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Case study of coaching Mark, the GP of a British VC firm, and his portfolio founders as well, to achieve higher operational efficiency and returns.

Mark is a GP in a top European VC. When we first talked, he was suffering from all the major VC pain points. His fund wasn’t a top fund with a major track record, so he had trouble accessing the best deal flow. The team was lean and wearing many hats, so at the end of the day he couldn’t undertake the highest value-adding tasks because he was stuck with the crappy ones.

Also, as most people know, in any VC fund there’s usually one winner GP that makes up for all of the other ones. And Mark made it clear to me he wasn’t that GP. But he wanted to.

But most of all, Mark was suffering from a time management problem. More specifically, effort managing with different portfolio startups. Anytime he had a free hour, he didn’t know whether to already invest it in a winner portfolio startup, or to invest it in saving one of the stragglers – or on which of them.

The combination of freeing up my time to help the promising start-ups together with the higher level of transparency in the data has saved me countless hours.

Not only do I believe this has resulted in several million gained in startup valuations on our 4 exits YTD, it literally freed up half of my personal time, which I can use to source more quality deals and support more promising startups. I can’t even put a price tag on that one.

Although the Vasco’s results will become apparent on venture liquidity events, having freed us to support the higher quality ventures we consider possible unicorns, he’s already helped us deliver at least a couple additional million in returns to LPs.

They’re happy. And so are we.

Mark

When I spoke with Mark, I offered a two-pronged attack:

  • Coaching him to maximise time on high-value activities and clarify priorities;
  • Coach the founders of his portfolio startups to help them through transitions such as hiring, “the second birth” of making a company process-oriented instead of founder-oriented, and also, why not, gather some information on actual company performance and major problems, and strengthen relationship with Mark as a board member;

Time Management and Task Prioritisation

We started by analysing Mark’s time. The question of juggling different tasks, from getting LPs on board for new funds, to sitting on board seats of different companies with different success levels, to desperately trying to obtain performance KPIs from silent startups was the easiest one to tackle right away.

Sure, Mark had a principal. He usually helped with sourcing deals. But Mark’s major issue was chasing his all of his portfolio startups that, as typical in the industry, didn’t feel the need to keep their investors aware of everyday operations – or even bigger problems.

We quickly realised that Mark’s time was best used in supporting promising ventures. In parallel, we would be working to obtain further information from existing portfolio startups, and create more transparency between the founders and the board. So, with that added layer of information, Mark would be helping these portfolio ventures for the specific areas they needed to address (operations, hiring, strategy)

Aside: Productivity and Performance

Coaching the hedge fund GP is not an easy task. Considering every hour, minute of this client’s life can determine a difference of millions down the road, through the proper selection and nurturing of ventures, the arsenal of techniques for productivity and performance had to. be carefully vetted and curated.

For Mark’s case, we started by prioritising his task and working on prioritising based on their value at the end of the day. We compressed or eliminated the ones with lower value and invested in the ones with higher value.

Although the decision to help ventures with higher potential more aggressively than ones with lower one seemed obvious, sessions were had on how to do this in practice. You don’t need even an hour to give good advice to a coachable rockstar founder, but you might need 4 to properly convey and emphasise good advice to a struggling egotistical one.

I worked closely with Mark on creating a very simple map of which ventures needed which kind of help (hiring, strategy, cashflow), and how to address each one. We tailored the message to each of the founders, and I coached them in parallel to gauge their reaction and help them create an action plan for implementation – or to raise objections to the board with backing data.

Coaching the Founders

Then, in parallel, came the founder part. Not as straightforward as coaching Mark, many founders saw uninvited coaching as something superfluous. It was necessary to establish rapport, create a business case for each startup, and do a continuous effort to show the value of coaching to the founder.

After overcoming this initial objections, though, the coaching process became straightforward and value-adding. Founders started seeing a coach as an objective third-party, a trusted advisor focused on improving their performance with no bias in terms of strategy, prioritisation, or other.

Common topics that founders came to me for help with included conflicts with key employees, high levels of stress ranging on burnout, and support in making tough decisions with no right answers, like necessary pivots, changes in employee roles, changes in strategy or pricing, and others.

A great part of the coaching was focused on removing cognitive biases and strengthening transparency with the board. The goal was to have each founder be transparent about internal problems with the board as soon as they happened. Personal issues ranging from pure ego to insecurities and childhood traumas prevented them from being transparent and seeing sharing problems as “business as usual”. There were also some valid reasons, naturally, such as being afraid of being fired if the VC knew a more competent CEO.

Vasco’s work with our founders has been great, and truly intriguing, to be honest.

I don’t know how he does it, but it’s been more than once where a founder is very self-centered and proud and doesn’t communicate with me as the board member. After a few weeks with Vasco, their demeanor changes considerably. They don’t admit to being wrong, or show weakness most of the time, but they are much more transparent.

Vasco really helps consolidate the collaboration spirit a VC must have with its portfolio ventures, and that founders so many times are afraid of. He helps the founder see the investor side and align with us.

It’s hard to put a price tag on this, considering fluctuating venture valuations, but by helping flag two severe problems in our ventures in the inception stage over the past few months, our startups have saved at least the cost of hiring two wrong people and choosing an overpaid supplier – a total of around $300k less cash burned, at least, now available for more runway for them.

And, ask Vasco always asks us to quantify, this will have an impact on the startup valuations, and returns to a degree. It might not be possible to track down to the specific dollar value, but it’s at least 50 times considering what we invested in the coaching. Excellent ROI.

Mark

Focusing on Performance

Considering the possible conflict of interest between coaching the founder when founder and VC interests diverge, the best way to resolve it was to avoid it entirely. Coaching sessions were focused purely on psychological performance, conflict resolution, change management. Topics included:

  • Hiring and retaining top talent in a quickly changing team and environment;
  • Resolving key conflicts, especially involving negotiations related to equity or compensation;
  • Developing soft skills and team skills, especially towards cultivating leadership for both the founding team and first employees, but also for other aspects, including customer-facing conversations;
  • Dealing with fast growth. Adopting a VC-backed model of “grow at all costs” doesn’t always generate alignment with the founder. It’s necessary to coach him to either accept this model or come to a resolution with the firm;
  • Stress management and identity protection. Last on the list, but probably the most pervasive and permanent. Every single founder faces a gargantuan challenge and the possibility of failure. And when it hits, it hits hard. Especially for founders that derive their whole identity out of work, startup failure many times equals suicide. And every up and down is felt with a magnified whiplash. Coaching founders on properly managing stress and surviving the endurance game of founding was a key activity;

Aside: Coaching the Narcissist

One of the biggest challenges when coaching a young talented founder (or, putting it as they would tell you in every possible occasion, a Forbes 30 Under 30), is to walk the tightrope between respecting their need for recognition and ego massaging, and being able to provide candid feedback, even when negative. One of the reasons why founders don’t communicate with their board is precisely out of pride or feeling their authority threatened.

A lot of work was done with two specific founders with more narcissistic characteristics on providing an open, candoral style of communication and seeing the venture not just as “their” baby anymore, but as a shared project where it’s just good business to keep close communication and partnership with the board.

Seeing Results

As a VC model always has a component of “spray and pray”, although promising ventures are identified, you never really know which ones are going to make it, and you fully expect one home run to make up for all the other rest of the portfolio.

As coaching was done both on a company that later reached Series D (and still going at present) and others that ranged between modest exit and failure write-off, results are mostly measured in terms of operational efficiency.

I see the founder coaching as an excellent method to increase collaboration with the founding team. It helps us get a more transparent view on the status of the portfolio venture, what the team are going through, what results they’re achieving, and allows the board member to intervene with surgical precision on key challenges identified with Vasco’s help.

Although it’s impossible to pinpoint the coaching practice to a tangible increase in venture valuation, given fluctuating valuations dependent on so many different factors, we’ve made at least some additional million on the existing exits YTD.

But aside the actual portfolio coaching, I see the coaching as a tool to increase our own operational efficiency and save me, personally, precious time that can be invested in sourcing and vetting quality deal flow.

Vasco helps the founders tell us what’s wrong and seek help on the particular topics they need. On one hand, he maximises my personal productivity, and on the other, strengthens our bond with portfolio ventures, creating results for them. Both are no mean feat.

Mark, after 5 months of coaching – both personal for him and for 7 founders of his portfolio

To be honest, as a coach, this welcome additional value proposition was something I was not predicting in the beginning. From a founder standpoint, I was considering that each specific intervention and session would help each specific founder reach their dream faster and get a higher valuation. And to a point it did.

But for a VC, whether two or three portfolio companies exit with a $50M or $55M valuation isn’t that much of a difference. However, the increased level of transparency, and the ability to assist on issues with pinpoint accuracy, together bring an operational efficiency that allows the firm to remain lean and scale its operations while raising additional LP money, new funds, and adding additional ventures to the portfolio.

If this service could be of value to you, let’s get in touch.

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