Jennifer Clamp (withaata.com) and R.A.Williams (rwilliamscoaching.com)

“What support do founders most need post-funding in order to scale and succeed?”

With only one in ten investments delivering a meaningful return on investment for both founders and investors, there is no more important question for those seeking to successfully build and scale new ventures.

Our work helping founders to successfully scale has shown us that the right support can be the difference between success and failure. To deepen our understanding of why this is, we went looking for UK-based research; we couldn’t find any - and so we did our own.

We asked a number of UK-based founders, founding teams and VCs to tell us from their experience what support founders and founding teams need to scale successfully and to deliver meaningful ROI.

We were struck by the value of the honest insights they shared with us and we felt that that value was worth sharing more widely. We’ve summarised some of the key findings below (1).

Context - What’s the problem?

Founders and founding teams are offered all types of support and advice at the early/start up phase. An abundance of accelerator and incubator programmes guide founders through the process of establishing a viable business, enabled by a diverse range of networks and seed and angel funds

However, this sort of support becomes less relevant as businesses take on investment and look to scale. At this point, new challenges emerge as founders and founding teams discover, after months of gruelling fundraising, that receiving VC funding to scale is not the happily ever after they’d imagined but simply the beginning of a new chapter with different risks and challenges.

Founders and their teams also discover they have often outgrown their networks as they develop more complex needs, and find themselves looking primarily to their investors for guidance.

Why does it matter?

Innovation is critical to the future of our society, whether that be by fuelling overall economic growth or in helping to solve complex social problems. The more businesses which scale successfully, the greater the potential resource for the ecosystem as a whole.

As successful venture partners go on to raise further funds and founders who have successfully exited businesses go on to start new businesses or invest in others, the ecosystem grows and provides greater benefits across the board.

Providing more effective and fit-for-purpose founder support would significantly improve the performance and reduce the failure rate of scaling businesses and thus significantly de-risk VC investment portfolios.

So… what support do founders really need post-investment? And who is best placed to deliver it?

5 highlights of our research so far

1. Of the investors we have interviewed, 67% view the support they offer their portfolio companies in raising follow-up funding as a key way in which they support founders.

Follow up funding is key to the support investors offer.

2. The only support provided to founders and founding teams which investors rated more highly than support with the next round of fundraising is the psychological support and informal advice which they provide to founders.Investors used phrases like "someone to bounce ideas off", "availability", "being at the other end of the phone", "providing a safe space" and "help with the challenges, whatever they may be" to describe the ways in which they offer non-financial support to founders.

3. Over 90% of founders identified help/ support with their holistic wellbeing and decision making as a key need, and would value more of it. It would appear that this kind of support not only helps founders to develop but strengthens the founder-VC relationship, further de-risking the investment.

4. While founders recognised ongoing psychological support and sounding boards for their decision making as key requirements, they were more circumspect about always seeking them solely from their investors, given investor expectations and obligations. A number of investors also recognised the conflict between building transparent, supportive relationships with founders while protecting their investments and fulfilling their investment obligations and targets with their LPs.

5. Help with recruitment and professional development also featured as a key form of support, which both investors and founders would value (55% of investors and 100% of founders we've spoken to identified this as an area in which they would value more support and resources).

Current Conclusions

Providing the right support for founders (and their investors) is both vital and complex, and there is a significant benefit to be gained by those who invest in it for the three reasons we outline in our current conclusions below:

#1 Follow-on is funding is foundational: Perhaps unsurprisingly, some of the most important support investors provide for founders is in making introductions to other investors. It follows that amongst the most valuable relationships, an investment partner can cultivate are those with other investors who can provide their portfolio companies with the right co-investment and follow-on funding in subsequent rounds. The most effective VCs excel at offering this specialised support. (2)

#2 Skin in the game creates a conflict: Whilst founders and VCs were broadly aligned on the vital importance of founder support when it comes to holistic development, strategic decision making and well-being, there were differences in how they thought it should be best delivered. Most of the founders and founding teams we spoke to trust their investors’ expertise and experience and value a close relationship with their investors. However, many founders would prefer to (at least initially) have the option of airing some of their strategic and other questions, concerns and challenges with someone with less “skin in the game” than their VC (3). Most of the founders we spoke to would appreciate signposting to this type of objective support.

#3 The right support can be a powerful value add for VCs looking to attract the best investments: The insights from this research suggest that VCs who are more intentional in investing in and signposting broader support for their portfolio companies, including support with decision-making, recruitment and professional development, should not only deliver better returns but be more attractive to the highest potential portfolio companies. The value-add VC model could be refined and more focussed, with founders benefitting from refining their criteria when weighing up investors.

What’s next?

While this project began as a white paper, we’ve since decided to run the research on an ongoing basis, sharing relevant updates and insights.

The VC and scale-up ecosystem in the UK, while one of the more advanced in Europe, is still, in the words of one of the experienced UK VC partners we interviewed, “a cottage industry” compared to the US. We believe that a rapidly evolving ecosystem (in an increasingly unpredictable market) is best served by ongoing research.

As we continue to collate and analyse our findings, the insights we are generating and the feedback we are receiving continue to confirm the hypothesis that this data could help build the support available to UK-based founders and investors.

As more and more investors recognise the value of investing in supporting founders and founding teams, we hope this research will guide them to focus their resources on the areas which will have the greatest impact.

If you’ve found this research helpful, please consider taking part and/ or sharing it with founders and investment partners you know, along with the invite for them to take part as well. Alternatively, email us if you’d like to know more.

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Footnotes

(1) With the permission of our participants.

(2) This kind of support is especially important for investors focussed on supporting underrepresented founders, where the right level of advocacy for these founders makes all the difference in ensuring investment rounds are filled. As highlighted in Astia’s research https://www.astia.org/astia-edge

(3) The worry is that investment inevitably muddies the water, creating a conflict of interest which affects the ability of the investor to hear concerns clearly and compromises the credibility of the advice offered.

RESEARCH: Five sorts of support post-Series A founders most need and where to find them