#36: Unlocking Wisdom- Learning from Stakeholders and Investors in Venture Capital
Hi, I'm Jeppe and welcome to my weekly newsletter on Corporate Venturing, released every week. My aim is to provide a comprehensive perspective on the latest developments in the field and its related topics, drawing from the insights of top management, venture capitalists, founders, LPs, and family offices. I aim to offer valuable information and thought-provoking content that will aid in understanding the importance of Corporate Venturing in business strategy.
I’m a trained Venture Capitalist having spent the past many years working in and writing about Corporate Venture Capital which has opened my eyes for an essential part of Venture Capital.
But a bit of history first. The story of venture capital is a fascinating journey that spans several centuries. The concept of venture capital has its roots in European merchant banking during the 17th century. European traders and explorers seeking to finance their overseas expeditions often formed partnerships with investors.
These early examples of venture capital involved individuals or groups pooling resources for speculative, high-risk ventures. In plain words the Venture Capitalists are a marketplace with investors on one side, known today as family offices, pension funds, public funds, with the other side consisting of start-up founders of diverse sectors and stages.
What I learned from Corporte Venture Capital in a Limited Partner perspective
Through my extensive experience in Corporate Venture Capital (CVC), I've come to understand that it primarily involves translating the corporate strategy into a robust investment strategy, followed by the diligent execution of this strategy through the activities of the Corporate Venture Fund. When operating within a CVC, it's absolutely crucial to engage in regular feedback sessions with stakeholders, which is instrumental in gaining profound insights into their specific needs and how best to align our efforts to support their future endeavors.
My years as an Investment Partner at Maersk Growth further emphasized the significance of this approach. We recognized early on the importance of investing in a decarbonized future. This perspective crystallized when I had the opportunity to interact with Einride's CEO, Robert Falck. It became abundantly clear that Einride had the potential to play a vital role in addressing a pressing need for Maersk's customers. Such a strategic investment wouldn't have been possible without a deep understanding of Maersk's customer requirements that I gained through Corporate interaction.
But why are these learnings essential? Well, they are essential because if you comprehend the value that human interaction brings to your business, you can harness it effectively. In many Limited Partner/General Partner dialogues, the GP often focuses solely on securing capital. This can stem from a lack of recognition of the knowledge that LPs possess. Limited Partners invest in various funds, granting them extensive insights into the ecosystem. GPs can tap into this wealth of knowledge to enhance their skills and strategies.
Learning from Limited Partners
Engaging with Limited Partners (LPs) extends beyond capital allocation; it represents a valuable source of industry insights and market foresight. LPs are not just passive investors; they actively monitor market trends and possess in-depth knowledge of economic cycles and investor sentiment. By tapping into the wisdom of LPs, venture capitalists (VCs) can gain a competitive edge.
GPs should view LPs as true partners, inviting them to share their perspectives on industry developments, technological advancements, and emerging business models.
To maximize this learning opportunity, VCs should consider the following best practices especially when working with Corporates as Limited Partners:
Structured Knowledge Sharing: Establish regular forums or roundtable discussions with LPs dedicated to exchanging market intelligence and strategic insights.
Transparency in Operations: Maintain an open-book policy with LPs, sharing the rationale behind investment choices, fund performance metrics, and strategic shifts within the VC firm.
Customized Interaction Plans: Recognize that each LP may have different areas of expertise and interests. Tailoring interactions to leverage the strengths of each LP can lead to more meaningful exchanges
Conclusion
Recognizing the significance of learning from stakeholders is paramount. Within the realm of venture capital, the art of learning from investors often takes a back seat. Yet, it's not solely about engaging with portfolio startups; it's about harnessing the invaluable insights within the extensive network of our investor base—an untapped wellspring of wisdom.
I hope you enjoyed this week's newsletter. If you have any suggestions or contributions that you would like to share with me, please do not hesitate to reach out. I would be delighted to hear from you.
/Jeppe