Can venture capital firms genuinely differentiate their value-add to founders, or is the core VC product commoditized with marketing layered on top?

Sarah Guo · published Apr 28, 2023

Investor brand is driven in the long term by returns, by backing companies that matter, and by reputation with founders — not by writing small checks into the biggest-name rounds.

She believes she can build brand by playing her own game and being good at the job, and is willing to take the risk of skipping brand-motivated checks.

Scope: she will still invest small in a very small set of companies she wants to be part of the journey for

15:28 20VC: In AI Who Wins? Startups or Incumbents? What Happens to Wealth Inequality? Why Will $10BN+ Companies Only Have 10 People | Why Defensibility in Startups is BS & Speed is Everything? Why Large Groups Worsen Decision-Making with Sarah Guo

Adam Besvinick · published May 29, 2023

Reputation is the number one currency an investor actually controls, and a great reputation compounds into better deal flow, better founder references, and better odds of backing the best founders

Learned from Chris Sacca's deference to founders and how it translated into his standing as an investor

3:51 20VC: Why Financial Models at Seed, $5M Seed Rounds & The Fear of Signalling Risk is all BS | Why Multi-Stage Firms Have Destroyed Seed & Who Wins and Who Loses in the Next 10 Years of Venture with Adam Besvinick, Founding Partner @ Looking Glass Capital

Phin Barnes · published Oct 2, 2023

In ten years The General Partnership will be an institution that matters in venture capital, with a market-legible taste such that its investments read as validation

Because they will have built a recognized point of view on a specific type of founder, company and way of working

Scope: conditional on 'everything going right'

57:59 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

David Tisch · published Feb 5, 2024

It is not possible to prove an investor's value inside the compressed transactional window of a fundraise, so consistency and reputation over a decade-long relationship is the only viable approach

The real relationship spans a decade of ups, downs, needs and wants, and what a founder needs differs by founder, stage and industry — none of which can be demonstrated in a week-long sales pitch

10:05 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

Terrence Rohan · published Feb 5, 2024

Investors cannot differentiate through commoditized services; the only real differentiation is breaking through to a level of trust and genuine human relationship

Advertised value-adds may sound impressive but they degrade and commoditize over time

11:52 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

Gili Raanan · published Mar 18, 2024

Sequoia is distinctive not for quality, tradition or performance individually — other firms have each — but for combining all three.

Many clubs offer one of those attributes; only a few offer the unique combination, which is why you want to play for them.

10:37 20VC: 19 Company Portfolio: 1 Decacorn, 7 Unicorns, 4 Acquisitions; One of the Best Seed Investors of All Time on How to Pick Generational Defining Founders, Why Nothing but the Founder Matters & Why the Best Investors are Never Happy w/ Gili Raanan

Paul Graham · published Mar 2005

Founders should be skeptical of VCs' claims to provide valuable experience and connections; a VC is essentially just a source of money, so take the most money soonest with the fewest strings.

Only the top VCs genuinely offer advice and connections, and even that comes expensive; as you go down the pyramid VCs get rapidly dumber, closer to bankers with a few buzzwords.

Scope: excludes the very top firms/partners

source How to Start a Startup

Semil Shah · published Nov 21, 2022

Venture investing comes down to simply doing good deals; practitioners overcomplicate it with everything else

The business is that simple at its core — everything else is complication

60:25 20VC: Semil Shah on The Biggest Mistakes VCs and LPs Made Over the Last 24 Months, Why LP Churn is Coming, Core Lessons on Scaling from $1M Haystack Fund I to Today and How To Find, Win and Manage LPs as an Emerging Manager

David Tisch · published Feb 5, 2024 · hedged

For the most part all VCs offer the same undifferentiated product — money in exchange for equity — and everything layered on top of that is obfuscated sales pitch

The actual transaction is identical across firms; the 'pick me for these reasons' differentiation is constructed after the fact

Scope: 'for the most part'

6:53 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

Gili Raanan · published Mar 18, 2024

Venture is a service business in which providers are hard to differentiate because the product is cash, so brand is the decisive advantage.

A strong brand creates a compounding cycle: the best entrepreneurs partner with you, the best executives join your portfolio companies, and other investors want to fund them — making the game easier and faster.

11:37 20VC: 19 Company Portfolio: 1 Decacorn, 7 Unicorns, 4 Acquisitions; One of the Best Seed Investors of All Time on How to Pick Generational Defining Founders, Why Nothing but the Founder Matters & Why the Best Investors are Never Happy w/ Gili Raanan

Bastian Lehmann · published Apr 8, 2024

VC value add is largely a marketing tool rather than a real driver of outcomes; the best VCs recognize there is very little they can do beyond writing the check and staying out of the way

The people running the company are the ones who can actually change things; value-add framing helps firms attract talent and LPs and increase their own position in the flow of money

Scope: applies to the best VCs he has met; he applies the same principle to his own angel investments

34:58 20VC: Postmates Founder Basti Lehmann on How the Uber Deal Went Down and How a $2.65BN Deal Turned into $5BN, Why Great VCs Add No Value and VC Value Add is BS Marketing & Why The Biggest Companies in History Will be Born Today and Replace Incumbents

Frank Rotman · published Aug 26, 2021

In today's market founders, not investors, set the clearing price and dilution, and can get valuation, capital and help in one package — which forces VCs to up their game to win deals

Founders have very good options on the table and can choose among great partners

Scope: describes the current environment

36:42 20VC: Has Price Discipline Disappeared? Is it Possible to Build Ownership Over Time? Why Venture Is Less Collaborative Now Than Ever? How fast Do Breakout Companies Become Obvious? How To Construct an Optimised and Repeatable Investment Decision-Making Pr

Marcelo Claure · published Jul 31, 2023

The new winning venture firms will be those able to help entrepreneurs alter the course of their business, not those that merely provide capital for access

Capital used to be free and readily available; today it comes at a high cost and is not readily available

5:46 20VC: Marcelo Claure & Shu Nyatta on Lessons from Investing $7.5BN at Softbank & Why Dumb Money has Gone, Why "LATAM is Under Construction" and the Next 10 Years Will Be the Best & Investing Lessons from Missing Nubank & OpenAI & Investing in FTX

Trae Stephens · published Apr 3, 2024

A long-standing brand and a publicly, strongly opinionated partnership is a major advantage in winning competitive deals

Founders Fund is rarely in situations where a founder prefers someone else's term sheet, and the partnership does come together to win deals when needed

20:11 Long standing brand and vocal partnership wins competitive deals

Adam Besvinick · published May 29, 2023

An investor's reputation with founders is non-negotiable, while reputation with other investors is optional and handled differently by different people

A strong reputation with other investors gets you invited into deals and lets you punch above your weight on the cap table, but not everyone plays that way; founder reputation is the one you cannot compromise

4:30 Founder facing reputation is non negotiable while peer investor reputation is optional

David Tisch · published Feb 5, 2024

Founders should choose investors because they like them, since an investor's value is only realised after they're accepted into the round, not demonstrated before it

The value component of venture plays out over the relationship after investment; trying to prove value ahead of the pitch is a head fake

9:10 Choose on likability since value cannot be proven pre investment

Terrence Rohan · published Feb 5, 2024

VC value-add is commoditized, and in practice is often a couple of quick motions to win the check after which the investor fades into the background

What founders report is a burst of effort during the round followed by disengagement

9:52 Value add is commoditized burst of effort then fades

Doug Leone · published Sep 14, 2021

Being the first investor at one employee and staying fifteen to twenty years is a durable competitive advantage that cannot be replicated by indexing every Series B

Company building takes headcount and time; you cannot do that work if you are investing in five deals a week

19:45 Being the first investor and staying fifteen to twenty years is a durable edge indexing at series b cannot replicate

Doug Leone · published Sep 14, 2021

The later you invest, the more you must prove real operational muscle to win, and at the very latest stages help with an IPO is a commodity benefit that leaves only price to compete on

Late-stage companies already have everything an investor's operating bench could offer, so there is nothing distinctive left to tell a founder

28:10 At the latest stages ipo help is a commodity benefit leaving only price to differentiate

Paul Graham · published Apr 2007 · hedged

What separates great investors from mediocre ones is the quality of their advice, not just the money.

Investors help with deals and introductions, and the smarter ones, especially angels, give good product advice; most investors give advice but only the top ones give good advice.

source Advice quality not just capital separates great investors from mediocre ones

Paul Graham · published Oct 2010

Competition from super-angels will finally put a market price on the help VCs claim to add, which previously founders had no choice but to accept.

Until now founders needed money at a scale only VCs could supply, so VC value-add claims were untested.

source Super angel competition finally prices vc value add that founders previously had to accept untested

Paul Graham · published Oct 2010

Nobody yet knows whether startups that want to get really big need the advice and connections only top VCs supply, including the VCs and super-angels themselves.

Super-angels only know their model seems promising enough to try; VCs only know it seems promising enough to worry about.

source Unclear whether scaling really big requires advice and connections only top vcs supply