Every venture capital fund shares the same overarching goal at its core, to drive outsized returns.

There are five stages in this quest, as laid out by Nikhil Basu Trivedi in his newsletter next big thing: find, decide, win, help, exit.

This framework, which Nikhil called the “Venture Capital Flowchart”, reminds me of a very similar framework that my partner Michael Skok ingrained in me when I was Head of Platform at Underscore VC. Michael coined the framework as SSWIBE (Source, Select, Win, Invest, Build, Exit). However you prefer to define the different steps of the investment journey, the objective is the same.

Each of these steps, from selecting companies with exceptional potential to helping portfolio companies connect to the right customers, is vital to bringing a fund towards its end goal. Yet, given the artisanal nature of VC and the limited resources inherent to the business model of venture capital, it’s impossible for an investing team to be exceptional at all five stages. That is, unless funds get creative.

Platform has become that creative way for VC funds to provide the kind of bespoke strategy that leads to exceptional returns, at every single stage of the investment journey.

With the task of leveraging and activating their firm’s network and expertise, platform professionals are the modern “growth hack” for VC funds. It’s the reason that the VC platform function has emerged as the fastest-growing career path in venture capital, with 53% of VCs now having platform teams; more than double the proportions in 2000, according to a research report I co-wrote for the VC Platform Global Community.

For my first newsletter, I aim to provide a concrete framework of the role platform plays in each of the five stages of investments, with examples of how they contribute to realizing outsized returns.

But word to the wise, not every platform team can or should do it all. The first step is figuring out where your fund needs the most help or where your top priorities lie, and focusing your efforts there.

For example:

• If you’re in a new fund without a long record of success, you’ll likely want to focus your platform efforts in the ‘find’ stage.

• If you’re a smaller fund with just a handful of investors and a large portfolio that needs support to accelerate their growth, it likely makes sense for platform to be focused on the ‘help’ stage. 

• And if you have funds 10+ years into their investment period and are eying liquidity for more mature companies, you may want to over-index on a platform that can support the ‘exit’ stage.

By laying out all platform possibilities in the framework-driven and digestible way below, you will be able to establish where your fund needs support, and how platform can effective support your fund’s needs.

Platform’s Role in Finding

Finding the best companies in the ecosystem is the first step VCs take toward their end goal. 

Even at this outset, platform can play an influential role by 1) ensuring their fund is exposed to quality deals earlier than their competition and 2) empowering funds to proactively source deals at scale. 

Let’s break it down:

Branding and marketing

One of platform’s roles is to help the fund identify compelling investment opportunities and capture those founders’ attention, ensuring they are already interested in and engaged with the fund before they are ready to raise. 

This is often led by a firm's head of marketing, head of content, or CMO (whose functions fall under the platform umbrella). This includes efforts such as crafting a quality website, creating valuable and creative content targeted at the fund’s target companies, distributing content effectively, PR initiatives, social media and more. These efforts are arguably the most scalable method to earn external credibility and drive inbound deal flow.

Some funds with standout marketing efforts include First Round Capital, whose publication First Round Review has become something of a bible to founders that are looking for high-quality tactical content, Atomico whose annual State of European Tech report is one of the most insightful and anticipated industry benchmarks each year and, of course, Redpoint Ventures where, under the creative leadership of Josh Machiz and Rashad Assir, they have completely pushed the needle on what VC content can look like with a highly accessible and engaging strategy using TikTok and Instagram short-form videos.

Events and programs

Hosting well-curated events for founders and the ecosystem is a scalable way for platform teams to build relationships and ensure their fund remains top-of-mind when founders look to raise. 

From Australian VC fund Blackbird, which goes all out with a Coachella-like Sunrise Festival each year that features more than 50 speakers across three stages, to Upfront’s annual Summit which hosts more than 1,000 top investors, entrepreneurs, and leaders in LA. These large-scale events, led by innovative platform geniuses like Joel Connolly and Kerry Bennett, bring their fund’s ecosystem together, bolster the fund’s brand, and are a strong source of future deals.

Programmatic data-driven sourcing

Recently many VC funds have been adding product and data science experts to their platform teams who help drive forward a fund’s data-driven sourcing strategies. These individuals can build proprietary platforms and tools that allow their funds to find companies to invest in before their competitors by looking at signals such as a company’s traction, growth, or talent trends. 

An example of a fund that has heavily invested in this strategy is EQT Ventures. Their team built an internal data and machine learning platform, Motherbrain, which helps the investment team in their efforts to find and invest in compelling companies. Another is Fifty Years who has built a number of tools, including Paper Scraper to stay on top of the latest scientific research to surface investment opportunities before the inventors even start a company.

Network driven sourcing

Incentivizing a fund's network to support sourcing efforts is another responsibility often tasked to platform folk. Most funds do this informally, showing their appreciation for great introductions by sending gifts or swag, but some funds have decided to adopt a more structured approach, providing cash rewards and sometimes even allocating carry for successful intros. 

For years, many of these ‘scout programs’ have remained in the shadows. Funds like Sequoia and A16Z are known to have secret incentivized scout programs for well-connected individuals, but today we are seeing more transparency around sourcing economics. Newer funds like Baunkunst have established programs such as ‘Bankunst Collective Investments,’ which openly share on their website that all those who source an opportunity that Baukunst invests in, “will receive financial upside in the form of deal-by-deal synthetic carry on that investment to honor their ongoing contribution to the collective.” This approach enables a fund to benefit from exponential exposure coming from a network with strong incentives.

Platform’s Role in Deciding

Selecting companies with the greatest potential for growth and profitability is the next step in amplifying a fund’s chance of achieving outsized returns. 

Here, platform can have a powerful impact by providing leverage for the investment team to execute better and more comprehensive diligence. 

Let’s break it down:

A community of experts

A highly effective way that platform teams can optimize the selection process for their firms is by establishing a community of trusted subject matter experts and entrepreneurs. This community acts as an extension of the investment team, providing market insight on prospective investment opportunities. 

Some platform teams that shine here have established vetted proprietary networks akin to GLG. These networks can be instantly mobilized for input during due diligence, streamlining the process and eliminating reliance on individual memory for network connections.

Standout examples include Eniac VC, who have built out a strong network of domain experts and senior executives across the Fortune 5000, and Primary VC who established the Primary Expert Network, a group of vetted functional leaders from across NYC tech. Some funds, such as Pillar VC, take this model a level further and invite these individuals to be limited partners in their fund.

Founder & executive assessments 

An emerging role that platform plays during the diligence stage is conducting assessments, both formally and informally, of founders and executives who are leading companies that the fund is considering investing in. The leadership team is often hailed as the most critical component to a company’s success, and the capacity to conduct leadership-specific assessments equips a fund to identify and invest in the most resilient founders and executives, increasing a fund’s odds of betting on the right team.

What historically was a tool just for growth equity and PE funds such as Vista’s CCAT and expensive assessments such as ghSMART is now being led by talent partners who are part of the platform teams at funds of all sizes. Talent partners come from a range of backgrounds and those with a background in psychology, such as Franzi Hunger at Kaya VC and Noa Matz formerly at F2 Venture Capital, can provide real expertise and leverage to support their investment team with this critical piece of the investment decision process.

Speeding up diligence processes and efficacy

Many platform professionals act as the operational glue at their firms and are responsible for creating more efficient and effective ways to execute investment processes. For many platform folks, their north star is to provide their GPs with leverage to scale their time. From building and maintaining better internal tools and collaboration platforms, to rethinking the way a firm approaches diligence and deal voting, platform is often focused on using the firm’s internal and external expertise to drive the right investment decisions.

For example, one of the many features of Seven Seven Six’s Cerebro platform, designed by Alexis Ohanian and Cristina Apple Georgoulakis, is that it serves as the fund’s operating system and allows the team to optimize the tracking of notes, contacts, meetings, time tracking, document management and more. 

Tools such as this demand creativity and initiative from platform teams, but have the potential to streamline a fund’s diligence process, resulting in faster and more informed investment decisions.

Benchmarking 

In the diligence stage, several funds have found ways to integrate their platform team when digging through robust data rooms to drive insights on a company’s performance with higher accuracy and objectivity.

Often, funds sit on troves of historical data around company performance and have called on their platform teams to make sense of this by creating benchmarking tools to more effectively utilize when deciding on prospective investment opportunities.

VCs whose platform teams have created impressive internal benchmarking tools include SignalFire, whose end-to-end real-time data platform, Beacon, is used to benchmark metrics of companies as part of their diligence process. Another best-in-class example is Scale Venture Partners, which built out an internal platform, Scale Studio, with data from over 1,000 private companies that they use to benchmark the growth and operating metrics of companies to assess their potential success.

Platform’s Role in Winning

It goes without saying that winning the best deals will ultimately translate into achieving greater returns for VC funds.

With the investing landscape more competitive than ever, platform can play a significant role in enabling a fund to win competitive deals. They do this by elevating their fund's reputation, enhancing entrepreneurs’ experience, and articulating their fund’s post-investment promise. 

Let’s break it down:

Maintaining an exceptional brand 

A fund’s brand is not only a way to drive deal flow, but to win deals. When prospective founders conduct their own due diligence on VCs during their search for funding, maintaining an exceptional brand that communicates a fund’s value-add and alignment with founders is a vital (and scalable) way to push companies to sign with the firm.

In the same way that it’s an HR team’s responsibility to stay on top of their team and monitor company reviews and feedback on Glassdoor, platform teams are on the front lines not only building their firm’s brand (with events, content, and marketing efforts) but also monitoring and defending it. Today, CEOs have more and more places to share and solicit feedback on potential investment partners such as VC Guide, Landscape, and private networks like YC’s Bookface, and it is often on platform teams to monitor and support the fund's reputation online and offline.

Enhancing entrepreneur's overall experience

From the first pitch meeting to the signing of a term sheet, the platform role can provide tangible value to companies and ensure every touch point with the fund is a seamless experience. The enhanced experience not only encourages a company to sign with the firm but also signifies a commitment to the quality of their future relationship with the fund.

There’s a lot that goes into maintaining a good “founder UX” and it is a full-team effort to get this right. Some things I’ve seen platform teams do here:

• Make it easy for a founder to get to a pitch meeting. This can be as simple as providing detailed directions on how to get to your office or as lavish as sending the firm’s private jet.

• Provide a special experience. Many funds look for ways to build more of a personal relationship with founders after a partnership pitch. Platform teams often take on the role of organizing creative and special experiences with prospective founders that is more than just a nice dinner.

• Make sure companies know where they stand. Most founders just want a quick and transparent answer from an investment team. I’ve heard of funds that have made this process both transparent and interactive with a Domino’s-like “diligence process tracker”.

• Consider every part of the office experience. I know of a fund that hired an experienced designer to help them redesign their office, taking into consideration every touchpoint a founder has when coming in for a pitch meeting from the colors of the lights to the process of connecting their laptop to the TV to make their experience magical.

Tangible value-add from the get-go

One of the most concrete ways that the platform role can help set its fund up to win a deal is by providing business support to prospective entrepreneurs well before a term sheet is even issued. 

Andreessen Horowitz, for example, frequently offers founding teams who are too early for them access to their BD and talent teams. This is a way for the firm to help the company and prove to them how they’d be able to support it if the company invites the firm to invest in later rounds, improving their odds of potentially winning an investment allocation in a future round.

When I was Underscore VC, I took a page out of the A16Z playbook and I recall that we won at least three investments in competitive situations because I was able to engage potential customers, advisors, and talent to meet with the founders during our diligence process, far before presenting a term sheet. 

Communicating future value-add

Providing value to potential companies at the sourcing stage is a method that is a high reward but at times high effort. However, platform can also effectively communicate how their fund will add value to the companies down the line after the firm wires an investment. 

This can be executed in engaging, creative, and of course, scalable ways. A prime example is NextView, which includes its own pitch deck to potential founders front and center on its website. With CEOs increasingly asking prospective investors how they will be helpful to the company, creating a compelling story of platform-led value add has become a significant factor in a company’s ultimate decision of what investor to partner with. 

Platforms' Role in Helping

While platform professionals play a part in all five stages of investing, it is often in the ‘helping’ stage where they really shine.

It falls within the platform’s responsibility to do whatever it takes to enable a fund to support founders and executives outside of the board room; removing the otherwise fixed constraints of a GP’s time and providing scalable help to portfolio companies. The focus here is to accelerate a company’s road to success and ultimately drive outsized investment returns. 

There is a massive amount of nuance around how platform teams help their portfolio companies, making it impossible to cover in this piece alone (don’t worry we’ll go deeper on this in future newsletters). However, we will start broaching this topic by providing a very simple and generalized framework of the essential roles that platform plays in this phase:

1. Helping build a product

2. Helping sell a product 

3. Helping operationalize the company (to build and sell more products)

4. Helping secure additional funding (to build and sell more products)

How do platform teams contribute to these areas? While every fund takes a slightly different approach, they all have the same three essential “tools” that their platform teams use throughout the ‘help’ stage:  Talent, Expertise, and Network.

Let’s break it down

Helping build a product

Regardless of the industry, whether it's pharmaceuticals, B2B SaaS, social media, or services, every company aims to build a world-class product that attracts paying customers.

Platform teams can often help in this domain with three core tools:

• Talent: Assisting the company with recruiting exceptional people, like software engineers or product managers, who will build the product.

• Expertise: Providing advice and facilitating connections with industry experts who can guide the team in building the best possible product.

• Network: Connecting the company to vendors and service providers that will help them build a more successful product.

For funds such as Connect Ventures, which have built a powerful network of product experts and resources, this is a core part of the firm’s platform offering.

Helping sell a product 

The second part of the cycle is helping founders and executives to sell their products. Every company’s sales and go-to-market needs are different; some funds focus on helping their consumer portfolio companies with branding and retail partnerships to drive sales and some help with enterprise connections for their B2B portfolio companies.

In this process, the platform teams lean on the same three tools:

• Talent: Assisting companies in hiring, training, and supporting their commercial teams to effectively sell the product in their respective markets.

• Expertise: Providing tools, training, guidance, and connections to experts to enhance their product sales strategies.

• Network: Developing a network of decision-makers and influencers within a portfolio company’s target customer base to facilitate connections, open doors, and close sales. 

Stage 2 Capital is a great example of a firm that has made this kind of support the core of their platform offering by building and activating an impressive network of seasoned go-to-market experts to help their portfolio with selling their product.

Helping operationalize the company (to build and sell more products)

As portfolio companies are successful in building and selling more products; their challenges and needs, specifically around operations, finance, HR, and compliance, become increasingly complex. Here, platform teams can provide support to the portfolio using the same three tools listed above: talent, expertise, and network. 

• Talent: Recruiting across operations and finance and providing best practices on team-wide talent development, HR, culture, people operations, organization design, compensation, and DEI.

• Expertise: Assisting the company with enhancing finance and operations processes to support rapid growth.

• Network: Creating relationships with vendors and advisors to enable the company to operationally scale and anticipate future challenges.

One fund whose platform shines when it comes to operational support is Founder Circle Capital which has built The Circle which hosts two strong communities specifically focused on CFOs and CHROs. These communities support growth stage executives both within and outside of their investment portfolio with talent, expertise, and network - all in one.

Helping secure additional funding (to build and sell more products)

For most founders to fully realize their vision of building a successful and high-growth company  (one that will ultimately drive outsized returns for their investors), they will need to raise additional capital to fund their ongoing product development and sales efforts. This is the final part of the cycle where platform can step in, leveraging two of the same tools:

• Expertise: Providing advice, training, feedback, and coaching on how to find and pitch to potential investors.

• Network: Making introductions to investors in the firm’s network who may be a good fit as a follow-on investor.

It comes down to a unique platform approach that is able to successfully turn this very strategic and complicated process of fundraising into a more scalable and sometimes productized offering. NFX, for example, has built out its own tool called Signal which provides CEOs with a fundraising database and CRM to manage the fundraising process and have a fundraising strategist on their platform team dedicated to helping portfolio companies successfully navigate this process.

Platforms' Role in Exiting

In some cases, platform’s role extends to the final step in the investment journey: exiting. 

In today’s market, where many funds are sitting on great markups but LPs have yet to see distributions, there's a shift from focusing solely on what investments are worth on paper (TVPI) to how much cash investors can distribute to their LPs (DPI). 

The average founder will sell their company once, maybe twice, in their life. The average VC will sell a company two to five times in a year, some even more. That’s why VCs should do everything in their power to assist portfolio companies with this very complicated process. It is in this final stage where platform's impact is not only the most measurable but can be particularly high-yielding.

Let’s break it down:

Exit readiness and storytelling

In many ways the exit stage is an extension of the help stage and the best platform teams start working on exit readiness with their portfolio companies far before an exit is in sight. Platform professionals can work with their portfolio companies to develop tailored strategies to reach and attract potential buyers through a compelling narrative, or provide companies with support and resources on their journey to taking a company public. 

Another element of exit readiness includes assisting in streamlining internal processes to ensure a smooth exit process. For some funds this support goes beyond guidance just for the company and extends to helping founders and executives with how they should personally prepare for the changes that may come from a major wealth creation event.

An example of a fund that has built strong expertise in helping portfolio companies with exit readiness is Inovia Capital. They have two individuals on their platform team who are exclusively dedicated to corporate development and helping their portfolio companies with the external part of exit preparedness and execution.

Strategic introductions

Platform professionals can play a significant role in creating conditions in which their portfolio companies have buyers. This includes fostering strategic relationships early on with corporate development teams, PE firms, and investment bankers, expanding a company’s network to potential buyers, and making those impactful introductions.

As an example, Insight Partners platform team has built a strong community of corporate development and executive leaders from the majority of the Fortune 500 called the Ignite Network which they can quickly activate for targeted strategic introductions for their portfolio.

Conclusion

From finding promising companies to guiding them through successful exits, the role of platform in venture capital firms is pivotal, and one that actively contributes to a fund’s end goal of generating outsized returns. The growth of platform teams within VC firms is not just a trend; it's a strategic necessity. 

The challenge facing most investors and platform professionals is knowing where to concentrate their efforts. As illustrated in this article, there are dozens of distinct activities that platform can focus on to drive their fund closer to the ultimate goal of generating outsized returns. It is overwhelming when considering all these potential strategies discussed and it's important to remember: no single fund should attempt to do it all.

Instead, funds should focus on identifying which activities are most aligned with their unique needs, across the five stages of the venture capital flowchart, and prioritize their strategy accordingly.

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.