There are two types of successful venture capitalists: cool VCs and rich VCs. The rest are doomed to get the leftovers.
This is because the VC game is, fundamentally, about gathering information and whoever has the most, the fastest, wins.
Rich VCs find good deals because they typically have big networks, have been around for a while, and have all the startups knocking on their door because they’ve got heaps of cash.
But there’s also another breed of VC firm appearing: those getting in on promising-sounding teams through the power of cool, rather than capital.
Enter the VC brand masters.
The Family is a Paris-based investor and startup support network, but it is also a marketing machine. It has an eccentric website, several quirky newsletters, runs endless events and produces heaps of useful content.
It even has a team of designers — the “swag team” — who’ve kitted out its Paris and Berlin offices with palm trees, gold-edged chairs, huge Turkish rugs, chandeliers and life-size animal toys. In an example of marketing magic at its finest, The Family has also spun off a joke brand-turned-actual business, Kymono, which makes branded clothing for startups.
And while it’s a bit too early to tell in monetary terms if it is successful — The Family launched in 2013 and raised a $17.4m fund last year — it’s well-known in Paris and has strong companies such as Agricool, Algolia and Heetch in its portfolio.
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Another Paris-based investor — and “venture capital mutant” — is Daphni, which had a brand even before it had a fund. When the team met with LPs while fundraising, they would take along a box of goodies (including branded notebooks, with a custom font) along with a colourful pitch deck, filled with stills from films.
“The reception was super strong,” said Willy Braun, one of the firm’s founders, said when I visited Daphni’s colourful office in Paris last week. “They either hated it — because they thought we weren’t being serious — or were excited, because it was not what they usually saw.”
Braun says that looking different, right from the start, helped LPs and startups believe that Daphni would act differently too, and carry out its mission to build a new category of VC.
Now, you could argue that specialising in a niche is a better approach for challenger VCs. (That is a good strategy.) You could say that all moderately-good VCs see promising deals anyway so being cool doesn’t really matter. Or you could argue that doubling down on data (like Blossom Capital) is the smartest way to have the greatest visibility on deals.
But the truth is that being “cool” is not just about attracting the best companies in the increasingly competitive world of VC investing. It’s also about helping the startups which those new funds have already backed become the best companies.
This happens because the VCs with the best brands are also assumed (rightly or wrongly) to back brilliant companies. This, in turn, gives those startups an advantage when it comes to media attention and later-stage funding.
This is obviously true for the “rich” VCs with some memorable past successes. When Atomico, which manages Europe’s biggest dedicated fund ($765m), backed flying car company Lilium, people started to really take it seriously. When SoftBank invested in simulated world startup Improbable, it certainly received plenty of attention.
But “cool” VC funds too — even those without many (or any) successful exits — can generate plenty of buzz for their portfolios.
London-based VC firm LocalGlobe, launched in 2015, has a great brand and a reputation for picking winners. Is it an amazing fund? Maybe. Do its portfolio companies get more attention than a less sexy fund’s? 100%. When LocalGlobe invested just £700,000 in beauty-booking platform Beautystack, The Telegraph ran a story. Most national newspapers wouldn’t bat an eyelid at that sum.
Now look at the other end of the scale. London-based firm MMC Ventures, which last week announced a new £52m seed fund, is probably great at what it does. But do people talk about the companies it backs because MMC backs them? I don’t think so.
VCs need to be big, go brand or go home.