Updated: May 10, 2021
Every day, I am privileged to speak to founders of hyper-growth startups. Each one of them is building a successful company by doing something that has never quite been done before. And I can’t help but wonder: can Silicon Road learn something from these startups? After all, venture capital is an industry that can be disrupted just like any other.
We already have several things in common with many of the startups we invest in. Our team is small, nimble, and with very diverse backgrounds. What’s more, we’re moving fast: we’ve averaged one investment every six weeks for the past year, much higher than our median peer fund. That allows us what we think is our competitive advantage: we’ll be able to have a stable of about forty companies in our portfolio. We’ll be able to draw on them to solve the pain points of our retail partners, and help our investments grow in the process.
But the best startups never stop improving. With that spirit in mind, there are many parts of the venture capital model that scream out to be optimized. For example, we may speak to hundreds of companies every year, but only a handful of these are going to go on to build a business that will provide meaningful venture returns. It’s imperative that we don’t miss them. So we need to scrutinize our investment funnel, and make sure we’re not ruling out a future unicorn just because they didn’t communicate their message well, or worse, because we didn’t understand how dire the problem they are solving is.
We also can’t afford to just passively evaluate the startups that approach us; often, the very best companies quickly close rounds, taking investment from existing investors (inside round) or new investors brought into the deal by current investors. We need to make sure that we’re actively pursuing these companies, too.
How are we going to manage fundraising, constantly hunting for new startups, and helping our large portfolio grow all at the same time? One way is by building time assets: things that we invest time into building that makes us more efficient down the line. We’ve already built a scorecard to quickly assess companies in our pipeline, and we require startups to fill out an intake form to streamline our first meeting. Each of these took an hour or two to create and refine, and has undoubtedly saved us countless hours with companies that aren’t a fit for us. That gives us more time to spend on the real opportunities. We will keep building processes, scorecards, and documents that make us even more efficient and effective. Even though Silicon Road isn’t a startup, adopting some of the strategies that startups use to achieve stratospheric growth might be the key to our success.