VENTURE CAPITAL STRATEGIES
There Are Only Four Venture Capital Strategies
Among the many approaches in venture capital, there are fundamentally only four ways. The best VC’s pursue all of them.
1. Add Value
2. Source better
3. Invest better
4. Exit / sell better
1: Add Value
Adding value is a real strategy because it moves existing investments up the curve. It increases the return on an investment.
Improving portfolio company operations is the most common approach. Recruitment, marketing, partnerships, sale, operations, and board support are common areas to help. Most often this takes the form of coaching founders or rolling-up your sleeves to help them get work done. Start-up studios are interesting, blurring the lines between founders and investors.
Adding value is absolutely necessary—it's the promise to your founders to be their partner. And it earns you the right to be involved with great founders. Ultimately, great founders in great markets build great companies.
For founders, an investor's ability to add value is obviously important. Great founders are choosing their investors and want to bring in people who will help build the company.
2: Source Better
Sourcing better is a real strategy because it rescales the distribution. Fishing in a better pond can make as much (or more) difference as being a better fisherman.
A classic way to source better is to build a better network. Focusing on a geography or sector can create strong networks in order to create regional dominance.
Outbound sourcing is an under-appreciated approach in early-stage ventures. Because inbound referrals are plentiful, investors often ignore outbound efforts. The key is being able to target founders who actually are exceptional. But if you can, why would you not make sure you are talking with the best out there?
KYRIN Capital builds high-quality and selective networks of founders that spin-out many great companies, and proactively reaching out to the founders who excite us most.
3: Invest better
Investing better is a real strategy because you end up in bigger winners.
The most important factor for picking better is, by far, good judgment. Good judgment is hard to describe. It's a quality, which only reveals itself over time. It’s the single most important asset for an investing partner.
Picking better is also a function of doing research and developing insights. If you can predict major technology and economic trends, you will be rewarded with more winners.
Art and science (or guts and brains) both play into picking. And both are hard. This is because the winners start to become very obvious as time goes on. Most Series C investors have very similar lists of the top ten companies they would like to invest in. Brand and reputation have increasing payoff as you move into later-stages.
Founders want to work with VC's who invest better for the same reasons they want to work with VC's who source better—they want people to associate them with the best. It sends a positive signal to customers, employees, and other investors. And it's a more valuable network to be a part of.
4: Exit / Sell better
Exiting / Selling an investment better is a real strategy because this finally determines the return on investment an investor is rewarded with.
If the sourcing has been perfect, the negotiated investment terms attractive, the added value process outstanding, although the exit / sale not well timed and not executed professionally, the actual realised investment return could become not according expectations of capital providers.
KYRIN Capital has, besides a strong investment track record, a strong track record of exiting investments on behalf of investors and selling companies on behalf of business owners.