It is widely known that getting the right investors at the right time can be vital to a startup’s success. This truth is always top of mind for founders who are raising venture capital.
While it’s somewhat standard practice to get an idea off the ground with friends and family, then angel investors, things get more complex as startups approach their early stages and begin raising successive rounds. Having investors that provide tangible support beyond money — at just the right points along a startup’s trajectory — can be vital to scaling up past even its expectations. Here’s why.
The stages of building a startup
Building a startup is a multistage challenge. On Day One, it’s about hacking value and moving from zero to one. Founders must identify product/market fit and prove that the idea can be built.
This step is entirely on the founders’ shoulders, and they can typically fund this themselves via friends and family or angel investors. Once that’s done, they have to build what might be called an MVP — a minimum viable product — which takes more capital and operational complexity.
During this phase of hacking growth, there are other nuances: Product and sales operations need to be established, key employees need to be hired — and all needs to happen in tandem and at a high degree of quality if you want to become a business with scale. Once all of that has happened and is working correctly, founders are officially in the business of company-building, and are moving out of early-stage and into growth-stage venture capital funding.
The real value of early-stage VC perks
Early-stage VCs often pride themselves on being hands-on with their portfolio companies: Marketing, legal, accounting, hiring, operations, sales, mentorship and other services are offered by them in-house or through various networks.
During these first few stages, where budgets are tightest and growth needs to be most rapid, these offerings can make an enormous impact. Founders who know how best to leverage these resources will give themselves an advantage over their competitors — those who secure early-stage checks from investors that disappear after signing miss out on what engaged ones provide.
One of my favorite examples of the impact of early-stage support centers on creating scalable foundations early — sales, operations or staffing. The goal of an early-stage company is to achieve as much hyperbolic growth as possible with the proper infrastructure to support it at scale.
Many startups are fortunate enough to experience rapid growth, but get caught in a perpetual game of catch-up as they develop the systems to handle that growth on the fly. I’ve seen companies with fantastic products not grow because their infrastructure couldn’t meet demand. Having an early-stage venture partner with the right offerings could have prevented that struggle and made the most of that early momentum.
Blending early- and growth-stage investors
As startups progress from seed to Series A, it can make sense to bring on growth-stage investors alongside hands-on early-stage backers — especially if those early-stage investors have done what they need to do during the pre-seed/seed stages. At this point, bringing more of the “spray and pray” funds can be helpful, but founders should be wary of bringing them on too soon. Having a solid group of hands-on investors early on sets the stage for success when growth-stage conversations start happening.
Conclusion: Vet your investors
Founders should meticulously vet their investors at every stage. Getting VCs who can deliver value across the business from Day One is a must — it’s about much more than just money. Getting the right people in the right positions at the right times is how you ace each phase and reach your goals.
To sum up, the benefits presented by initial-stage venture capitalists and how those offerings fit into the startup’s strategy is massively important for early-stage founders. In addition to being necessary in maneuvering through startup growth challenges, support and resources given by hands-on, deeply involved investors is a massive shortcut to rapid, sustainable growth.
Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.
Illustration: Dom Guzman
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