PS#040: My Playbook for Building Your VC Network (Part 4)
The last piece of the puzzle is the broader ecosystem.
A trusted ecosystem is critical to (1) building your theses, (2) sourcing deal flow, & (3) evaluating opportunities in the market.
As I mentioned in the previous parts of this series (start here if you’re just joining), the ecosystem can help you get a deeper understanding of how a space or industry actually works. This information will help separate the companies that are solving real problems with need-to-have solutions (vs. more nice-to-have solutions).
In the long game of venture capital, we’re looking for the companies solving real problems with need-to-have problems. Those are the ones that can last and make it to the end.
Today, we’ll walk through the five categories I target as I build out my ecosystem network…
Content creators
Customers
Value chain
Incumbents
Academics
Content creators.
When I’m just starting to build my network in a space, I’ll often start with content creators.
Content creators include journalists, bloggers, podcasters, event planners, etc., essentially anyone who is building content on a particular space or industry. They are often an excellent source of market intelligence and deal flow because there job is to build content (e.g., articles, videos, events, etc.) around things happening in the space.
Their job is to be obsessed with this space (if they are doing it well), just like investors. You can create a pretty symbiotic relationship by trading intel, sharing companies, and making introductions. In the early days of venture capital, I’m not sure that this was quite as easy. However, in today’s world, there are people out there creating content on everything.
Take advantage of it.
Customers.
These are the most important relationships to build in your ecosystem.
It’s the holy grail.
Customers will include the champions (those leading the charge on purchases), buyers (the ones who ultimately make the decision), and users (those leveraging the solution). An individual can be one of these, two of them, or all three. It completely depends on the company, solution, industry, and situation.
If you’re able to build trusted relationships with potential customers, you’ve gained access to…
market intelligence of the problems they are facing,
potentially understanding their budget and willingness to pay for solutions,
how their process works for purchasing solutions,
and, most importantly, introductions that could add real revenue to your investments.
You’ll be able to call upon them to strengthen your theses, deepen your diligence, win investment opportunities, and better support your portfolio companies.
Even better, you can provide them with real value as well.
The types of customers open to this kind of relationship are looking for innovation. Help them be better at their jobs and find new solutions to solve their problems. Provide value.
Value chain.
For me, the value chain includes the other pieces of the industry.
This might mean vendors, suppliers, integrations, services providers, etc. They work in the industry and have a different perspective on how things operate.
I often find that these relationships help me fill in the broader view on the industry’s mechanics. They help me build a complete picture of the value chain.
These individuals will have additional market intelligence and could highlight interesting startups playing in the industry (i.e., deal flow). Again, this is pretty symbiotic. Individuals in this category will often be looking for the same thing in return (e.g., market intelligence, new startups, introductions, etc.) so that they can better perform their own jobs.
It’s all about making others better.
Incumbents.
Relationships with the incumbents in a space can be a little tricky, but are still very important.
The incumbents (or larger, mature companies in the space) can provide a lot of value to you as an investor. They can be good thought partners, challenging your ideas, as they have a lot of expertise and experience in the space from a completely different perspective. More tactically, they can offer commercial relationships with startups, acquisition opportunities, insights into the potential market opportunity, competitive landscape dynamics, etc.
There’s a lot of good value.
And, similar to the previous groups, there’s also plenty of value that you can provide. Incumbents are also looking to understand the latest market trends, newest startups and technologies, potential acquisition opportunities, partnership opportunities, etc. However, they are competitors. You’ll need to be careful in what you share and how you share it.
Academics.
The last category is academics.
This includes professors, researchers, thought leaders, etc. They are often dedicating their time to researching new technology that will find its way into the private and public markets. This can give you (potentially early) access to new founders, technologies, and/or startups.
On the other hand, these individuals are highly curious. They are always interested in learning more about the changes happening in their fields. The intelligence that you can provide of what is working/not working in the commercial sectors can help their own efforts.
Bonus: ecosystem cheat sheet.
I’ve got another cheat sheet to share with you.
Use this as a guide (below) to start building your ecosystem network in a new space. This has helped me establish my understanding in all sorts of spaces.
It doesn’t matter if you’re already an expert or starting from scratch (as I did), this will make sure you have everything covered for you deal flow, diligence efforts, and market intelligence.
I’ve talked a lot about providing value in this series. Well, in the next few issues, I’m going to talk about a few simple ways to start providing value within and outside your firm.
As a teaser, one of the easiest ways is by building market maps.
I’ll share my process for building 10x market maps so that you can extract the most value from your venture efforts. Stay tuned.
