The way that venture capitalists, corporate venture funds, angel investors, and start-ups collaborate is changing. Here’s a new model for an always-on, real-time approach that eliminates surprises and accelerates results.
There used to be something called the “Bicycle Test” for Venture Capitalists. VC’s wanted startups housed in offices close enough – within a reasonable bicycle ride – to help ensure close collaboration. Physical proximity meant adequate oversight.
VC’s also historically preferred their start-ups to be housed in a single office. One-office meant adequate collaboration.
Not in Today’s Disrupted World!
Today’s fragmented and distributed world makes the bicycle test and one-office concept business liabilities. With the accelerating speed of disruption, Venture Capitalists, Startup CEOs, and start-up teams must work more closely than ever to succeed, but must do so whenever, wherever, and in whatever way makes the most sense.
VC-start-up collaboration goes far beyond raising and receiving capital funding. Great VC’s help build great companies through strategic guidance, process insights, and networking. Holding CEO’s feet to the fire around just the right metrics and milestones to succeed can also make the difference between success and failure. Just as business is continually reinventing collaboration – from processes to technology – so must the venture capital and start-up world.
Piecemeal Processes No Longer Cut It
To execute on their visions, most start-ups cobble together models, tools, and templates from a range of sources. People get advice from investors, read books, create PowerPoint slides with the latest framework, and then piecemeal together process documents that are shared with their teams via cloud drives.
The discipline of aligning teams to clear business processes and rigorous metrics are often lost on start-ups, which often have inexperienced management teams who miss key steps as they manage the chaos of start-up life. The outcome is haphazard at best, and often leaves the broader team struggling for clarity and direction, exactly the opposite of the laser focus needed to get the business off the ground. Famous failures such as Color and Homejoy are example of startups that raised 10’s of millions in Venture Capital but failed to address key engagement metrics and business issues. It is unclear if investors saw these problems before it was too late.
In addition, most investors rely on monthly board meetings and color commentary from CEO’s to understand the health of their investments. Startup CEOs and Executive teams spend an exorbitant amount of time every month preparing their communication materials – usually in the form of PowerPoints – for board meetings. These monthly frenzies steal time away from the very thing that the executive team needs to be doing: building the business.
Next Generation Venture Capital & Start-up Collaboration
In the future, real-time collaborative dashboards will provide visibility, transparency and accountability for all the major processes that startups must master, and that VC’s require. The soft stuff is often the hardest stuff when it comes to business. Creating this type of alignment helps guide teams through the specific steps required to validate ideas, test key assumptions, build the best business case, and execute plans.
In the future, instant insight into the health of the business, red flags, and even opportunities will be instantly available across the start-up. No more nasty surprises. Project dashboards will roll up to initiative dashboards, which will roll up to departmental dashboards, which will roll up to the executive dashboard, which will ultimately roll up to the Board of Directors dashboard. Everyone has access to the process steps and metrics that drive success, from engineers to venture capitalists. No matter what the role or function, people always possess their individual picture of the work to be done, as well as how their piece fits within the larger strategic context. Everything they do ties back into contributing data and insight into the larger “collaborative network” in which they operate.
So, Executive teams will no longer spend days building their board decks that become instantly outdated after the meeting. Venture capital partners and other investors possess ever-present knowledge of the company’s progress and status. Teams move faster since their always aligned around the latest strategies, plans, metrics and actions.
There are real reasons why the “Bicycle Test” and “One Office” mandate have been institutionalized by the venture and start-up communities. While the fate of these specific approaches is quickly going the way of the fax machine, the principles underlying them will remain success factors. How these principles get embodied through next generation collaboration tools and technology is yet to be seen. One this is certain: whatever it looks like, it will likely be the next big thing.