How Venture Capitalists Use Maven

At Maven, we often get asked how different types of professionals use our service to assist them in making better business decisions. Maven’s Clients include all different kinds of individuals and organizations, including corporations, law firms, consulting firms, investors… and many more. One particularly interesting category of user is the Venture Capitalist (“VC”).

For those unfamiliar with VC’s, these are professional investors who help private companies grow by providing much-needed capital and business expertise. Many VC’s are former entrepreneurs who have experienced success and want to share that success with others who have new and interesting business ideas. VC’s invest at all stages of private companies, from “two gals with an idea” who need a small amount of money to prove a concept or explore a market, to larger, more established companies that need fresh capital to expand their operations. As noted in our recent announcement, Maven is partially backed by a renowned venture capital firm, Accel Partners. Many of the “new economy” companies you are familiar with were originally backed by VC’s as well: Apple, Google, Facebook, LinkedIn, Twitter, Gilt Groupe, and Pandora have all received VC funding at one time or another. The spectacular successes and failures of venture-backed companies are the stuff of legend in Silicon Valley and beyond.

So how do Venture Capitalists use Maven?

VC’s engage in valuable interactions with Mavens at virtually every stage of their investment decision-making process, including:

• Idea Generation– Also sometimes called “prospecting,” this is when the VC is looking around for interesting new ideas. Maybe he heard about an industry trend or a hot new technology, and wants to learn more. Areas of friction or inefficiency are particularly interesting. Common questions you might get from a prospecting VC during a Consultation are “What is the most difficult or frustrating part of your job?” or “What’s broken in your process?” The VC is looking for “pain points” for which a smart entrepreneur might be able to develop a product to address. Once the VC identifies a key pain point, he might be able to find a small company trying to fix it, or the right entrepreneur (maybe even you!) to attack the problem. He might also ask “What have you seen recently that is new or different? Any cool new products out there that are making your life easier?”
• Due Diligence– VC’s hear about interesting new companies all the time. A busy VC might get pitched for an investment by 20 new companies per week! So how do they sort out the good ideas and great teams from everyone else? More importantly, once a VC has developed interest in a company, how does she decide whether or not to invest? The process of evaluating a specific investment opportunity is called due diligence, and for many VC’s Maven is a key tool they use at this stage. Whether “getting smart” on an industry by talking to a veteran player, or validating the target company’s assertions regarding its potential customer base or market size, the VC can use Maven to quickly locate qualified professionals to lend their insights. At this stage the VC might ask you, “What do you think of this idea? Does it make sense?” or “Approximately how many widgets do you purchase every year?” or “Would you buy this better mousetrap? If so how much do you think you would pay for it?” The goal, of course, is to help the VC decide if the company they are evaluating has a bright future and would make a good investment.
• Helping a Portfolio Company– VC’s like to think that they bring more than money to the table for the companies they invest in, and in most cases this is true (it certainly has been for Maven). Once the VC makes an investment in a company, how do they continue to add value? One way is by advising the company on its strategy, product development, or marketing. At Maven we receive many requests from VC’s who are trying to find ways to help their portfolio companies by continuing the diligence process after the investment closes and acting as an (somewhat) independent set of “eyes and ears” in the marketplace. They ask questions like “Who are potential strategic partners for this company?” or “What other applications exist for the technology they have developed?” Occasionally they may even help the portfolio company with hiring a key employee by using Maven to speak with people who have hired similar employees. They might ask “What are the key characteristics you would look for if you were hiring for this position?” or even “Do you know someone who might be a good fit for this job?”