A survey of >700 entrepreneurs conducted by Oxford Capital shows that sector expertise and the ability to make introductions are among the key areas where VC funds can differentiate themselves in the eyes of founders.
The top two qualities entrepreneurs value in a VC are the quality of the relationship and the ability to provide strategic support. This shows they are often evaluating a VC based on their ability to operate effectively as a future board member.
Next up is speed: if a VC can't execute quickly then this often indicates they either have complex decision-making or simply lack conviction about the opportunity - both fairly undesirable in your VC backer.
So once a founder has met a couple of smart people that they like and who are excited to invest, how do they choose between them?
We were gratified to see that sector expertise and the ability to provide introductions ranked highly for so many entrepreneurs, as these attributes are at the heart of what MTech Capital can deliver to our portfolio companies.
The lack of interest in direct operational support runs counter to the trend of early stage VC funds investing heavily in "platform" teams in recent years to stay competitive and win the hearts and minds of entrepreneurs.
We're pleased to see validation that a sharp sector focus can help VCs win in competitive rounds for investing in the best companies.
Relationship with Investment Manager is understandably the most common choice. However I was surprised to see speed of execution feature so prominently, and operational support (where many VCs have made huge investments in platform teams) feature towards the bottom.