Community, not Portfolio: What, why and how of VC Communities
Well, this is my first-ever medium article. In fact, I am writing one after almost 3 years — the last I wrote was in March 2018. So, don’t judge my writing skills :)
A little background
Here is my story in brief:
I have been in the community space for more than 7 years now and currently working with the Google Developer Relations team in India as a Program Manager for their Developer Student Clubs program. From being a community volunteer to leading & founding a community to working with community organizers in helping them nurture & scale their communities, I have walked through all phases of a community’s journey.
On the startup ecosystem side, I have been volunteering with Headstart Network Foundation since 2016. I have been helping startups scale in their UX design. I had the opportunity to witness the significant impact a volunteer-run community could have on startups without access to many resources.
With these two divergent interests of mine (community-building & startup ecosystem), I wondered what kind of an impact would VCs be able to make in the ecosystem leveraging the power of community or how can communities act as a business tool if they are planning to invest in a community?
Here are my two cents based on my research and a few interactions with VCs & portfolio founders to understand the concept of “Community” in the venture capital business model. Okay, enough talk. Let’s get started.
Developer Community vs VC Community
‘Communities in the developer ecosystem’ are not a new concept. If you want to grow as a developer, I can’t over-emphasize the benefits of joining a developer community. There are many advantages, from peer-programming to sharing knowledge, mentor-ship, sharing support, sharing tools, code reviews, answering questions, and much more. Most IT giants (and now in fact many tech-startups too) have realized that building a vibrant developer community is critical to evangelize the use of their software or platform and developer up-skilling on their products — either online or offline (in pre-COVID times). Google too has various developer community programs (shameless plug) such as Google Developer Groups, Google Developer Experts, Women Techmakers, Developer Student Clubs, TensorFlow User Groups, and other product-specific community groups focused around students and professional developers.
But the question is, are communities making a dent in the business model of VCs, and do they care? Yes, they do. Andreessen Horowitz, First Round, Y Combinator, Spark Capital, First Mark, 500 Startups, True Ventures, Techstars, and many more are some global VC firms that heavily rely on the power of communities. First Round has in fact posters plastered on their office walls striking off “Portfolio” and mentioned “Community” below it. Now I believe you would have guessed the reason for this blog’s title ;)
For these VCs, it seems the community has become a viable business strategy both in terms of how they build their organizations and in some cases, how they make investments. It ultimately improves the firm’s brand reputation in the ecosystem.
Indian VCs and Communities
In the Indian context, VC firms are not behind the line but a lot more focus can be given to reap the benefits of a matured community.
“A strong community at Blume has enabled our founders and their teams to connect, learn and grow with each other — we strive to continue building and strengthening this community and creating opportunities which in-turn will fuel faster growth across the board.”, says Sarita Raichura, Principal, Blume Ventures
Blume is one such Indian VC firm that has “Community” at its core. Started in 2010 by Karthik and Sanjay, Blume bridged a gap that had existed in the Indian venture market then, between local angel networks and larger global venture capital firms.
“Blume Villa in Bengaluru, India has been a great adda for our community gatherings!”, says Sanjay Nath, Co-Founder & Managing Partner, Blume Ventures. Blume organizes regular events and engagement activities for their portfolio companies, founders, peer VCs, and startup ecosystem.
The Indian arm of venture capital firm Accel Partners has conducted a lot of programs till now to help the startup ecosystem. Last year, they launched SeedtoScale, a platform to help early-stage founders with best-in-class content, immersive programs, and a well-curated community. By helping lay the foundation to starting up with this community-based learning, Accel hopes to give back to the startup ecosystem.
In 2019, Sequoia India launched The Guild — a program and community designed with, and for, the founding CEOs of some of the most successful growth-stage startups from our portfolio.
This VC firm vs That VC firm
Gone are the times when the startup founders go to a VC firm just on the basis if the fund partner has the ability to invest and sign a term sheet or not. So, what support does a founder look for in a VC firm?
It is the value-add beyond the funding, mentorship, and advisory level guidance from VC partners as the company grows which will help them shorten their learning curves, become more geographically diverse, and scale to international markets.
“Selecting the right investor can do wonders to your company. It is almost like bringing a new co-founder on board”, says Saransh Garg, Co-Founder, Nova Benefits.
Saransh co-founded Prodigal in 2018, a Y-Combinator backed startup aimed to bring the power of AI and ML to the lending ecosystem. He later co-founded Nova Benefits in 2020 which helps companies provide the best health benefits to their employees. He says, a good investor not only brings in the capital but also ideas and helps you take your business in a positive direction which was previously unknown.
But, why should VCs invest in a portfolio community?
At the heart of any community, lies its “people” — people who engage in the community by either giving back to the community or getting benefited from the community. In a VC platform community as well, there could be two stakeholders primarily: first-time entrepreneurs who are looking for guidance from startup veterans and startup veterans or existing portfolio founders who want to “pay it forward” with their experiences and learning.
Community breaks down the concept of first-time entrepreneurs building in silos, creating a safe online and offline space for founders to share their experiences, stories, and failures.
That’s the reason for most VC firms focused around communities, fund value or the number of investments they make in a year is no longer the success metrics rather it is the relationships they build with the ecosystem at large and how they leverage those relationships to achieve firm’s long-term objectives and deliver business value:
- To accelerate portfolio companies’ progress: what opportunities and support can a VC firm provide post-investment?
- To help portfolio companies build products for global markets: how to build products for next-billion users?
- To increase the chances of a favorable exit: how sooner can the investment in a portfolio company yield returns for the firm through acquisition or IPO?
- To improve qualified deal-flow: what are the firm’s most important and highest yield sources of quality deal-flow?
- To boost brand perception in the entrepreneurial ecosystem: how strong is the firm’s brand to win investment allocations in competitive situations?
Trivia: While researching for this blog, I came across a community of VC portfolio community — VC Platform Global Community (VC Communitiception 😜). I was in total love with their concept of a peer-to-peer learning environment for those who actively work in VC and are in charge of growing, supporting, and creating communities for their firm’s portfolio companies.
3 pillars of a VC Community
As the fund’s portfolio grows, it becomes super difficult for the fund to provide the same experience, value, and mentorship as they provided to existing portfolio founders. However, what they can do is leverage the power of collective knowledge to build relationships, educate the startup ecosystem and build the firm’s reputation.
1. Building relationships
With the increase in the fund’s portfolio, the learning gap from the portfolio network widens. Hence, it is of utmost importance for the VC firm to increase the quantity and quality of relationships between its portfolio founders and measure the success on these parameters: how many connections you make, how frequent you make those connections, and what is the outcome from each of those connections/interactions for portfolio founders? Each interaction should be attached to a feedback mechanism to generate meaning from the network. The sad part is founders do get busy with their startup operations and often feel a scarcity of time to help other portfolio founders.
Interestingly, IntroBot — a startup based out of India is emerging as a savior for VC firms. The AI community manager (don’t worry Community Manager jobs are not in danger 😜) is helping several Venture Capital firms and Angel Networks make their portfolio communities 10x more efficient with their AI-driven WhatsApp bot.
“Funds are already aware of the immense value of the network they end up curating (especially as a few success stories emerge). The primary struggle is with maintaining a balance between encouraging enough people to seek help while not spamming the extremely busy founders”, says Divyaansh Anuj, Co-Founder, IntroBot
2. Educating the startup ecosystem
While browsing through Spark Capital’s The Creators webpage, I stumbled upon these interesting lines which fit well in this context:
“No two founders’ journeys are the same. But every journey is full of ups and downs, wins and fails, plans and pivots. And while there aren’t any rulebooks or formulas to startup success, there are insights and inspiration when you stop to listen.”
A community-focused venture capital firm will not only think of peer-to-peer learning of their portfolio founders but also sharing knowledge, stories, and experiences of their portfolio founders with a wider startup ecosystem to learn, grow and mature itself. It is all about the “pay it forward” attitude. Let’s accept it, we all learn something from the community (or community events) so we should be ready to give back to the community as well whenever required.
3. Spreading awareness
VC partners need to start emphasizing the importance of being present at startup networking events and giving a platform to their portfolio companies as well to showcase in these events. It is all about building a community to spread awareness and improve reputation.
Headstart is one such organization working towards helping aspiring entrepreneurs and early-stage startups mentor, showcase and scale their product. It is one of India’s oldest and largest grass-root level organizations with a vision to “change the world through entrepreneurship”. In his own words, Amit Singh, Co-Founder & MD, Headstart Network Foundation, says:
“Networking events are critical to kick-start a startup ecosystem. It typically takes 18 Startup Saturdays (monthly networking events by Headstart) to get 20 local product startups off the ground in a small tier 2/3 city in India. And that’s the critical mass to get network effects rolling. Startups connect with their prospective co-founders, customers, vendors, mentors, employees, and possibly investors. An ecosystem is built.”
I have been part of Headstart for more than 4 years and the impact they have created in the Indian startup ecosystem is phenomenal. Since 2007, Headstart has helped numerous startups showcase their offerings and get feedback on their products.
VC Community Initiatives
It is difficult to quantify the success metrics of community efforts — for some initiatives it could be a tangible outcome while for some it could be an intangible outcome just focused on relationship building. Here are some recipes for landing successful community initiatives that a venture capital firm can focus on to meet its long-term objectives:
Founders’ guide to staying afloat in a pandemic
COVID-19 has impacted everyone in its own ways, especially SMEs and early-stage startups. Portfolio founders and VC firm partners sharing their stories of resilience during the COVID-19 pandemic and advice as a playbook or YouTube video series will be an inspiration for small businesses to stay afloat during a pandemic/economic downturn. Ixigo’s story, for example, of surviving the economic downturn of 2008 and then navigating the COVID-19 pandemic as well. Note: I definitely don’t want another pandemic or economic downturn to come but no harm to be prepared in advance to travel through uncharted territories and bounce back from any crisis.
A design sprint is a five-day process for answering critical business questions through design, prototyping and testing ideas with customers. Organize design sprint sessions for portfolio companies to help them build products for the next billion users and global markets. Of course, this should be followed by capturing their testimonials and feedback on how the sprints have benefited them. Want to learn more about design sprints? Check out these steps to execute your own sprint by Google Ventures.
Hire with portfolio company
Portfolio companies are always on the lookout for amazing talents to join them. A dedicated portal by the VC firm with open positions in portfolio companies for anyone to browse through or organizing hackathons with problem statements from the portfolio companies will attract great talents.
Student Entrepreneurship Program
Foster entrepreneurial spirit among students, encourage them to ‘Solve for India’, and support innovative ideas with mentorship from portfolio founders. Genrobotics is a great example of a startup by undergraduate students and solving the problem of human scavengers.
Beyond educational, personal, financial, societal, and other constraints a lot of Indian women have gone beyond their limitations to set up a place for themselves in the entrepreneurial world. Bring more women entrepreneurs closer to your firm by providing mentorship from women founders of the portfolio companies.
CEO/CTO/CXO Round tables/Summits
Bring CEOs/CTOs/CXOs/Founders of all portfolio companies together under one roof to understand their point points in the company’s execution, product development, growth, PR, patents, etc. and work together to resolve them during the summit with the help of in-house experts or startup industry veterans.
Give a spotlight to portfolio companies through YouTube videos, blogs, etc., and educate the ecosystem on highly relevant early-stage topics through interviews with portfolio founders.
To conclude, I believe these initiatives enable VC firms to build stronger and more engaged communities. VC Community space is an interesting domain, still in its nascent stages (at-least in India), evolving with time and hence there is a lot to learn and experiment with. However, enough time must be given for the community to establish, grow, mature and become self-sustainable.
Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has. ~ Margaret Mead
That’s it, folks! Thanks for your time, thanks for reading! :)
If you like to know more about me or get connected, check out my profile below:
Siddhant Agarwal on about.me
I am a Design Thinker, Developer, and Entrepreneur in Bengaluru, Karnataka, India. View my portfolio.