Tuesday, November 11, 2008

Your VC 's Hidden Value

As someone who has worked with numerous startups, founded a few, and written many business plans I follow the VC community. Most that I have ever met, talked with or corresponded with have always remained behind closed doors. For some entrepreneurs these VC's are fine. For others though you need to look beyond the term sheet to find the hidden value some VC's can add.

While writing this post, Fred Wilson of Union Square Ventures comes to mind. He is the perfect example of how I define "hidden value". Fred is "out there". Recently named the #1 man in New York tech, He Tweets on Twitter (one of his Union Square investments). He uses Disqus (another Union Square Investment) for people to leave comments (and have an extended conversation) on his AVC blog. He tags all his blog posts with yet another Union Square Venture investment, Zemanta. I am certain he uses ALL of his venture portfolio in similar fashion.

Fred Wilson has become not only a showcase but an eco-system for his investments. His very popular AVC blog is read by approximately 120k people per month. As someone who is a frequent visitor to Fred's blog, I myself find myself using most of his portfolio's tools/services. I saw how effective, and useful they were for Fred...so why not for me?

If you have ever launched a startup, you know just how hard, and how important it is to attract your early-adopters. This is usually the costliest(Marketing) part of your launch. Having a VC (or any investor) who can add "FredWilson" value (likely 10's of thousands if not 100k users) has found the hidden value not written in any term sheet.

What value does your VC (or if you're a VC) add? Please leave YOUR comments. If you think others might learn from this post, please DIGG it.

You can have a chat with me here on Twitter.

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css said...

Great post - agree 100%. But VC's like Fred need to become the rule, not the exception.

fred said...

that's awfully nice of you to say

but there are plenty of others out there that walk the walk

Brad Feld, Bijan Sabet, Andy Weissman are three that come to mind right away

i am sure there are dozens more

Andrew Finkle said...

Fred, I used you in my example because I am familiar with both your blog and as a result many of your investments. I am certain there are plenty of others (as you mention).

Hopefully though the point of my post gets through to both those VC's that do NOT (of which there are many), or to those entrepreneurs who are looking for funding.


Unknown said...

Great post Andy. Many entrepreneurs get caught up in the color green and jump at any cash that is available to them, not realizing who or what they are getting into bed with.

Leveraging smart money, VC's or investors (especially a guy like Fred) that can bring value to the table increases the sum of the cash received (in my mind) by many multiples.

Great post.