VC Network Operations: The Secret to Scaling Relationships and Driving Returns

A VC fund’s network is arguably its most critical attribute and differentiator. Whether engaging with industry experts to help with due diligence, connecting portfolio companies to customers, or introducing CEOs to follow-on investors, a rich network keeps a venture capital firm ahead of the curve. 

But there’s a catch: most investors struggle to stay on top of those relationships. Not because they don't want to, but because staying on top of this complex web of relationships is a full-time job, and they already have one.

As a VC fund grows and develops, the networks built over time become impossible to maintain and ultimately activate when needed.

Firms approach this challenge in a variety of ways. The most innovative ones leverage their platform team to support the operations and management of their network. While the function may go by different names, I'd like to introduce a standardized term for a platform role that I see as increasingly vital at today's top firms: VC network operations.

VC network operations is there to transform the ad-hoc process many funds use to manage, grow, and engage their network, to a structured, product-like approach that enables a fund to activate and utilize their network's full potential at scale. 

When we say “VC network”, we mean a group of individuals who offer strategic support throughout all five stages of investing. They can wear many hats: company advisors, potential hires, customers, acquirers, investors, service providers, reporters, analysts, and more. While this newsletter will not go into detail about the different networks that exist (though you can read my post on that here), it will provide a framework for the three areas that VC Network Operations should oversee to effectively position their firm:

We'll also look at examples of funds whose platform teams are creatively engaging their networks and, for funds that decide to turn this into a full-time role on their team, we will discuss the kind of person best suited for this dynamic and critical role.

1. Relationship Initiation

Though most VCs come to the table with an already-developed network, throughout the lifecycle of the fund there is always the need to build new relationships with strategic individuals and organizations.

This is especially crucial if your fund is venturing into a new sector, geography, or investment stage where established relationships have yet to be built. Similarly, if your portfolio requires a specific functional need, customer introduction, industry partnership, or other connection that your firm has not yet encountered, the ability to initiate new relationships is key. 

Methods of Relationship Initiation

Relationship building can take many forms: cold outreach, events, and referral networks. Each fund and each investor should find the way that’s most authentic to them. 

Some funds get incredibly creative with how they go about initiating relationships. Take Shrug Capital who created a ‘VC Calendar’ featuring tweets from tech and VC professionals for every day of the year, and then distributed physical copies to those featured. This initiative instantly expanded their network, set their fund apart, and initiated relationships in a scalable manner. Shrug Capital has launched numerous similar campaigns that help them to rise above the noise and effectively expand their network.

First Round Capital is another prime example, known for its application-based programs like Fast Track for top operators and experts. This approach not only leverages their strong brand but also encourages top professionals to apply to be part of their network. Creating an open application makes their network more accessible, transparent, and diverse. It also enables them to identify and connect with individuals interested in joining their network who might have otherwise remained out of reach.

Network Gap Analysis

In my consulting work, one of the most common challenges I come across is VC firms that have extensive and established networks but struggle to find the right person to engage when a portfolio company has a very specific need. To address this, I utilize what I call a “Network Gap Analysis”.

A Network Gap Analysis is a method of identifying areas where a firm lacks connections needed to support portfolio companies effectively. The way to approach this analysis is to measure the firm’s current network strength across a fixed set of characteristics to identify unmet needs in the firm’s current network. This can be done methodically, using data to calculate exactly how many connections a firm has in a certain demographic and how strong those relationships are. Alternatively, it can be done more informally by anecdotally thinking through your network across each category and flagging those that feel underdeveloped.

Examples of the characteristics to include in this analysis are:

  • Functional network strength: Areas like sales, marketing, finance, product, customer success, etc.

  • Geographic network strength: Regional connections

  • Academic network strength: Often focused on student, faculty and alumni networks at top research universities

  • Pillar company network strength: Connection to executives and top operators at leading unicorn companies in a specific industry or vertical

Starting with this gap analysis enables you to take a data-driven approach to network operations and reveals where you should focus your relationship initiation efforts.

2. Relationship Nurturing

Just as a customer success team monitors and strengthens weakening relationships to prevent churn, in venture network operations, relationship nurturing is a critical component.

A VC's network is vast and diverse. While investors don't need to tap into every relationship at all times, it's essential to identify which connections in a fund's network require attention and extra care, as well as which connections deserve recognition for the value they have recently given your fund. 

Keeping track of changes and developments within the broader network ensures that when a fund needs to leverage a relationship, it's primed and ready.

Methods of Relationship Nurturing

Thoughtful swag, curated events, monthly newsletters, and even a simple birthday message are some of the many ways a fund can nurture its network.

One fund that has done an incredible job building and nurturing its network is Primary Venture Partners. A quick LinkedIn search shows that over 600 people list their role with Primary on their profile, most of whom are ‘experts’ in the Primary Executive Network. Primary works throughout the year to actively nurture their network including through their annual NYC Summit and many other small events and engagements.

Another fund that stands out here is Underscore VC (where I previously worked).  Underscore’s Core Community is a members-only community that provides a curated experience for founders and experts to connect and engage, with regular events such as their annual summit as well as sector-specific engagement opportunities.

The Law of Mutual Affiliation

Much like initiating a relationship, nurturing one is essential to staying top-of-mind for relevant stakeholders in your network. The goal is to establish what I call 'the rule of mutual affiliation' between your firm and key network members.

'Mutual affiliation' transforms a casual acquaintance who merely claims to know your firm into someone eager to assist your firm when needed. It’s the difference between someone getting back to you in a month, and hopping on a call in minutes. Both Underscore and Primary do an exceptional job here, as evidenced by the number of members of their network who proudly boast their affiliation as a member of the fund’s network on their LinkedIn profiles.

Achieving mutual affiliation requires continuous and intentional nurturing efforts. The ongoing engagement in the relationship nurturing stage forms the critical link between relationship initiation and relationship activation.

3. Relationship Activation 

When all is said and done, VC network operations culminate in finding the right people in your firm’s network to activate at the right time.

Being able to do this swiftly and efficiently can have a significant impact on your fund’s performance. For example, activating trusted industry experts in your network to support diligence on a prospective investment can assist in making better and faster investment decisions; activating your network when a portfolio company is hiring for a critical role or needs an internal champion at a large corporation to help close a deal can manifest in meaningful value creation (and translate into real fund returns!). 

But let's face it, this is easier said than done. In the past, relationship activation often involved sifting through an unorganized mess of years' worth of notes scattered across Word documents, Evernote notes, voice recordings, physical notebooks, or, more commonly, someone's memory. Unsurprisingly, this method no longer works.

Today, the best funds realize that the only way to activate their network at scale is to invest in network operations efforts including maintaining a single source of truth of the firm’s network data and enabling the dataset with tools to query and manage the network. These firms typically rely on modern technology stacks that optimize and automate relationship activation efforts (more on that in our tech landscape below).

Some firms are ahead of the curve and have even built their own internal relationship activation tool stack with highly bespoke approaches. Aleph is one fund that has done a great job here.  Their internal relationship activation tool, Aleph Connect, creates visibility into their network and enables founders to submit intro requests to potential customers and business partners. 

Whether you have a fully custom-built relationship activation engine or an off-the-shelf tool that provides the necessary functionality for relationship activation, what matters is to have a standardized “network operations system” with complete and accurate data.

Keeping Up to Date 

Things change. That executive at a Fortune 500 company that used to specialize in cybersecurity and live in San Francisco may have moved roles within the company and relocated to London. They may have different interests or have gone through a significant life event that would render your reach-out inappropriate. 

At a fund where network operations is done well, these changes would be fully updated (primarily by automated data enrichment), contacts flagged as relevant, and relationships nurtured so that reaching out would be welcomed and activation seamless.

From a GP’s Network to a Fund’s Network

Almost every venture firm I work with experiences a similar challenge: typically the GPs maintain the firm’s largest and most valuable networks, yet they are also the busiest people at the firm, creating a bottleneck when others want to tap into their networks for introductions and relationship activations.

A key mandate for network operations is to lead the charge of converting the individual network of each investor at a firm into a collective network for the fund that is shared, transparent, and accessible.

When these individual networks become a firm-wide asset that can be activated by any member of the team at any time with access to the right data and context on each individual in the network, the firm's network instantly becomes more valuable and effective.

Tracking and Assessing

Part of the role of network operations is to diligently track every point of activation, ensuring a firm knows precisely when and how a node in its network is being activated, and closely monitoring the outcome and efficacy of each activation.

While some firms opt for manual processes, logging each network activation in spreadsheets or Airtable databases, others leverage semi-automated methods through platforms like Zapier or custom-built processes capable of tracking email BCCs for every intro and activation email sent within the firm. Regardless of the method chosen for logging and tracking, the key is to maintain a record of these crucial touch points.

The most effective firms take a proactive approach to outcome tracking. For instance, they may automate follow-up emails three or six months after an introduction is made to assess the outcome: Did the portfolio company hire the person they were introduced to through the firm’s network? Did the prospect intro turn into a huge customer? Or did the conversation ultimately lead nowhere? 

Understanding these outcomes is crucial for refining and enhancing future relationship activations. Moreover, this approach ensures that you don’t overburden anyone in your network unnecessarily and allows you to acknowledge their help and value, feeding back into the ‘relationship nurturing’ phase of the network loop.

Technology’s Role in VC Network Operations

In the past few years, new technology platforms have revolutionized all three stages of network operations, making it significantly easier for firms to grow and manage their networks.

Today, there are dozens of off-the-shelf tools that require minimal customization available to firms that automate and enhance their network operations. The map below shows the most commonly used tools categorized by stage and usage.  Many of these tools have features and functionalities that touch multiple steps of the network operations framework, but I’ve focused on where each tool shines to simplify the landscape. (Disclaimer: this is not a comprehensive list, so please reach out if you use a tool that is not mentioned, and we will add it to the map!)

Some firms with ample resources have opted to make network operations their secret sauce, building internal proprietary tools or developing complex low-code automations and databases to manage their unique approach to network operations. However, for most firms, the tools listed above offer the necessary functionality and customization needed to achieve their network operations objectives without the need to invest in building and maintaining custom software.

While technology tools are increasingly vital to managing the three parts of the network operations framework, without dedicated manpower and the focus of a firm’s platform team on network operations, most components of the framework will still prove to be a challenge for firms.

This brings us to the final part of executing a world-class network operations strategy: the right resources to lead it.

The Right Person for the Role

The concept of hiring a dedicated individual for a network operations role in a VC fund may be a relatively new idea, but I firmly believe that over the next few years, network operations will become one of the most sought-after and crucial platform roles, if done right.

In the past what we're calling "network operations" could have been thought of as "executive operations" and was often managed by an admin who helped a partner manage their calendar and support them in maintaining their relationships. But as the VC industry has evolved, expanded, and become more complex so has the network that most partners manage and it requires much more than just a highly organized and detail-oriented professional who can assist them in managing their diary.  Rather, it requires a strategic leader and a complex data and technology stack.

When firms look to hire a head of network operations, they often think of this as a ‘community’ focused hire and prioritize finding a ‘people person’ - someone skilled at building relationships. However, this is usually the wrong profile for the job. Consider this: someone who focuses solely on expanding the network only exacerbates the problem. They create a larger network but with the same lack of systems and operational rigor to nurture and activate the expanded set of relationships. 

It's important to clarify that while the ‘people person’ may be excellent for a truly community-focused VC platform role, they’re likely not the best person to fill the role of a VC network operations professional. 

Often the ideal person for the network operations role is someone more introverted, someone who may not enjoy hosting dinner parties and networking at conferences, but rather someone who is system-oriented, data-obsessed, and KPI-focused. They are the ones who can track, monitor, and measure a firm's network, maintaining a high-level view to ensure that each stage of network operations - initiation, nurturing, and activation - is driven at scale by the fund's priorities. 

These folks can come from a diverse set of backgrounds.  Some of the more exceptional network operations leaders I’ve come across have previous experience in consulting, data science, and revenue operations.

Conclusion

The VC business model is inherently limited in size and manpower. But it is being able to tap into a fund’s rich network - comprised of industry experts, internal company champions, and other key connections - that enables investors to have an outsized impact on their portfolio companies and ultimately boost their fund’s returns.

It is why I firmly believe that network operations will emerge as one of the most critical components of VC platform in the coming years, and the right folks leading this area will prove crucial in unlocking value for their funds.

But don’t take my word for it - a study published many years back in The Journal of Finance found that venture capitalists with a more significant network centrality (meaning the relative importance of a fund's network) have a noticeable increase in the likelihood of their portfolio companies successfully raising follow-on fundraising and surviving. In today’s increasingly competitive VC landscape, this finding is undoubtedly even more relevant.

The best funds of tomorrow will be those who prioritize the development of robust network operations today.

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.

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