Does the venture platform model (dedicated talent, BD, and portfolio-services teams) genuinely help founders, or mainly serve to justify larger fund sizes?

Sarah Tavel · May 6, 2024

VC firms with internal specialist teams are scaling the GP rather than serving the founder, and the resulting game of telephone is worse for the CEO

At Greylock, handing a CRO search to the internal talent head meant the CEO had to relay through the recruiter to her, saving her time but degrading the founder's experience because she wasn't on the weekly recruiting call

37:03 20VC: Benchmark's Sarah Tavel on Are Foundation Models Commoditising | Why Frontier Models Will Be Closed Source | Why the Value is in the Application Layer | The Future of AI is "Selling the Work" Not the Tools

Sarah Tavel · May 6, 2024

Even the best specialist recruiter can't match an investor who does the work directly, because quality of hiring depends on knowing the CEO and execs and having an owner's mindset rather than a consultant's

A specialist has many other clients and wants the job done, whereas an owner cares about getting the best person rather than filling the seat and can help close the best candidate; doing many reps has made recruiting a superpower for her and her partners

38:55 20VC: Benchmark's Sarah Tavel on Are Foundation Models Commoditising | Why Frontier Models Will Be Closed Source | Why the Value is in the Application Layer | The Future of AI is "Selling the Work" Not the Tools

Nick Chirls · Sep 6, 2024

Platform services — business development teams, recruiters and the like — do not move the needle on a company's outcome, but trusted people around the table who help founders make good company and financial decisions genuinely do

Judgment and trust affect decisions; services don't. And those trusted people need not be VCs — they can be other founders or independent board members

Scope: trusted advisor role can be filled by non-VCs; sometimes it is a VC, e.g. Doug Leone

42:13 20VC: Why VC is a Ponzi Scheme Today | Why Most VCs are Bankers | Why Big VCs Ruin Startups | Why Incentives in VC are Broken | Why American Dynamism is a Tool for VCs to Raise Money with Nick Chirls, Asylum Ventures

Harry Stebbings · Oct 2, 2023

GPs use large platform teams to justify fund size increases to LPs, and the fee gain from the bigger fund far exceeds the added cost of those teams

There is opacity between the cost centers LPs see and GPs' actual economics; pointing to 20 expensive go-to-market, sales and talent people makes a 2% fee on a billion palatable where it once was 2% on 200 million

19:51 20VC: The Services Model of Venture Capital is Broken, The Best Founders Do Need Help, The Most Important Signals to Assess When Meeting Founders & Why Kids Bring Less Happiness and More Joy with Phin Barnes @ TheGP

Harry Stebbings · Oct 25, 2024

Portfolio services teams are used as a justification to LPs for increasing fund size

A firm can point to headcount in talent and BD as a team structure that requires a much larger fund

8:03 20VC: The Truth About Multi-Stage Firms; Why Portfolio Services are for VCs not Founders | Why Politics is Rife & Decision-Making is Broken in Large VCs | Why Reserves are Bad for Founders & How Boutique Firms Will Win with Mark Goldberg @ Chemistry

Harry Stebbings · Sep 6, 2023

VC talent partners add little value because a head of talent cannot discern between fundamentally different senior hires and ends up only writing job descriptions and running process

Hiring a head of developer relations versus a CMO requires different networks and judgment that one generalist talent person cannot have

41:40 20VC: Why Small Funds Outperform Large Funds & AUM is a Vanity Metric | Why 99% of Investments in AI Startups Will Go To Zero | Being a "Traction First" VC & Investing Lessons from Investing in Canva and Missing Figma with Nikhil Basu-Trivedi

Harry Stebbings · Oct 2, 2023

In-house VC talent teams are largely useless unless heavily invested in, because one head of talent cannot recruit across the diversity of roles founders need and ends up merely writing job descriptions

Hiring a CMO is a totally different task from hiring a head of developer relations; no single talent lead can cover that range

Scope: unless the firm genuinely invests in the function

22:16 20VC: The Services Model of Venture Capital is Broken, The Best Founders Do Need Help, The Most Important Signals to Assess When Meeting Founders & Why Kids Bring Less Happiness and More Joy with Phin Barnes @ TheGP

Harry Stebbings · Dec 11, 2023

Value-add platform teams at venture firms are looked down upon within the industry

35:35 20VC: Why Founders Should Take as Many VC Meetings as Possible, Should Founders Meet Associates, How to Get Intros to the Best VCs, How To Extract the Most Value From Your Investors, Why Post IPO Operators Are the Best Angels with Sam Corcos @ Levels

Sam Corcos · Dec 11, 2023

Platform/value-add teams are looked down upon mainly because most firms are bad at delivering the value they promise founders

Firms understand that value-add is what founders say they want and tell founders they offer it, but they don't actually deliver on it

35:46 20VC: Why Founders Should Take as Many VC Meetings as Possible, Should Founders Meet Associates, How to Get Intros to the Best VCs, How To Extract the Most Value From Your Investors, Why Post IPO Operators Are the Best Angels with Sam Corcos @ Levels

Phin Barnes · Oct 2, 2023

The standard fee-and-carry model cannot support real services to founders, because those services appear as a cost center on the VC firm's own cash flow statement

Services are a cost on the firm's P&L rather than something the fee-and-carry structure rewards

0:00 Fee and carry structure treats services as a cost center blocking real value add

Phin Barnes · Oct 2, 2023

The best executive searches are owned end-to-end by a single person who partners with the hiring manager, not delivered as a pooled resource or a list of candidate links.

One owner can understand the company's needs, build context and a funnel, run the interview loop, and carry a candidate from evaluation through offer, close and onboarding — a shared or list-based service can't do that.

23:05 Best executive searches are owned end to end by a single dedicated person not a pooled resource

Pat Grady · Jul 8, 2024

The right response to a larger, faster founder market is to keep the investment team as small as possible and scale the non-investing platform instead of hiring a hundred investors.

Concentrating experience and knowledge in the fewest people means that whoever stumbles across the next outlier founder can give them the outlier experience they deserve; the platform is the scalable part and amplifies investors while building compounding advantages

35:54 Keep the investing team small and scale the platform instead of hiring more investors

Nikhil Basu Trivedi · Sep 6, 2023

Most VC platform offerings are about scaling the firm rather than actually helping companies, and recruiting is a muscle great companies build themselves

Only a handful of firms have platform offerings that genuinely move the needle for portfolio companies

41:33 Platform offerings mostly scale the firm not help founders recruiting is a self built muscle

Reid Hoffman · Dec 7, 2020 · hedged

Venture capital firms are fundamentally centered networks, and if he could redo Greylock he would have invested more time earlier in building that network infrastructure

Greylock's recruiting practice, customer-finding practice and network building were among its strongest assets, so doubling down earlier would have compounded

39:03 Vc firms are fundamentally networks so early investment in network infrastructure compounds returns

Reid Hoffman · Dec 7, 2020

The value of a VC firm's platform depends on how well the network is designed and deployed operationally, not on the size of the operation

When Greylock was talking to Instagram at 13 employees, its network produced three serious engineering candidates in four days, two of whom joined — throughput came from running networks, not headcount

39:50 Platform value depends on network design and deployment quality not headcount size

Dan Siroker · May 15, 2024 · hedged

A wave of pain from structured rounds is very possible: ZIRP-era companies too proud to take down rounds are selling employees on 'up rounds' that carry 2x liquidation preferences, which almost guarantees employee stock is worthless

Pride and fear about the old valuation push founders to hide dilution in structure rather than take a markdown

53:26 Structured up rounds with heavy liquidation preferences mask down rounds and wipe out employee equity

Mark Goldberg · Oct 25, 2024

The platform model was a genuine innovation when Andreessen Horowitz introduced it 10-15 years ago, but it has since become a crutch for large firms and the industry's reliance on subdividing the job is showing cracks

Subdividing the job into talent teams and customer-development teams is very difficult to do well and is now used to manufacture leverage

7:05 Platform model was genuine innovation but now a crutch for manufacturing leverage

Sam Corcos · Dec 11, 2023

a16z's platform advantage comes from both a much larger operating team and making its services discoverable — e.g. a Notion doc listing every service available in the bio/health vertical

Founders can only extract value from services they know exist; a catalogue of offerings (exec comp studies, GC and marketing leader email lists) prompts discoverability

36:08 Platform value is realized through discoverable documented service catalogues

Jason Lemkin · Aug 11, 2023

Recruiting is the one area where venture firms could add massive value, and every venture talent arm has failed at it

Almost no first-time founders are born great recruiters or know how to hire a great VP of sales, marketing or engineering; the talent arms are staffed by people who don't want to work hard at a tech company and are phoning it in

38:52 Recruiting is the single highest value service but talent arms have uniformly failed at it

Sam Lessin · Aug 11, 2023 · hedged

A founder who comes to him saying they need help recruiting should go work with someone else

39:42 Founders who need recruiting help should look elsewhere not to seed vcs

Jason Lemkin · Aug 11, 2023

Making the specific great VP of sales match for a founder is a game changer, and seed firms wrongly believe their value is being on speed dial

Founders don't ask for generic help; they conclude around $1M in revenue that they need a great VP of sales and will find someone themselves — landing the right specific person, e.g. an early Rippling hire, is what makes the difference

39:51 Specific vp sales matchmaking not generic availability is real platform value