The first article in this series looked at several problems Family Offices and smaller investment funds experience with the studio model. This article dives into the first problem – expertise – in depth and shows how Viaduct’s outsourced venture studio services augment in-house talent.
What is “Expertise”?
The venture studio thesis assumes assembling a team of seasoned startup experts adds value through:
Improved deal flow and deal evaluation, and
Improved ability to mentor and nurture invested deals to higher exit values.
However, many studios fail to define what expertise means in their environment – they look for roles or skills instead. While roles and skills are important, focusing on expertise helps the studio drill into what they really need to succeed.
Let’s imagine you are creating a posting called “CFO experience at a FinTech industry startup”. The questions you should answer include:
FinTech is a sector comprised of solutions for banks, allocators, consumers, financial markets and payments. The posting needs to represent the expertise needed by your portfolio companies.
Are you looking for someone who knows how to do taxes, initial deal documents, manage a team of analysts, HR people and facilities, or do your startups need someone who can coach a junior person into a CFO role?
Do you want someone who likes to go deep into projects or someone who likes to delegate?
How do you figure this out? It starts with your portfolio of prospective and invested deals – what do those deals need to mature to successful exits? What skills does the team need to pick the best deals for initial and ongoing investment? What if you invest in more than one sector – can you afford to hire someone to cover each sector? Most studios quickly realize the varying needs of their deals won’t be met by one person – so who should be hired?
The Expertise Matrix
To help you effectively hire, in a blended model that combines in-house and outsourced venture services, we recommend charting the expertise needed by each portfolio company (or portfolio industry sub-segment). You should try to hire the skills that appear most often, and a person with strong team coordination skills -- then use outsourced venture services to fill in the gaps.
How it Works
Once you have your in-house person, your outsourced venture services provider assigns an engagement lead to work with your team. Your in-house person and engagement manager create and use expertise charts to identify fractional executive needs and areas where the same person can help multiple portfolio companies.
Together they assign fractional executives to help with tasks and projects. The fractional people may work with a portfolio company to handle one call, or work part-time on a project for several weeks – they supply the specific expertise needed for the specific amount of time needed to help the startup thrive. Your in-house person then facilitates communication and meetings between fund management, startup leadership and the engagement manager or fractional executive.
Conclusion
The hub and spoke model of outsourced venture services helps family offices and smaller funds provide the right expertise, in the right amounts to accelerate investment and activate profitable exits. Working with an outsourced venture services provider like Viaduct is cost effective way to expand the expertise on your team and become a preferred investor for startups in your sector.
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