How VCs standout in a competitive marketplace

Table of Contents

The relationship between a VC and a founder starts with the power firmly in the VC hands. VCs  get a lot of inbound enquiries from founders. Some VCs I speak to are receiving hundreds of decks a week. 

But the VC market is now more competitive than I’ve ever seen it. And founders are becoming smart, experienced buyers when it comes to raising cash. Lots of people I speak to have been burnt by choosing the wrong VC. Founders recognise that they in exchange for the cash, they are giving up equity, and giving up a board seat. 

For some founders, they’re better off not having raised the cash because the wrong VC partner can heavily influence the direction of the company and founders end up building a product that you didn’t want to build. 

But for the founders that found the right VC. The impact is incredible.

But the emphasis is more and more on VCs to add value to founders beyond cash. But how do you do that? 

More value than cash

I speak to founders every day and typically they’re looking for:

A network of experienced professionals

VCs should develop connections for their founder network who can provide advice and guidance. Founders want access to product heads, sales leaders, marketing leaders and others who have been vetted and can help them not just sense check, but challenge their thinking as they build their business. 

Partner networks

Founders also want VCs who have partner networks they can tap into. They want recommendations on tools and platforms that are useful for startups, and they want access to discounts on those tools that a VC has negotiated based on their portfolio of investments. 

Essentially, founders want VCs who have an ecosystem of partners and products they’ve validated, rather than having to evaluate everything themselves. They want VCs who have done the legwork of screening tools, services and advisors so founders can leverage that network and hit the ground running.

Communities

Founders love to share challenges with like minded founders at a similar stage and in a similar market to them. VCs that embrace their founder network are always a step ahead. But it needs to be valuable connections. A seed stage company doesn’t want to be connected to a series B founder and a series B founder doesn’t want to be speaking to a seed stage company. 

When the tables turn

I was recently working with a business that was raising a seed stage of £3.2m from a mixture of VCs and angel investors. The founder had been pitching for several months without success from VCs. He’d been knocking on doors, and pitching his product without success. But following a new product release which had a really instrumental piece of AI technology he suddenly had lots of VC interest. 

The tables had turned and he went from pitching VCs to interviewing them to select the right fit. And the key factors in the decision making weren’t cash. 

The proposals that really stood out were from those that had operated in the space before because that created credibility. But importantly for the founder, was the culture of collaboration.The network, the operating partners, the Slack community, the monthly meetups, the webinars and ongoing support. 

This is a compelling proposition for a founder because they’re part of a journey with other people. They want someone to guide their journey, not lead it. They want a partner that provides value not just to their cashflow, but to their wider business, and importantly, to them. 

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