’ve spoken with a few institutional investors who believe a VC’s job is to select great founders and be totally hands off. On the other hand, most institutional investors I’ve spoken with routinely ask how we (VCs) add value beyond just writing a check. I don’t fully agree with the approach that VCs should do nothing to help their portfolio companies. Quite frankly, I believe that investors who think like that are in the minority.
To Travis’ credit, he’s correct in that there’s only so much a VC can realistically do when it comes to assisting with a founder’s day-to-day operations. There’s an art to finding a balance between being helpful to founders and staying out of their way at the same time. When opportunities do arise when a VC can and should do more, they represent the most fulfilling and rewarding aspects of the founder/VC relationship that makes being a VC super fun.
As an example, we (Serac Ventures) are in the process of finalizing an investment in a new portfolio company. This founder is located in a different state, so all of our correspondence had been done via Zoom and email. Generally speaking, we prefer to meet founders in person before investing. However, in a post-pandemic world, meeting and getting to know individuals virtually is by no means unusual.
We told the founder that at some point before or soon after our investment in her company, we would like to meet her in person, in her city or ours. We invite every founder in our portfolio to meet us in our city such that we can introduce them to potential investors and customers. Not all take advantage of the offer. Serac is located in a mid-sized, American city with a total metropolitan statistical area (MSA) of just under 1.5 million people. Most founders we meet target customers in larger/massive MSAs, so most of the time we’re meeting and spending time with founders in our portfolio when we arrange to meet them in larger markets.
But herein lies the advantage for founders who astutely recognize the opportunity of spending time in smaller MSAs – they face lower to no competition with customers (or investors) looking for their products/solutions. We’ve made this pitch to our out-of-state portfolio companies on several occasions, and recently the founder of our newest portfolio company took us up on the offer to visit.
My team and I arranged a two-day trip for the founder that included dinner on the first evening and several client and investor meetings the following day. We attended each meeting with the founder, which allowed us to give the founder a glowing endorsement before she ever said a word. Another added benefit of attending each meeting with the founder was that we had the chance to witness how the founder talked about her company with potential customers and investors. We routinely collect two or three customer references as a part of our due diligence process, but participating in a sales meeting with the founder greatly superseded that.
After the sixth and final meeting of the day, we went back to the Serac office for a debrief. The founder shared that she thought it was a highly productive day and that she was very thankful that we coordinated so many meetings for her.
So, back to the original statement that Travis Kalanick made about VCs not adding value. I would argue this is not 100% true, especially in light of the story I just shared. Again, when opportunities do arise when a VC can and should do more, they represent the most fulfilling and rewarding aspects of the founder/VC relationship. We look forward to facilitating more in-person VC-founder-client-investor days as we add companies to the Serac portfolio.
