Adding Value As An Investor

In almost everything I do, I’ve found that giving something and adding value is often more rewarding then getting something. Whether it’s spontaneously giving my team donuts (which actually wasn’t my idea) as a sign of appreciation or giving time to my family when I can, I find it to be a very satisfying way of living. I’ve tried to apply this thinking in my past and hope to continue doing so in the future.

In the VC world, adding value is pretty much the most important thing you can do. Outside of providing capital to founders of promising startups, it’s everything else you can give that sets you apart from other investors. This article here shows that VCs see things like helping obtain additional financing, strategic planning, and recruiting the best management as some of the top services they can add to portfolio companies. Of course, there are other ways to be seen as a value-add VC and not just someone who cuts the check.

For some of the investors who have been in the industry for a while, there are three things they can give that provide the greatest value: experience, expertise, and time. Seasoned investors are known for being able to “recognize patterns” after dealing with numerous startups and learning from experience. They’re able to see the big picture that founders and CEOs don’t see because they’re so focused on righting their ships. This kind of experience is absolutely valuable to companies because it can lead to quicker growth with fewer mistakes being made. Having expertise in the same sector that a portfolio company is in is also a great value add because they’re able to spot market trends in ways that founders may not. Finally, when an investor gives their time to the founder, it shows that they’re all in with them. It has to feel great to a founder when they know that their investor, who happens to be extremely busy, is using their time to provide help, guidance, and advice to the founder when they could be doing so many other things.

Another way of looking at this is through the idea of Intellectual Capital and Relationship Capital, as this article states. Essentially, in addition to financial capital, most of what an investor can provide falls into one of two buckets: 1) Intellectual Capital, where experience, expertise, and guidance play a role, and 2) Relationship Capital, where founders can rely on the investors’ deep network. Investors usually know other investors or industry leaders who may be willing to help out the startup in terms of securing additional financing or hiring a great person with experience as part of the executive team. This is a great way to look at it as well since it clears up what an investor could best be doing to help out portfolio companies.

Lastly, there’s the concept of being on the board of an invested startup. In addition to the previously mentioned methods of adding value, having a seat on the board is a privilege and one of the greatest positions an investor can have. Mike Volpi’s article on the art of board membership lays this out quite well. It all comes down to your relationship with the founder, the network you can provide founders and CEOs, being available for them, and more. Being an individual that they can rely on in good times and bad, from strategy decisions and recruiting to everything in between, is absolutely valuable in helping the company grow while continuing to have the shareholders’ best interests in mind.

Really what this comes down to is how investors can find ways to contribute to the greater good. It doesn’t matter how grand the gesture or how impactful the action – if you are an investor and you’ve found a way to be there for a CEO, you’ve done a great job in adding value. It has to be one of the most rewarding aspects of being an investor, and something I look forward to doing myself.