Are you a VC orphan in need of love?

The venture capitalist ecosystem is a pyramid — only a handful of companies (or perhaps even just one) in a portfolio will generate the significant returns VCs seek. In this situation, there are a few big winners and many more who get left out in the cold — the latter are known as VC orphans.

These lower-performing companies face a double-edged sword: even if they are moderately profitable and have achieved product-market fit, failure to reach the substantial profits investors are looking for can mean never even raising Series A, let alone Series B or C.

The Plight of VC Orphans

Reduced company performance and VC motivation further exacerbate the problem. In the current economic situation, VCs are struggling to fundraise or get liquidity from exits, focusing on fundraising rather than support, and cutting platform teams. Most investors will choose to pour more money into the most profitable companies in their portfolios while ignoring the orphans.

Meanwhile, founders, finding themselves under financial and time constraints, often need to restructure rather than grow and prioritise profitability over revenue growth. Faced with uncertainty, many will act to solve the issues without taking adequate time to reflect, reset, and learn new skills.

However, taking a step back to evaluate the situation and move forward from a place of clarity can help founders achieve the desired results more quickly. Although some VCs might be willing to help orphaned founders, they may not have the time or skills necessary to provide the support they need. Plus, they are not impartial and will always have an agenda since they have pumped millions of dollars into these businesses.

The Transformative Power of Coaching

Coaching can be a game-changer for these ventures. A seasoned coach brings a blend of strategic challenge, practical tips, and personal support, transforming VC orphans into favourite children. With their extensive business background and coaching qualifications, these professionals offer a unique blend of tools, resources, and strategies tailored to the challenges specific to founders.

  • Mending co-founder relationships: A common issue among VC orphans is tension within the founding team. Coaches excel in facilitating open communication, identifying and resolving underlying issues, and fostering mutual understanding. This mediation can realign the founders’ visions and strengthen the company’s foundation.
  • Strategic refinement: Coaches are adept at cutting through complexity, helping founders streamline their strategies into focused, achievable objectives. This process clarifies the business direction and enhances the potential for growth and investment.
  • Restructuring guidance: For founders facing the daunting prospect of restructuring, a coach can be invaluable. They offer practical support, ensuring that the restructuring process aligns with long-term goals and values, thereby setting the stage for sustainable growth.
  • Evolving leadership styles: As businesses evolve, so must their leaders. Coaches assist founders in adapting their leadership styles to the changing needs of their growing business, fostering a culture that drives performance and innovation.
  • Mastering communication: Effective communication is crucial. Coaches help founders develop strategies to control the narrative both within and outside their organisation, ensuring clarity and consistency essential for stakeholder trust and reputation.

An Investment Worth Making

While that might sound like a lot of work, the good news is that most of this is necessary anyway — even though founders might not realise it. With the right guidance and support, you can steer yourself, your team, and your business to a much better place.

For VCs with orphans in their portfolio, triage what ideas you still believe in and which founders you believe are coachable, and match funding with them for coaching to unlock those hidden gems in your portfolio.

As for orphaned founders — book an introductory call with a few coaches and see who you connect with. You will be amazed at the clarity that will come with just an hour or two of guided time to think.

If you’re hesitant about the investment, consider this: spending £15,000 to £25,000 on coaching for a Series A founder over a six-month period could safeguard millions in investment and future opportunities.

So, while the cost may seem substantial at first, the value it brings in nurturing and protecting your business’s growth is immeasurable.

With a little (tough) love from a seasoned coach, VC orphans can flourish.