The world would look very different without Venture Capital companies. Some of the world’s most innovative companies, especially those in the tech space, have been introduced through the efforts of venture capitalist firms. For a lot of entrepreneurs, the support of VC firms can be the difference between their product or service being introduced to a much wider audience and it remains in relative obscurity.
VC firms have also proved to be very beneficial to investors as well. This is because these investors get the opportunity to invest in potentially profitable companies long before they go public and are harder to buy into. For decades, the VC model was the same across the board; promising companies would apply to VC firms and if successful, receive the funding that they needed to take their business to the next level. For a long time, this system worked.
Companies from practically every sector were able to flourish through the help of VC firms. However, it seems that this method of old is no longer as favored within the industry. Instead, new VC systems are spring forth and the industry is on track to be better as a result.
The Flaws of the Traditional Model
On the surface, the traditional VC model seems almost perfect; new companies need money to scale their operations, hire new staff, and penetrate new markets. They apply to VC firms and if successful, they receive these funds. The VC firm and investors also benefit if the venture is successful, the public gets to enjoy innovative goods and services, and everyone benefits in the end. However, this system often overlooks a key factor in the success of any new business; the fact that businesses require more than just money to succeed.
It is no secret that even the best-funded projects often fail due to other factors such as labor, product design, market penetration flaws, and so on. This is even more so for companies supported by VC firms as they are typically in their inception stage and fronted by entrepreneurs who might not be the most experienced. Therefore the traditional method, for all its merit, often boiled down to simply giving money to entrepreneurs and hoping for the best.
Unfortunately, this was not always the case and over time, it was apparent that new firms needed more.
How This Change Will Improve the Sector
The market has taken note of this gap and many new VC firms are tailoring their services to better serve new firms. An example of this is SprintVC, a VC firm that specializes in supporting firms with underdeveloped IP potential. The firm invests on behalf of both single and multi-family offices as well as high net worth individuals and has recently secured a $500 million investment.
Besides the usual financial support of companies, SprintVC also offers a special “fast-track deployment” for them. The firm is involved with both Lp factories and research centers and thus, they seek out companies that have a specific need for such services. That way, the firm’s products, and services can be developed for their target market as fast as possible with experienced teams behind them.
What SprintVC is doing is evidence of the changing culture around the VC industry. New companies are receiving more support and specific resources that meet their unique needs. It is also reflected in the types of firms that SprintVC chooses to work with, curating a specific list of relevant companies rather than a mass of unrelated entities.
‘We have a narrow and clear scope regarding possible candidates even with an established product-market fit, we aim at high-technology companies with complementary needs towards our Lp’s factories and research centers catalyzing so business and technology growth for one another across an array of industries from AI, robotics, biogenetics, IoT and edge computing,” says Mario Medved, an executive at SprintVC.
The results have shown for themselves as the company has been behind such firms as Peloton, a fitness company that has soared in popularity in recent times, as well as highly established tech companies like LG.
The future of venture capital
We are on track to see a major shift in the VC industry. This shift will ultimately redefine what a VC firm is and what it does. For now, the common narrative is that a VC firm helps young companies secure funding. This is true but in the future, the narrative will likely be that VC firms help young companies secure funding and business support.
This business support will include the development of products and the scaling of operations. This will mean that moving forward, firms that seek out VC companies will be given a better chance at survival and success.