VCs fail to add value beyond funding, early stage founders say
The past year has seen VC investment go through the roof as firms look to capitalise on increased demand for tech, but founders are unhappy with what firms are offering beyond funding.
Forward Partners’ More than Money report published today will make uncomfortable reading for the VC community.
VCs may well have splashed the cash at record levels last year but the report shows they have a long way to go when it comes to value add. While 92 per cent of investors claim to add value, 65 per cent of founders who gave their investors a low value-add rating said they “tried, but failed” to add value beyond a cash injection.
Forward Partners and Landscape VC canvassed more than 500 founders and investors in the UK and Europe, focused primarily on the earliest stages of funding. Some 88 per cent of participating founders were pre-seed, seed and series A.
“There’s a perception that value-add is a marketing gimmick and when investors fail to deliver they make that perception a reality,” Forward Partners’ chief executive Nic Brisbourne. “However, it’s still a highly prized offering as when applied properly it can be an effective tool for driving growth.”
Despite the inconsistencies, the majority of founders (61 per cent) indicated they still want value add as part of the investment package with almost half considering it to be more important than a VC firm’s brand and portfolio.
“To win, VCs have to provide better value to founders. It’s also in our best interest, as being there to give a timely boost or acceleration when our portfolio companies need it is not only highly rewarding but improves returns. That’s the real magic of effective ‘value-add’,” Brisbourne added.