Why do so many VC platform teams put a particular focus on talent?

To answer this question, we need to back up and understand the two primary areas that consume most portfolio companies’ time and resources: building a product and selling a product. These core activities are intrinsically tied to talent, as the success of both depends heavily on having the right people in place.

Here is where the importance of talent becomes evident. As a VC firm, it is your mission to help portfolio companies build and sell in the most scalable and impactful way possible while navigating the inherent limitations of the venture capital model.

Beyond talent being the most strategic aspect of building a company, it also stands out as the area where a VC fund can make a completely outsized impact on their portfolio companies. Just think about it, a single brilliant executive hire can generate hundreds of millions of dollars in value, justifying why talent is a strategic cornerstone in a fund’s value-add strategy.

What sets talent apart is not just its high impact, but its repeatability. While a portfolio company might hire only one or two CFOs in its lifetime, a fund can be involved in hiring dozens of C-suite executives each quarter. This frequency makes it logical for funds to develop focused and concentrated talent strategies across their portfolio. 

So, what is the best talent strategy a fund can have? 

As with all components of platform, there is no one-size-fits-all answer. However, there are two core components to talent strategy for VC firms that are worth understanding to be able to assess how your firm should approach each one:

In this piece, we will break down the two components of talent in VC funds, acquisition and development, and share case studies showcasing how different firms have approached their talent support. My goal is to provide insights that will help VC funds determine the most effective talent strategy for their specific needs and objectives. 

Let’s get into it:

Talent Acquisition

Talent acquisition comprises everything involved in building world-class teams and attracting talent to join your portfolio companies. This includes sourcing candidates, screening and interviewing, negotiating offers, onboarding new hires, and developing long-term strategies to attract and retain top talent.

Funds may choose to focus their talent acquisition efforts on a specific subset or type of role across their portfolio that is most aligned with the fund's network or that they feel is most impactful, namely:

• Specialized Recruiting — Hands-on recruiting support focusing exclusively on functional areas where the fund has a specific expertise or concentrated focus (eg. finance executives, go-to-market talent, or product and engineering leadership).

• Talent Pipeline Development — Focusing on specific talent demographics or pipelines such as underrepresented candidates, DE&I initiatives, or recruiting from universities.

• Board & Advisory Recruitment — Concentrating on recruiting board members and advisory connections for portfolio companies.

Funds may choose to concentrate their efforts on one or more of these areas depending on their strategy and expertise. Some will even take a comprehensive approach covering all the above. But regardless of which area your fund chooses to focus on, the approach will fit into one of the four classifications below:  

Embedded:

There are those VC funds that go all-in on talent acquisition support for their portfolio companies, hiring a full-time talent team of recruiters that embed themselves into portfolio companies to develop and execute recruiting plans.

While this strategy can have a significant impact on portfolio companies, it requires substantial resources and expertise and is, therefore, particularly well-suited for larger funds with multiple platform team members who can match or exceed the qualifications of search firms and internal recruiters.

Examples in Action

Several prominent VC funds have implemented full-time talent team members that provide comprehensive recruiting support for their portfolio companies. Examples include some of the largest venture funds in the world, such as A16Z, Sequoia, Insight Partners, and Accel, which have formed entire teams of highly skilled recruiters and talent acquisition experts with specialized expertise to execute full-cycle searches for portfolio companies. 

These internal teams augment the traditional need for expensive executive recruiters and provide tailored support through an embedded internal team.

Training, resources, and network: 

Some funds opt for a more scalable approach, focusing on high-leverage activities that can be reused, repurposed, or have a multiplier effect. Rather than dedicating team members to provide embedded, individualized support to each company, they prioritize offering training, resources, and a strong network to enhance portfolio companies' talent acquisition efforts.

This approach is particularly well-suited for:

1. Funds with large portfolios and not enough time to provide dedicated resources to all of their companies.

2. Funds that have smaller AUM and are unable to hire top recruiters.

3. Early-stage funds looking to help close fundamental knowledge gaps in portfolio companies.

Examples in Action

Madrona, whose talent efforts are led by industry veteran and Talent Partner Shannon Anderson, adopts this approach, coaching founders to become effective recruiters. They provide hiring strategies through their blog "Hooked, by Madrona," emphasizing founder-led talent acquisition.

Redpoint Ventures focuses its efforts on building out an executive talent network to optimize access to top talent for their companies. Rather than doing the actual recruiting, their model focuses on cultivating and maintaining relationships with top talent. By doing so, they can swiftly connect their portfolio companies with exceptional talent when crucial opportunities emerge.

Their VP of Talent Network, Atli Thorkelsson, elaborates:

External support:

Many venture capital funds have found that curating a Rolodex of best-in-class external search firms and recruiting agencies is the most effective way to support their portfolio companies' talent acquisition efforts. 

This approach offers several advantages: time and effort savings for portfolio companies through pre-vetted resources, access to specialized expertise for building top-tier teams, and, at times, access to pre-negotiated preferential rates and terms thanks to the bargaining power of a VC firm.

This approach is particularly suited to:

1. Small or newer funds that may lack a developed platform team or the resources for hands-on assistance. 

2. Diverse funds investing across various industries and geographies that face varied talent needs, preventing a focused approach on any single function, location, or sector.

Examples in Action:

An example of a firm that takes this approach is Hyde Park Venture Partners as Jim Conti, Talent Partner explains: 

This constellation of search firms forms a crucial component of their service provider ecosystem, offering a valuable talent acquisition resource without overextending their own team or resources.

Talent Development

Talent development encompasses efforts aimed at enhancing the efficacy, efficiency, and skill levels of a team. It can include HR, people operations, learning & talent development, executive coaching, and related activities.

VCs that focus on talent development aim to nurture and grow their portfolio companies' existing workforce to create the dynamic and high-performing team needed for startup growth.

There are four different strategies funds utilize for talent development support, detailed below:

Embedded:

Some funds dedicate significant energy and resources to support their founders with talent development, employing talent professionals to enhance the human capital of their portfolio companies with a hands-on approach.

This model is common for firms focused on investing in early-stage companies that don’t yet have in-house HR teams or talent development managers in place. 

In many cases, these funds aim to save their portfolio companies from the high costs of external agencies or prevent companies from needing to make a premature specialized hire while ensuring they have the know-how to implement industry-leading talent and HR strategies from their earliest days.

Examples in Action

Lisa Zieger, a former talent executive, works with her portfolio at Spero Ventures to advise their earliest founders on some of the nuanced details of establishing a world-class people organization from advice on immigration and visa concerns, talent ladders and development plans, compensation structure reviews, HRIS implementations, performance review cycles and more. 

Another prime example is Anna Franziska Hunger, Talent & People Operations Partner at Kaya VC. Anna employs an embedded approach in the way she supports executive talent development at their portfolio companies. 

Leveraging her background as a psychologist, executive coach, and people operations expert, she focuses on one-on-one founder coaching tailored to the challenges faced by each of their companies’ executives.

Anna explains:

Training, resources, and network: 

While there are funds that provide hands-on individualized support for talent development as described above, others opt for a more scalable approach. 

Beth Scheer, Head of Talent at Homebrew Ventures, puts it well with her words: 

Examples in Action

Training, resources, and networks can come in various forms. 

An example is ‘Homebrew Guides’ a comprehensive talent resource page that covers topics like benefits at startups, human resources policies, and diversity at startups.

Another example of a fund with this strategy is Flourish Ventures, which prioritizes founders' mental well-being through a range of workshops and retreats. Their Head of Global Human Capital, Lisa Mikkelsen, walks through some of what they offer to founders:

External support: 

Many funds recognize that when it comes to talent development, skilled external agencies or service providers are often best positioned to set up their portfolio companies for success.

These funds opt to avoid 'half-cooked' efforts in talent development when they lack appropriate in-house expertise. This decision often stems from limited resources or differing strategic priorities, leading them to forgo building internal capabilities in this area.

This approach isn't limited to any specific type of fund; it's seen across the spectrum such as:

1. Early-stage, newer funds without platform team members or resources for developing training programs.

2. Established, later-stage funds that recognize partnerships with top-tier, vetted agencies often yield the best results for portfolio companies' specialized needs.

Examples in Action

Elizabeth Arnsdorf Patterson, People and Talent Partner at Sapphire Ventures, elaborates on why they lean on external support for talent development, and why it yields the highest outcome for their portfolio: 

Conclusion

Talent strategy has emerged as a critical differentiator for funds seeking to maximize their impact on portfolio companies, but as stated and explored in this edition, there is no one-size-fits-all approach. 

Instead, funds must carefully consider their resources, priorities, portfolio needs, and long-term objectives when crafting their talent support initiatives.

This could mean providing embedded talent support for their portfolio companies, focusing on scalable initiatives like training, resources, and networks, or curating best-in-class external service providers.

Whatever the approach, the goal remains the same: to empower portfolio companies with the human capital they need to thrive.

This post is brought to you with the help of Yaffa Abadi of Abadi Brands, a premier personal branding firm for leading executives and VCs.