The Tales of Usefulness Have Been Greatly Exaggerated
An Exploration of "How Can I Be Helpful?"
I've been told I can get overly clever with titles and headings so I'll explain the joke. In 1897 Mark Twain traveled to London and while away rumors began to circulate that he was on his death bed, or possibly dead already. When a journalist reached out to inquire if he was, in fact, dead Twain responded (sort of) "the reports of my death have been greatly exaggerated." 😉
I've written before about the origins of venture in the 50's and back then the memes weren't so dank. But the VC meme game has really stepped up in the last few years. Now @vcstarterkit has 50K+ followers on Twitter and most jokes about "VC usefulness" can go viral.
At the risk of over-analyzing the joke I wanted to dig into why the running gag revolves around VCs consistently saying, "let me know how I can be helpful" while the most common response to "how have your VCs added value?" is that they've "left us alone."
The Memeification of Venture
Venture capital is a weird hodge podge of money management, advisory services, thought-piece marketing, and (increasingly) meme accounts. As recently as 2019 the conversation around "let me know how I can be helpful" mostly revolved around lending "social capital in lieu of financial capital." In other words? VCs say it when they pass on an investment but don't actually mean it. To their credit, whoever runs the @vcstarterkit twitter account laid out a great article about this dynamic.
But progressively the meme has expanded to "all VCs are useless" pretty quickly. This sentiment creates a significant dose of soul-searching among VCs. When I interviewed ~90 investors for a piece all about how investors differentiate themselves a lot of those conversations had palpable angst.
"We've been talking about [our unique value prop] a lot lately, but not sure we have a firm wide answer on what our exact [offering] is (which is a problem in of itself)."
Venture investors wake up and look themselves in the mirror, convinced that surely they can't be useless. But the memes play again and again in their heads. Even investors who have sat on both sides of the table slip quietly into madness as they drip down the drain of circular logic.
To each their own. But in my mind, anyone who believes that all $900B+ of venture dollars invested in the last 6+ years was attached to absolutely zero beneficial advice or support is naive. Instead I think of it more akin to a marketing budget. They say 50% of your marketing budget is wasted, you just don't know which 50%. Well more than 50% of VCs are worthless, you (and they) just don't always know which half.
Instead of giving into the meme I propose a more thoughtful evaluation of what venture investors can actually offer a company. There needs to be a lot more realistic and honest discussion about that.
VCs (What Are They Good For)
Let’s explain the joke again. Alright, moving on.
I would argue that, much like the phases of grief, there are phases of VC value-add that everyone can progress through in their working relationship with just about any venture investor. Clearly laying out what can be expected is the best way to manage expectations.
Start From Zero
First and foremost the expectation has to be set that VCs cannot and should not be relied upon for the survival of any company. I did a podcast recently with Alex Banks where I described it this way:
"The whole point of venture capital is to help kickstart [a company's economic engine], which is really critical. BUT it's supposed to kickstart the engine, not run the engine. Venture capital was never meant to be the fuel that powers this engine for its lifetime."
Too many people have forgotten that. Some of the meme-ery of VC might stem from that. People expected a lot, and VCs even promise a lot, but there is a disconnect in delivery. Certainly that can crop from crappy VCs that would have loved to help out, but they had a tee time to catch. But in my opinion it's often just really difficult to nail a meaningful value-add which is why you have to start with zero expectation and go from there.
Improved Odds
I've written before (several times in fact) about this idea of working with VCs to "improve your odds." The idea first came from a Bryce Roberts tweet that I think about all the time in response to the question, "what product do founders want to buy from VCs?" Bryce's response to the question?
Marc Andreessen said it another way, describing it as a "bridge loan of credibility in advance of tangible evidence."
Once you start to measure any proposed VC value-add I think this is a good bar to begin with. Can the VC improve your odds of success? And I think there are a few ways they often go about doing that.
First & Foremost: Capital
Before any program or process the relationship to capital is critical. Bill Gurley, I believe, articulated this idea of the danger that comes from decoupling advice from capital (though I couldn’t find his tweet.) When you're just giving cash or just giving advice you have misaligned incentives.
In simplest terms VCs represent an allocation mechanism. The owners of capital (pensions, endowments, family offices) need help effectively allocating capital to the people who need it (founders) and VCs act as a well-informed middle man. Often the most valuable thing an investor can do is give you money.
One rave review from a company about their VC is a story I learned during my days at TCV. In 1999 TCV made their first investment in Netflix right before they spent the next few years getting batted around by the dotcom. TCV helped Netflix through a recap in 2001 and invested several times over the next few years.
"If there wasn’t TCV, there wouldn’t be Netflix.” (Barry McCarthy, Netflix CFO)
Not their talent arm or their brand or their events or their swag. Netflix owes their life to TCV largely because of their cash. This may have felt like a moot point over the last few years when most everyone was flush with cash, but capital represents lifeblood for an as-of-yet unprofitable company.
Advisor & Counselor
Shahin at Lux lays it out. The first thing that founders want from VCs is just to be available. To be someone they trust, someone they vibe with, who can help them think through tough decisions that are more difficult to discuss with their employees.
I've often been surprised when several of the founders I've had the pleasure of working with express so much gratitude in response to an honest conversation. Just the ability to talk in-depth about some of the things that are frustrating to them can make a world of difference.
Thought Leadership
Yeah, I said it. So sue me. Thought leadership is even more of a meme than "let me know how I can be helpful," but before I'm shunned in the halls of fintwit let me explain. Or better yet, let Sarah Tavel circa 2009 explain:
"I sent [a] white paper to an early stage SaaS portfolio company of ours that I work with, and laughed when I got the following response: 'This is great. Why are you giving away all the secrets?!' My answer: It's our freemium model (or rather, venture capital's freemium model). The difference is, we’re trying to give you a taste of what we've got so you take some of our money."
Anyone who isn't taking advantage of resources like the NFX marketplace library, or the First Round Review or the Vertical SaaS Knowledge Project from Tidemark is missing out on some high quality content. VC thought leadership is (surprise) another aspect of the meme. But so many VCs do it because the writing is a way of articulating their vibe to founders in order to better attract the right kind of pitches. For really high quality content if you think the writing is good? Just wait until you have the writer on your cap table.
What Else?
I could go on and on (and many people have). There are countless surveys, threads, and events that revolve around articulating VC value props.
There are several offerings that VCs can build their unique value proposition around. This first half of this post is acknowledging that, contrary to popular belief, VC value-add does exist. But it's muddled behind some ineffective social systems within the VC <> founder dynamic. So let’s dig into some of those.
Changing The Premise of the Meme
I've been told by my 14-year old niece that arguing with memes demonstrates intense insecurity (she believes in strong opinions strongly held.) Don't get me wrong. I'll continue to make fun of ineffectual VCs online as much as the next person. But there is always at least a little bit of truth in every "JK," so I want to, instead, think about ways that VCs can try to ensure their usefulness.
Here's How I Can Be Helpful...
I've written before about the reframing of the meme in question. The focus puts so much on the 'wait and see' approach to value add:
"'Let me know how I can be helpful' puts the ball in the CEO's court. It's up to them to decide how I can be helpful and until then I'll wait on standby. Instead, I try and ask "let me know if this is helpful" after I've taken the time to brainstorm the things I can do without any input from the company. This comes from spending time thinking about a business and what needs they likely have, and then doing my best to come up with some suggestions for them.
The meme can be undermined by shifting the focus away from "you tell me" value-add and instead emphasize the ideation phase. The more investors articulate their value prop the easier these suggestions become.
Value-Add Audit
When I talk to folks who are either building newer firms or those who are attempting to improve the way their current firm offers value I often see this sentiment: "The idea that founders shouldn't expect their investors to add value should change. There should be a reaction to actually delivering results."
I've written before about the concept of a "Value-Add Audit." Effectively a deliberate emphasis on tangibly measuring how much value any given investor can actually contribute. Not only should founders start to apply this concept to their VCs but venture investors should proactively apply it to themselves. How much of a difference have I really made?
And sure, right now this concept might feel like a nice to have. But when you consider some predictions that "between 50% and 75% of the active investors in private markets today will disappear within the next few years," you realize this is a much more existential threat.
Venture investing has also historically been very hard to do well (though a little less so over the last few years.) We're likely returning to a point where venture investing is much more difficult if you want to drive outsized returns that justify the inherent fees. So ensuring your value-add is tangible and measurable is more than just a nice to have, and not only is it an element of long-term survival for a fund, but it should also be something investors are laser-focused on in hopes of improving their outcomes. In a world of well-measured value-add you should start to see more definitive correlation between support and outcomes.
Make The Ask
This one is for founders. It's important to note how desperately good investors really do want to help. They do their best to offer up advice or benchmarks or best-practices from previous investments. But no one can know your company as well as you can. Micah Rosenbloom at Founder Collective put it this way:
"'Let me know how I can be helpful' isn’t something VCs say to be flip, or out of reflex. I think the reason it’s become a mockery is its vagueness."
He goes on to lay out 8 things that founders can ask from investors like introductions or closing candidates. Things that don't trigger any awkward social capital dynamics; just plain and simple ways that founders can try and kickstart their current and wanna-be value-add investors.
I think there is a whole post to be written about how founders can more effectively leverage investors with well-thought out tactical asks. That should be true of your current investors, but even for investors who haven't invested yet. Right now you have a very uncertain market and a lot of bored VCs. Many of them are excited about your business but they're probably not in a rush to make a lot of big investments, and honestly you're probably better off being very cautious about the current market climate before you raise.
Having a list of very tangible and needle-moving things that investors could potentially help with is the best way to try and harness that wanna-be "value-add" for good.
What Does This Mean For Venture Capital?
I'm not offended by the VC memes. But I don't love how close they hit home for a lot of people. I don't love how much they seem to reflect reality. I don't want every well-intentioned VC to hate themselves a little bit more every time they accidentally let slip the fateful, "let me know how I can be helpful."
The value that venture investors can bring is poorly measured, rarely discussed, and completely ad hoc. My sense is that there are a lot of smart people in venture that are like big lovable battering rams; they can knock down walls for you but you have to point them in the right direction.
VCs could do a much better job of deliberately identifying, executing, and measuring their value prop. And founders could do a better job of not letting their VCs off the hook. Don't just thank them for the retweet or the "way to go" response to your update email. We can do better than that.