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One of the things that early-stage startup leaders repeatedly hear, especially nowadays, is “you have to extend your runway”. The “runway” analogy refers to the time before your startup can “take off”. In other words – the amount of time that the money raised in the last round lasts without compromising progress.
Other than another funding round, the proverbial runway can be extended in two ways: 1, make your funds last longer; 2, generate income.
Easier said than done.
Through our work with countless startup founders and our ongoing relationships with early-stage VCs, accelerators, and entrepreneurship programs, we have learned an interesting fact:
VCs and programs have some unique and valuable tools to put at the disposal of startup founders. In the day-to-day hustle that is startup life, these “force multipliers” are often overlooked or neglected.
In other words: you may not know it, but your investors can help you in some very creative ways.
So, in an attempt to inspire both startup founders and investors, we talked to some well-known investors and program managers specializing in early-stage B2B startups. We specifically asked them about the creative ways in which they support their portfolio companies.
[important note: almost all of the people we spoke to had a lot more ways in which they support their companies. We just didn’t have room for everything…]
It’s lonely at the top
One of the key challenges that startup founders often point to is what a lonely journey it is. Early-stage startup founders make hundreds of decisions, often operating in new domains and markets. It can get pretty difficult if you don’t have a sounding board, even if it’s your second or third time around. Above all, investors provide their portfolio CEOs with mentorship and strategic support that stems from their vast experience as entrepreneurs or seasoned investors. However, sometimes it’s easier to talk to peers than investors.
NextLeap Ventures touches on exactly that void. As Oded Agam, Managing Partner & co-founder puts it: “In addition to working with each portfolio company separately, we also enhanced our ‘NextLeap Ventures Portfolio CEOs Forum’ and we facilitate and encourage discussions among the CEOs of our portfolio companies in a variety of ways. This forum enables all of us to share thoughts and actions related to challenges, opportunities and best practices to address them. In the past couple of months, we responded to the forum members’ needs by increasing the frequency of the CRO Forum sessions. There is genuine sharing and support. One very simple example is sharing information about all of the COVID-19 grants and relief programs in Israel, the EU, and the US.
We believe that our motto is truer now, more than ever – ‘if you want to go fast, go alone; if you want to go far, go together’ – and we encourage our companies and partners to help and learn from each other.”
StageOne Ventures takes this approach even further. Yael Eckstein, Marketing Director: “The market is rapidly changing, and adaptability is required on both the strategic and tactical levels. We support our portfolio companies across the spectrum, from strategic planning through renegotiating contracts and service provider pricing, to help our companies extend their runway.
One of our activities with our entrepreneurs is a CEO group forum, where we brainstorm and discuss various aspects of the business. We have discovered that sometimes, the conversation flow is easier when we are not present… When talking only with their fellow peers and other CEOs, people find it easier to open up and discuss different issues. So we set up an additional track of meetings where we provide all the logistics, say hello at the beginning, and then go offline to allow the transparent flow of communication. Topics raised there have ranged from internal communications, how to keep employees energized, becoming a better CEO & leader, marketing, sales, or even the time-lapse in the Coronavirus cycle and how it affects your actions and communication with employees and customers.”
That elusive product-market fit
It’s no secret that most early-stage startups adjust their product and value proposition several times before reaching that “eureka” moment when they know they have a winner. Having at least one pivot is almost a requirement of the game.
Reaching product-market-fit requires, well, reaching the market. Getting in front of enterprise decision-makers just to collect feedback or for a PoC can be extremely difficult for a young ‘brandless’ startup.
Glilot Capital Partners, for example, has built an established Cybersecurity Innovators community. Its members include CISOs from US-based enterprises as well as security thought-leaders and experts.
Dorin Baniel, Associate, Value Creation: “We create a trust relationship with leading CISOs, in order to collect honest feedback that is otherwise extremely hard to collect. Developing a close, ongoing relationship means that we are familiar with their interests and their business needs, which helps us make sure that we put the startup in front of someone who can truly help them.
The CISOs benefit from early access to cutting edge technology, backed by a partner they trust. The startups get early feedback from real customers regarding the need, the solution or product, the timing, business model, pricing, and more. Getting such input from the market early on can make the difference between a successful startup and a failed one.”
Rolling up your sleeves
Let’s face it, sometimes it’s just a matter of not enough resources to go around. Startup CEOs are constantly having to prioritize where a limited budget goes: product development, setting up an operational foundation, or developing the market. There are just not enough funds to do everything as fast as they would like.
Some investors support their portfolio companies with resources that help getting the work done faster.
Michael Niddam, Managing Director and Co-founder at Kamet Ventures: “As a venture builder, our focus has always been on building fundamentally great companies that can sustain market fluctuations and uncertainty. We have also been passionate about creating a culture where the entire Kamet team is invested in the success of each venture and goes to great lengths to support the ventures in times of need. As a result, we have been able to deploy our broad team of in-house experts across finance, strategy, legal, communications, talent, and technology as additional resources to all of our ventures that required support in Tel Aviv, London, and Paris. Our ability to equip each team with experts with fresh perspectives almost overnight is a testament to our unique model of building ventures, no matter the challenges we may encounter.”
** BTW, we (G2Mteam) have experienced firsthand the pleasure of working with Kamet through some of our work with their ventures. Most recently, we helped launch the new nSure.ai website together with the Kamet team.
How deep is your tech?
There’s deep-tech and then there’s ultra-deep-tech, and the deeper the tech, the longer the required runway.
Developing products based on new scientific research, new materials, or new production implies longer development times, testing, and market development. Just think about coming up with prototypes for hardware-based products… building the technology or even the business plans when there are physical elements (chips, boards, or electronic devices) – and that’s just one example of this complexity.
Some investors and programs have mastered supporting deep-tech early-stage startups, helping them fast-forward their process so they can shorten that runway.
Ayelet Ben Arav, VP BizDev at Incubit Ventures: “Early-stage, deep-tech startups have a long and complex journey ahead of them before they can reach the market. Their products are often complex, requiring in-depth expertise in several technology domains, manufacturing expertise, and access to production facilities. For a young startup that does not have deep pockets, this can mean impossible entry barriers.
Incubit Ventures leverage the unique assets available to Elbit Systems, to support deep tech startups. We provide startups that are developing civilian products with access to Elbit top-notch experts, infrastructure, manufacturing equipment, business opportunities, and many other resources.
For example, one of our startups focused on maritime robotics and needed to test its product in a live environment. We provide its team access to Elbit’s port to perform trials. A startup with optical tech uses Elbit’s optics manufacturing capabilities. Another startup that develops drones was able to consult with professionals from Elbit’s engine production factory. The list goes on and on. Some of these resources, they could not have accessed otherwise.”
“The startups that participate in Ignite – Intel for Startups come from a very technological background, and are experts in their fields,” explains Barrel Kfir, Director of Portfolio. “What we provide them with is the additional business knowledge that they need to succeed, and can otherwise take years to master. We partner each company with mentors from Intel and their relevant industry, who can offer guidance on the tech side and/or business side. In one case, an Intel mentor with a business focus had a different view from the founders on the market segment that the company should focus on. So he flew them to Spain to meet 15 potential customers and validate that hypothesis in just a few days – something that could have taken them many months or even years to do on their own.
Despite not being able to conduct our second cohort in person due to COVID-19, we felt that it was important to move forward, and transferred the program online. These are challenging times for everyone, especially startups that are trying to stay afloat, and we wanted to do what we could to offer that mentorship, advice, and expertise.”
Markets have changed – so have your investors.
During the seven years that we have been working with early-stage startups, we have felt a fundamental shift in investors’ approach to supporting their portfolio companies, and in the supporting ecosystem. Experience, strategic support, and connections to the market are a major component of the value that VCs and various programs provide their portfolio companies, but these days there is an openness to doing a lot more, hands-on, and in a creative manner.
If we can give you a tip – founders, try and uncover the power boosters that your investors have to offer.
Approach them with the crazy ideas you come up with. Who knows, they just might say yes.