Value add investing is often loosely defined, causing savvy entrepreneurs to approach and appraise it with skepticism. But we believe true value add investing is something very specific. It is the institutional ability of an investor to support all members of its portfolio in various challenges they face, from ideas to execution and from seed to lead. Taken together, a proper value add program complements the founding team’s brilliance with additional skills and capabilities required to scale a venture—both by applying best-in-class expertise and connections as well as by offering guidance around common obstacles and challenges.
Value add success is achieved by:
- Working closely with each portfolio company to understand their team’s strengths and weaknesses
- Employing diverse experts in multiple vital business functions
- Specializing deeply in company sector and investment stage to compound and concentrate the focus of the value add team, network, and expertise
YL Ventures’ investment strategy is based on our knowledge in the field and market, and our ability to help our portfolio companies. Because our investment thesis evolved with value add at the center, everything we do ties back to that core function. Over the years, we have built our team, firm and investment strategy in a way that makes value add a structural priority.
The support we provide extends from strategic direction (when to make key hires, identifying the right customer/segment and choosing the right partners and follow-on investors) down to tactical considerations. Although truly effective value add capabilities will all complement and cooperate with each other, for the sake of understanding how we’ve structured our approach, we can break down our value add operations into four distinct teams:
- Business Development: customer discovery, investor, strategic partner, and potential acquirer intros, establishing product/market fit and go-to-market strategy
- Marketing: PR, messaging, content, social media, events, company launch
- Operations: recruiting, finance, logistics
- Research: lead generation, competitive analysis, customer research, market intelligence
To demonstrate how these separate functions interrelate, cooperate and complement one another, I will walk through the various stages of our portfolio companies’ growth, and share real-world examples of how our collective value add efforts have accelerated performance at each phase.
As we invest in very early stages, during this stage, we meet teams with an idea still in development. The process begins with deep due diligence combining insights from our internal expert staff as well as our extended global network, comprised of U.S.-based, cybersecurity executives. Their feedback provides powerful validation for potential investments. Throughout the years, we structured these relationships to a Venture Advisor program. These advisors take an active role in the DD process. These are open discussions, where entrepreneurs are given the invaluable opportunity to brainstorm their product with top executives in their target market from day one and receive deep market validation, insightful feedback, and guidance.
Example: Nathan Burke, CMO of our portfolio company Axonius, shared the following: “The only way to validate our idea was to get in front of Chief Information Security Officers. These are extraordinarily busy people constantly being hounded by vendors, so having an investor with impressive CISOs advisors was crucial. Early on, we were able to share our idea with major CISOs, and the feedback we received was instrumental in developing our solution.” In less than two weeks we facilitated over ten calls with leading CISOs and these directly led to material improvement and tightening of Axonius’ messaging and value proposition.
- Business Development: due diligence, early intros to Venture Advisor network
- Marketing: company deck, marketing assets
- Operations: budget feedback and review
- Research: market research and validation, competitive analysis
After deciding to invest and partner with the founding team, we accelerate strategic development by aiming to put founders in front of as many advisors (and members of our broader CISO network) as possible. Preliminary vetting might have validated the general potential of the team, product, and market; but the major challenge ahead is developing a roadmap for executing on that opportunity. Our advisors not only offer crucial input, but they are also prime candidates for customers and partners down the line.
Upwards of 50 one-on-one meetings with Venture Advisors and other potential customers help hone and sharpen every element of a startup’s strategy. Teams get feedback on go-to-market strategy, positioning, messaging and prioritization of different features. Each company is advised and guided differently based on what they need. Support for recruiting, operations (legal, organizational), and more helps founders focus on what matters most.
Example: Following our investment in Vulcan Cyber, we partnered closely to accelerate their growth. Together, we helped: planning for expansion, shaping up financial projections and facilitating key meetings with potential customers and advisors. These meetings helped the founders take their promising idea and hone it down to its sharpest edge. The messaging expert we introduced, Ken Rutsky, worked with the team on applying these findings to finalize their messaging. Incredibly, two high-profile industry experts (Andy Ellis, CSO of Akamai, who joined as an advisor, and Michael Sutton, former CISO of Zscaler, who invested in the seed round) would ultimately come straight from our Venture Advisors network.
- Business Development: work to identify product/market fit and accelerate ramp up, help find early customers, beta partners, service providers, messaging experts, PR firms
- Operations: recruiting, finance, logistics
- Research: help Business Development team identify customers/partners
When the time is right, we put coordinated effort into action to help portfolio companies get maximum lift from their launch. Marketing expertise and extensive pre-work developing product/market fit and value proposition ensure messaging with maximum potential impact; then expertly coordinated and executed PR, social media, content marketing, guarantees the launch delivers a major media and market hit.
Example: When Twistlock‘s Co-Founders Ben Bernstein and Dima Stopel approached us with the pitch that would eventually become Twistlock, they had little more than a few slides and a brilliant idea. We enthusiastically committed to investing, knowing Ben and Dima had to move to launch immediately. Within just seven days, we helped revamp their marketing materials, messaging and website; introduced them to a marketing specialist in the U.S. and made dozens of journalist intros. With that, Twistlock was formally introduced to the world, receiving global press coverage and wide industry acclaim. Moving so quickly to launch resulted in Twistlock’s huge advantage of claiming the space—and they’ve remained number one in cloud native and container security ever since.
- Marketing: PR, press kit, messaging, timing, website, content, strategy and launch coordination
Creating and sustainably growing a business is one of the biggest pain-points for startups following initial launch. That’s why bringing business is our #1 priority and we leverage our full capabilities to accelerate and scale our portfolio’s business. Here’s where we start to tap our network not just of customers but of future strategic partners and follow on investors.
These are very early introductions but they start the relationship off strong. When the time is right, we begin generating lists of potential follow-on investors within our network. Many of these intelligently chosen connections lead to warm introductions that prove hugely productive. We also provide “targeted lead-gen services” by focusing on specific types of customer and identifying strong prospects. Building such connections takes time—so it’s never too early to start.
- Business Development: Accelerate intros to customers, investors, partners. Set up meetings, generating, engaging and converting leads.
- Research: Target qualified customers, follow-on investors, potential leads through extensive market research and intelligence gathering.
- Marketing: PR, secure continuing coverage, assist with event marketing, finding speaking opportunities, continuously helping to hone messaging and brand.
- Operations: Enable effective scaling through help with recruiting (both in US and Israel), assisting in making key executive hires.
Although we don’t typically lead Series A rounds, we have participated in every single one of them. Without exception, we are committed to our portfolio entrepreneurs from seed to lead. This dedication is why we actively work with our portfolio companies to prepare them for further investment and acquire great partners for follow-on rounds. Thinking about a scalable budget, company deck, messaging the scaling-up story, presenting all the achievements, generating a pipeline of relevant VCs, introductions, etc.
- Business Development: Make intros to relevant investors inside and outside network.
- Research: Help identify promising partners, work to prepare all necessary materials.
- Marketing: Proactively drum up press for company in advance of follow-on round search.
The Power of True Venture Value Add
Everything we do, from due diligence to follow-on investments is multiplied and enhanced by our holistic, dedicated value add operations. Powerful research capabilities allow us to identify strong opportunities at the earliest stage and vet them thoroughly. Robust business development accelerates entrepreneurs from rough ideas through to finished products at global scale. Impactful marketing staff sharpens the perfect message and amplifies portfolio companies’ global reach. Comprehensive operational support helps ensure everything runs smoothly, even while growing and moving at breakneck pace.
Over the coming months, multiple members of our value add team will be sharing their own perspectives, insights, and advice on each of the specific categories of value add I covered here. Stay tuned!