Vendor Communities: A new way to build trust

Writing a cheque is no longer the sole priority of fund seekers in 2021, startups want more. Which is why, VC firms around the world have embraced the new concept of building a community and have recognised its growing importance. More often than not, certain companies, especially seed stage startups, run by first time entrepreneurs, have been building themselves in silos. The concept of a platform community can break these down and build a safe online and offline space for the companies to share their stories, successes and even failures.

What does this do?

It builds a strong peer-to-peer network which assesses each individual company’s learnings, in turn leveraging it for the collective good. Moreover, it also builds a database of unique and incredibly useful insights that benefit the community and help in making better informed future investment decisions. Sounds like a win-win situation, doesn’t it?

Why is a community becoming more and more important for today’s Venture Capitalist firms?

Every firm has the right to brag about its ability to ‘add value’ to a startup, and even though it might sound exciting at first, many tend to forget that as the firm’s portfolio grows it becomes increasingly difficult for the partners to allocate their time for individual guidance. Their limited time and resources in turn become the barrier to adding values to their investees.

This is where the access to a community of founders becomes extremely important. As a fund’s portfolio grows, so does its collective knowledge. As Venture Capitalist portfolios continue to become geographically diverse, it can no longer afford to be limited to a city-wide or a country-wide affair. The internet is the common thread between the world and it is the best way to scale the conversations between founders in different sectors, countries and cultures. When companies help each other, everyone wins.

Ideas are a commodity and fast executions are the need of the hour. An all accessible community for first-time entrepreneurs will accelerate their learning in a bid to leave a mark in an increasingly competitive global market.

Why now?

With great power comes great responsibilities. As the bar keeps getting raised everyday, startups want more than just funding from their VC firms. And why not? There’s a stronger need than ever for knowledge sharing and connectivity within portfolios, as founders are facing the same challenges all over the world, at the same time. It only makes sense to combine our knowledge and expertise to create a more competent work environment for all. With free business tools, cloud servers and open source technologies available in the market, it is increasingly becoming easier for people to start a business. Even though the VC portfolios may differ, the changes in the market affect everyone in the same manner. If companies can leverage the knowledge and skills across their portfolios, it helps everyone in the long run.

Let’s talk about communication. Most of the networks around the world rely on emails and newsletters to get their message across, but more often than not, emails tend to get missed, deleted or just misplaced. Even though these forms of communication get the job done, where it fails is in building a personal connection and does not give your network a sense of belonging that could be associated with your company. This in turn results in less engagement from the members.

This issue can easily be solved by providing access to a community platform, which comes across as a pledge to your network that you can bring them more value. It also shows that your firm is committed to giving each individual in your network an opportunity to grow, learn and build more meaningful relationships.

Lastly, building a community will also provide you with a competitive advantage. While a handful of VCs have already jumped on the community bandwagon, it is going to become a norm in the industry. Providing access to your network in the form of an online community can be a unique selling point for your firm, which could in turn attract new founders and future LPs. Creating an opportunity for individuals and companies with a common goal to connect, will inevitably add value to your network in the long run.

Real life stories

Over the last ten years, many Venture Capitalists have happily embraced the idea of building a community around a thriving network of entrepreneurs and investors alike. Some of the prominent names include A16Z, First Round, Workbench, Spark Capital. No, this is not a small time experiment being run by these firms, some funds have made community a part of their core mission - that’s how dedicated they are to the process.

Another popular VC, Y Combinator boasts of their network. With over 1500 founders, they provide a network like no other, with excerpts available from almost every category.

Other funds like Union Square Ventures have made community a core component of their investment philosophy. Their theory is investing in large networks of engaged users that are defensible through network effects. Their goal through this thesis is to create a safe, productive environment for their teams to connect over. USV also hosts full dau summits for specific groups within their portfolio like product managers, community managers, etc. Along with that, they also indulge in digital events, half day workshops for all members of their portfolio companies.

As the need to reach potential investments become a huge priority for VCs, they also continue to increasingly invest in activities and events which will help in bringing the existing communities together. Another fund called 500 Startups hosts several full conferences which are generally made open to the public. Not just that, they also provide weekly mentor sessions, random happy hours and fireside chats for portfolio companies in a bid to create a strong presence of a community, in its truest sense.

Success is a two way street

The process doesn’t stop after onboarding a new company. It is important to guide the companies once they have been absorbed by the Venture Capitalists in a way that both the parties benefit from the relationship. The goals here are pretty straight forward and consistent - education, connection and marketing.

Education: Sharing is definitely caring

As mentioned above, one of the greatest ways a network can benefit its portfolio companies is through events, content and creating opportunities for knowledge sharing online. Each firm can bring in their set of expertise in the form of mentors and experts from the Silicon Valley to provide their portfolio companies with a set of real-world solutions to their problems.

A great way to make sure if a network’s ways are working is by asking for feedback, asking members if they learnt something new which they think they will be able to put to use the next day and if they’re overall satisfied with the value being provided. If the answer is yes, it can definitely be counted as a success for the community.

Connections: Relationships matter

A sure shot way to help the onboarded companies is by increasing the quantity and quality of relationships between members. Let’s not forget that a Venture Capital community functions the same way as any other community - with a huge focus on making and retaining connections. Taking USV’s example here, they focus on the 3 Vs of interactions - Volume, Velocity and Value. The three need to work in cohesion. If the focus is put only on volume, then one may incentivize the wrong behaviour. Calculating value on the other hand, takes time and requires patience and consistency. Hence, finding the right balance is absolutely key here.

It is now the duty of the founders to relay their wisdom to the new kids on the block. By facilitating such interaction, founders can help get funding, create new jobs for smart people, help partners access knowledge and opportunities and hence create a nurturing environment for the startups. At the end of the day, every time founders from various walks of life come together, exciting things are bound to happen. After all, the fun is in keeping the passion alive, right?

Marketing: Community as a way to build awareness and reputation

As discussed above, communities can very well serve as a unique selling point for firms. Owing to its comparatively fresher approach and charm, this latest pillar in the Venture Capital business model is meant to attract eyeballs and create a buzz. By becoming a part of a community, founders are automatically brought into a powerful network of peers and mentors. Any startup would be thrilled to get access to such a community because they are providing more than just funding with their investments - they are giving you access to intellectual wealth too, one that has taken a long time for them to acquire for themselves.

Content and events which were historically kept private just for portfolio companies, are now being shared at a global level to spread awareness and improve their reputation in the circle. In this case, the early bird definitely gets the worm. It’s all about making the right noise at the right time and benefiting entrepreneurs on the way too.

Where does this lead us? 

This is where GetProven’s role comes into play. We provide a solution which lets other founders understand more about which vendors their peers are choosing and provide them with an edge when it comes to shortlisting high quality vendors. We understand that it can be difficult to find vendors quickly and even more difficult to boil down to your top options. Proven helps VC backed companies to find the best professional services suppliers by choosing them on merit and not marketing, by providing all your options under one roof. At Proven, we believe that great companies have great clients, which is why we firmly advocate finding the perfect professional fit for your services to make it big in Silicon Valley.