Your capital is not enough, do more to add value, businesses tell venture capitalists in new report
Venture capitalists, sometimes seen as the lifeline for start-ups, are falling well short of expectations, providing only limited help to the early-stage businesses they choose to support.
A report from Forward Partners and Landscape VC revealed a gaping mismatch with the majority of businesses surveyed saying their venture-capital investors failed to add value beyond capital despite many promising a package of support.
The report, which canvassed opinions of over 500 business founders mainly in the early stages of growth across the U.K. and Europe and along with venture capitalists in the area, found that 65% of business founders rated their venture capital experience lowly. Many said the venture capitalists “tried, but failed” to add value beyond capital.
“Deliver what is promised. I don’t mean to sound glib but it’s very simple. It should only be offered if it, in fact, can be delivered,” the report quoted one unnamed respondent as saying.
Notably, the survey showed that 86% of female founders believe a venture capitalist’s ability to add value would be a key consideration for them. That’s 26% more than their male counterparts.
Overall, the report painted a worrying picture steeped in a wide-ranging mismatch. Three-fifths of founders described their value-add experience as “negative” compared to what their investors claimed to offer. Almost half said they thought their investors had “little knowledge of the sectors they are investing in”, while a third (33%) feel that value-add is “over promised and under delivered”.
Underscoring that mismatch, 92% of venture investors felt that they do provide added value beyond a cash injection.
“VCs need to do better. Investors need to get to grips with what matters to founders, and deliver more tailored offers and better products to entrepreneurs,” Matthew Bradley, Partner and CFO of Forward Partners told Fortune.
“Founders are telling us that they’re not getting what they need. This matters; founders really care about what their VCs bring to the table alongside money,” he added.
When the relationship did work, however, the early-stage businesses did benefit. A third of founders reported that access to an investor’s connections and network contributed to their growth, while 30% said fundraising support from their venture-capital investor contributed to business growth.