Here’s What Entrepreneurs Should Request From VCs (Besides Money)
The investor-founder relationship can be a lot richer than just raising capital
I live for that sudden flicker in an entrepreneur’s eye during a pitch discussion. The one which suggests I’ve asked a question that is simultaneously both new to their fundraising experiences and interesting to them personally.
“What do you want from me besides capital?” is a flicker-producing question more often than it should be. Maybe it’s because raising money itself can be such a trudge or many investors over-promise and underdeliver—that you’d be happy to just get capital and be done with it. But my VC fund Homebrew is founded upon the belief that we’ll put sweat and reputation behind your startup, not just a wire transfer, so to me, it seems like a normal question to help understand if you need things that we can—or can’t—provide.
The answers I receive typically fall across four categories:
- “Vertical Expertise” — More hands and minds around the industry maze they’re traversing. Information, relationships, pattern matching for marketplaces, SaaS, financial services, agriculture, media, etc. Our backgrounds and portfolio suggest that we might have ability to help the founders move faster and with greater accuracy in testing their market hypotheses.
- “Horizontal Expertise” — We see lots of startups plus we’ve built and run large teams. Founders articulate a certain kind of support they’d like in figuring out operational decisions and growth challenges. Hiring, org structure, product development philosophies, and so on. Most of time (~80%) this is about determining best practices or building a toolbox so you can apply the right tool to the right task. About 20% of the time it’s about discarding the best practice to do something unique or irregular because it’s what best fits your strategy, capabilities, and culture.
- “Personal Support” — In what I hope is a mutually self-selecting outcome, we often hear from founders who emphasize wanting investors they trust and feel like they can have real conversations with. They want investors who support them as people and support their growth. People who will hold them accountable for building something they’re proud of but remember we sit on the cap table, not the org chart.
- “Venture Industry Advocacy” — They want ears to the market, help with the next fundraise, assistance with optimizing the rest of the cap table — generally, a translator and facilitator between them and the capital markets. Not an outsourcing of the responsibility, but sort of a “you’re one of them, but on our side” scenario.
In reality, across a multiyear relationship with a portfolio company we end up doing all four of these, but it’s important to start off understanding expectations. For what it’s worth, I’m not looking for wrong answers per se, but there are probably two major red flags for me.
The first red flag, when asked what they want from me besides capital, would be a “nothing” shoulder shrug. The second would be any response that suggests a CEO is trying to get an investor to solve problems that the founders really need to own, or looking for validation in way that translates as “I’m not sure this company is a good idea so I’m raising money as a process to see if some VCs will tell me it’s a good idea.” Otherwise, I truly am just interested in any answer as mutual prequalification.
By the way, if you’re fundraising and your potential investor doesn’t proactively ask this question — or a variation of it — it’s perfectly reasonable (even advised) to say something like, “Can I share some of what I hope to turn to our investors for post-fundraise?” or “For us, a fundraise is more than just a wire transfer. It’s a relationship and here are some of the things I’d like to make sure we’re both excited about doing together.” You’ll all be better for this discussion!
