Digital TransformationHow Venture Capitalists manage their Portfolio

DSP-Partners I Darmstadt I April 2015

Overview

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Big Corporations often struggle in their Quest for Innovation and Agility

Their Journey towards Digital Transformation could benefits from fresh Thinking outside traditional Industries

DSP-Partners interviewed Venture Capitalists to synthesize Learnings that Incumbents can draw from Venture Capital Players about successfully growing Start-ups

Digital Transformation Thoughts:How Venture Capitalists manage their Portfolios .1

3Source: DSP-Partners, Interviews with VCs

Strong expertise: Investment professionals have either long experience in VC, as entrepreneurs, Start-up founders or managers in Digital companies

Strong Network: VCs need strong networks (mission critical) to (a) source new deals (b) manage/advise their portfolio-companies (c) find management (d) additional financing rounds (e) exit their investments

Good reputation: No politics; it is not good to be seen as a VC who is difficult to deal with; founders of previously financed start-ups serve as reference for the VC

Large throughput: VC companies screen large quantities of start-ups every year for potential investments along defined criteria: need traction, need a trusted referral, need to be in focus areas

Focus: Different approaches as some VCs focus on start-ups in dedicated segments (e.g. Media, SaaS, B2B Software, Consumer etc.) while others have a broad spectrum

Strategy: Strong sense of own strengths and weaknesses; depending on the deal, they decide upon being lead-investor or co-investor; managing a large portfolio

Digital Transformation Thoughts: How Venture Capitalists manage their Portfolios .2

4Source: DSP-Partners, Interviews with VCs

Hands off: Typically VCs manage their portfolio companies via the quarterly board meetings and monthly KPIs and management-calls (1/2 h per week), no day-to-day management; involvement in situations such as search for new management, search of advisory board members, financing round, special topics where they can bring in their expertise or network, management support; Coaching of the founders (except when in crisis like running out of cash, legal, HR/Press)

Pragmatic: few formalities, no “business procedures”

KPI-/Milestone-driven: The start-ups’ traction is measured along growth oriented and operative KPIs such as customer numbers, revenue, conversion etc. on a monthly basis along a KPI-sheet; key financial focus is on the “cash-wall” and milestones to steer timing for fundraising

Focus on people/teams: Investment-decision are more based on the quality of the team than on the quality of the product (early stage)

Fixed budgets: In early stages, when an investment-round is closed, a capital increase takes place and the money is secured, at later stage, sometimes Milestones are set for payout of funds/loans

ContactStefan BehrendtFounder I Managing PartnerDSP-Partnerswww.dsp-partners.comwww.twitter.com/stbe

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