To Stay In The Game, European VCs Wake Up To Offering Services And Software

As the European tech startup market becomes yet more crowded with investors and accelerators, those investors are realising they are – gasp! – going to have to start working harder to differentiate themselves from their peers in the venture community. For some, that means offering more seed stage investment, for instance. But money, famously, can’t buy you all the love, so some VCs are investing in more of a service offering for their portfolio companies. This has become more or less a standard in the U.S., but is starting to become a differentiator in Europe too.

To that end, London and SF-based Index Ventures has chosen to up it’s game by revealing that it’s been working on an internal online platform for the last few years. Previously known only to the companies it’s invested in, Index’s platform is a mashup of the CMS Drupal, Salesforce and “enhancements” by Datahug, the startup which is now used by several Silicon Valley firms.

The platform is largely used in a ‘concierge manner’ internally. It contains hundreds of recommended vendors, recruiters, benchmark stats, PR firms, office space suppliers, etc in a number of cities globally.

Partner Saul Klein says: “We call this ‘Total Football’ for VC investing. That means leveraging the collective intelligence of the network we have between the Valley, Europe and Asia. We use this platform to help us do that.” This is, Klein says, like a Yelp for startups.

But Index has also set up separate communities for its companies, mostly email groups. There are 10 Active communities with 600-plus active members out of Index’s 135 companies. There might be a list for CTOs, or one for Product Managers. Where they can can pose questions directly to each other on the relevant community mailing list, swap ideas at meet ups and attend in person workshops.

Romi Savova of Index portfolio company CreditBenchmark says “I have a few colleagues that work at other young companies and it often feels like we are more “in the know” because of this platform.”

Klein told us they have been “deliberately about not talking about it” but has chosen to come out of the gate with this information because “in Europe entrepreneurs have a right to expect investors to deliver more than just money to the table. In the Valley this kind of offering is Table-stakes.”

He has a point. The venture industry in Europe has come a long way in the last five years, with the rise of accelerators like Seedcamp, Tech Stars, Startup Bootcamp, new early stage funds like Episode One, Earlybird, Hoxton Venures, Point Nine Capital, Passion Capital, Connect Ventures, Playfair, Creandum, Northszone, Sunstone and crowd funding platforms like Crowdcube, Seedrs and the rest.

The entire European funding ecosystem has become a lot more competitive and it’s starting to take cues from the likes of Andreessen Horowitz, which has a large internal software platform dedicated to accelerating their portfolio companies and entrepreneurs. Andreessen has over 70 people in services for its portfolio company.

“Our idea is to have services as a marketplace, not a fulfilment centre. We’re not here to do someone’s work for them, or to have them outsource tasks to them, but we’ll support and help them amplify and grow,” says Klein.

Does it help Index source deals?

To some extent, yes. For instance, Index can look at “Talent “in Play” when they are looking to hire someone for one of their companies. But it’s also useful as a document repository, holding best practise documents, job listing templates etc. which is useful for new companies. The kind of database any VC ought to have, frankly.

However, there’s no suggestion that other European VCs do not have similar internal databases which they use to augment their portfolio company’s capabilities. Index is not alone – though it claims to be more ‘joined up.’

Rory Stirling of MMC Ventures says while they don’t currently use any software to manage portfolio communication “other than good old fashioned email” they “are however getting smarter as to how/when we help this peer networking to take place.”

“We do use a number of tools internally: Asana, Evernote, Dropbox, Pipedrive, Typeform and more recently Slack but so far these have mainly been internal only. We have thought about how we best extend this into our communication with the portfolio teams but haven’t done anything yet,” says Stirling.

Over at PROfounders Capital Sean Seton-Rogers says they “just introduced Compass Monitor.” But of course, they are also investors in that business as well.

At Episode 1 partner Simon Murdoch says they use Insightly which “is a very good value Google App to manage our deal pipeline. We have Google Groups for different C level people in our investee companies. We are therefore relatively low tech.”

At White Star Capital Christian Hernandez says they “ended up going with“. This is a CRM platform specifically built for VC and PE, built by a former founder who used to run IT inside large funds.

“It therefore understands the data structure and actions (deal flow, weekly partner meetings, the need for an email interface to forward inbound opportunities),” says Hernandez.

Christoph Janz of Point Nine Capital says they put a lot of effort into providing forums for their portfolio entrepreneurs to compare notes, network and exchange knowledge.

“I started a Basecamp project for the founders of my SaaS angel investments several years ago – as a platform for people to talk about all questions related to SaaS. This has meanwhile turned into Point Nine’s SaaS Founder Basecamp with more than 100 participants. We’re also doing offline events to connect founders,” says Janz.

But of course, there are also sceptics of how much technology can do when startups are so much about people.

Christian Thaler-Wolski of Wellington Partners says that in his opinion “networking among portfolio typically happens offline”.

“It’s a tried and tested recipe – bring a couple portfolio CEOs or CTOs to an event (dinner, pizza & beers) and you’ll have great conversations including best practices in just about anything. I’ve tried LinkedIn or Facebook groups in the past and it usually dies down after some initial enthusiasm. Most often the problem is extreme diversity in the portfolio and thus not much overlapping interests that can be shared continuously.

“And people get annoyed when others share one blog post after another, after all everyone gets those in their social feeds anyways. I’ve heard the same from other VCs even though publicly they may claim differently.

“For a while we tested an online deal flow management tool that pulls in all the data of the deal (AngelList, LI profiles of the founders, Crunchbase, etc). Problem is, it was only online and I do a lot of work offline when I travel (the airplane is my preferred deal review place). So I couldn’t use it the way I wanted it.”

He now uses Pipedrive for deal flow. He says it’s “easy and cheap and mobile centric.”

Others we spoke said they had ditched Salesforce because it was “too clumsy”, not mobile centric, expensive to set up and had feature overkill.

These days, if all an investor can offer you is money and the phone numbers of a few recruitment or PRs firms they happen to like, then, well, that probably doesn’t the mustard. It might be time for startups to look into the technology their investors are using, and what platforms they can offer, not just their money.