As we've grown First Round Capital over the last several years, I've come to believe that there are three types of value-add that venture capital firms can add to portfolio companies.
- The first is the money. There is no differentation or value-add here. Every investor's money is the same.
- The second is the value that the specific people (partners, principals, associates) at a venture firm add. Let's call it "people" value. Can your VC help you with your distribution strategy? Can they help you build your team? Can they connect you with a partner? This value is dependent on the skills and rolodex of the particular VC that a startup is working with -- as well as the amount of time they can allocate to your company.
- The third level of value is what I call "structural" value. This is the value that the firm can bring outside of any specific partner interaction -- it is scaleable, institutional value-add. While I think that my colleagues and I add a tremendous amount of "people value", we really spend a great amount of effort trying to add structural value to our portfolio companies.
This is why we hold our annual CEO Summit - which has featured speakers from Corporate Development at major Internet players (such as Google, Yahoo, AOL, CBS, Microsoft, and Fox Interactive), Bloggers and press (like Michael Arrington and Henry Blodget), evangelists from up-and-coming platforms (like Facebook and Amazon), and valley veterans (like Marc Andreessen).
It's why we have operate a well-used mailing list for our portfolio company CEO's and CTO's to share best practices and ask each other for assistance.
And it's why we just completed our "First Round Capital Agency Days" in New York City this week.
As we worked with our portfolio companies, one of the things we’ve been hearing loud and clear is that our advertising-related companies would like to have deeper relationships with large ad agencies.
So this week my partner, Chris Fralic, organized a two-day road trip to the four largest advertising agencies in country. We rented a bus, and drove our companies to meet with WPP, Digitas, OMG and Universal McCann. This gave our portfolio companies the opportunity to present to over 100 media buyers, account executives and strategists. These four agencies control a major portion of total US ad spending. The response was so strong that we’re going to do it again in the spring.
Thanks to all the companies (below) and agencies for making the event so successful -- and Chris for organizing a wonderful event!