“It takes two flints to make a fire.” — Louisa May Alcott
Whether they lead a round or just chip in late in the game, all early stage investors I know promise some sort of added value to founders. On the face of it, every VC will change the trajectory of any startup well beyond the monetary value of a check. Like the rest, ALLVP commits to helping startups succeed and we often get asked to describe our contribution to portfolio companies. I find that the best way to objectively convey our potential value is to describe how we organize internally. This post will help you delineate how we try to comply with our end of the deal. Remember, if you want to fully understand how much, if any, value ALLVP brings to portfolio companies, speak to our super founders.
When we founded the firm six years ago, we embarked on a steep learning curve that still challenges us everyday. From bossy micromanagers to passionate partners, we have evolved by learning from colleagues, founders and mostly our own hits and misses. As our portfolio grew to over 20 companies, we have changed our internal processes to better align with what startups need at a particular stage and what we can realistically do to help. This summer, we expanded an organization designed to learn and to help: our team, our meetings & events, corporate governance and how we deploy resources to add value.
‘You are demanding and intense but you always have in mind what’s best for the company — even if you’re sometimes wrong. The best way to describe your approach is Tough Love!’, exclaimed Pablo, founder of Petsy in an ALLVP founder session.
Our investment group is organized by industry: Emy leads healthcare, Male owns consumer digital and smart cities and Miguel runs fintech. Since creating the firm, we focus on these four verticals to have deep knowledge and broad industry specific networks. We don’t specialize further to keep a good balance between industry knowledge and risk allocation of a well diversified portfolio. While we split the lead in companies, Fernando and I have avoided sector specialization as we strive to run our firm as a complete partnership. Nonetheless, given our backgrounds and strengths, we do have a functional focus: Fernando oversees strategy, non market and financial issues — serious stuff; I focus on go to market, product and talent — whatever’s fun ;)
When you join ALLVP, you knit to a clan composed of passionate investors but most importantly, crowded of outstanding portfolio founders seeking to change the world. After all these years, we know the value you get from each other often surpasses whatever our team can do for your company. We make sure you unlock this value. Our oversized offices provide a unique setting for connecting ideas with our investors, your colleagues and our team. We hold small discussion meetings and big gatherings around themes such as B2B sales, AI technologies and mega trends. Our entrepreneurs and investors constitute a sort of network-as-a-service that each founder accesses when she needs it.
Whenever we close a deal, we create a 100-day plan and set up bi-weekly or monthly one-on-one’s to help founders execute on their commitments to investors. Later, these meetings help maintain focus on execution and growth. They allow founders to have a sounding board of people close to operations. In general, we start by going over the KPIs to be on the same page. Then we go over the most important projects or challenges. While we like to be involved, our communication with founders depends on their desire to access our advice. And yes, we use WhatssApp chats and dedicated Slacks. Whatever works.
One important thing we have learned is that a couple of meetings and intros to solve an important challenge or address an opportunity are rarely suited for the fast growing, fast changing environment in developing economies. If we want to have an impact, we need to see the project through much like a (effective) consulting project. So we now organize by engagement. Our most frequent one relates to fundraising — crafting a deck, engaging investors, negotiating terms and closing. We also work on projects to help build teams, go to market, operations and pivoting. At any given time ALLVP associates are working on multiple engagements.
Corporate governance may be a great asset or silent liability for your company. Not sexy, but true. Having served public and private company boards, we know this. Once the base of institutional investors grows in series B & C companies, special committees — such as compensation or finance — start to matter. Even if we try to avoid having formal boards before series A, we often fail. Latin American investors love to be board members. When they meet, we are often the most informed board member because of the catch-ups and engagements. If we disagree or have a strong opinion on an issue, we explain our position even if it’s uncomfortable. Boards may be challenging in that it’s difficult to craft and lead productive meetings. We help prepare those meetings, enroll other board members in important decisions and keep conversations productive.
11 Quick Tips to Get More Value out of Your Board — Mark Suster
As our portfolio matures, we’re continually involved in generating, evaluating and helping manage exit processes. Having the opportunity to work on these undertakings early has taught us some very important lessons. First, exit negotiations can be arduous to the point of killing a company if not managed with care. Moreover, a successful exit may require several attempts before a positive outcome. Finally, a complex cap table, bad corporate governance and bad investor dynamics can further complicate an emotional process for founders. Aligning expectations from the beginning is key. We strive to be at our best when you get to this momentous time for your company.
‘Despite not moving forward with our financing, we are sure you are in a better position after the added value you received from our investment process,’ said calmly an American VC to two flabbergasted Mexican founders over a bad Skype connection. A couple of days later, as we reviewed the fundraising progress and the company recovered from that long, tedious and unproductive due diligence process, my favorite founder admitted she caught herself saying ‘F*** you!’ to that outrageous claim but the sound did not come out of her mouth.
At the end of the day, as much value as any investor can provide, VCs will never be responsible for the biggest home runs (or screw ups) in your company — even if they suggest a successful pivot, the biggest claim to fame of all. For better or worse, you run the show. Moreover, remember that steep learning curve? Most of what we have learned since launching comes from our interaction with founders. ALLVP’s value is a collection experiences driven by our backed founders. If we are not the dumbest person in the room, it’s because we learn from you.
And, the added value we receive is amazing. We learned to work with corporates with Enlight and weex; we understood how to scale fast watching Cornershop; we learned how perseverance and purpose can change the world from Carrot, Santa Carmen and Cuidate; we assimilated the value of strategic clarity from Dentalia; we learned about pivots with Aventones and Salud Facil; we realized there is a prize for patience and focus from Prestadero, Visor and Uhma; we study about automation and machine learning with Alkanza and Apli. So yes, we may not succeed in all our investments, but we sure as hell learn from all of them.
Now that you know how we organize, before you partner with us, know we’re an intense yet caring bunch.