Traditional invest-and-exit VCs dying: Community-based funds take their place

By Polina Fomenkova, PR writer at F1V

The VC industry isn't about investing and waiting for an exit anymore. Modern investment funds try to add more value.

High-profile funds like True Ventures, Norwest, Atomico, First Round Capital have already invested time and effort to shake up the VC world, turning the once-conservative industry into something new. For years, they’ve been creating communities that help their portfolio startups move forward.

Email communication — when startup founders just send monthly or quarterly reports — is not enough anymore. Leaving it to just formal emailing will not create a sense of involvement on both sides. That’s why many funds have started to hold regular meetings to talk with startups informally.

VCs encourage startups to Zoom or meet personally more often to talk about their current challenges. They invite financial, HR, and marketing experts to help founders find solutions to them.

Alumni Ventures, for example, organizes meetings for founders with other funds and startups. By doing it regularly, the fund has built a community of 600,000 participants, where everyone can share their pains and find ways to improve their business. They can even test their pitches and find new partners for collaboration.

Non-competing founders, business experts, and investors can share working strategies and help each other avoid mistakes.

Gaining access to valuable knowledge from the business community is another huge advantage of community-based VCs.

The VCs organize workshops and provide startups access to guidebooks, online libraries, and discounts on services like AWS, GitHub, and Stripe.

True Ventures, for instance, has a content library where community members can explore the importance of psychological safety in the workplace, find ways to simplify sales predictability and cultivate emotional loyalty. Flyer One Ventures also provides educational lectures to portfolio companies and guides on marketing, PR and other fields.

And it’s a win-win. The startups get better exposure to new technologies and trends, while the funds can boast more successful companies in their portfolios.

Early-stage startups can rarely hire separate specialists for every business area they have. Hiring staffers with specialized expertise takes time and a budget for high salaries. As a result, new founders often lack the skills needed to develop, test, and scale products.

Founders may not have an accountant or a marketer and often have to take on several roles themselves, and this may prevent them from moving forward.

Funds like Firstrock Capital offer additional value for portfolio companies by helping outsource some of the functions: public relations, marketing, business development, sales, recruiting, financing, fundraising, product development, and engineering.

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