Entrepreneurship with Networks and Syndicates in VC times

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“The film industry is committed to working with the technology sector to find innovative new ways to deliver entertainment to consumers.”- Dan Glickman (US politician, lawyer, lobbyist and non-profit leader).

The VC ecosystem is like the creation of a movie. It starts when the screenwriter generates a new story, but to bring it to the big screen he needs allies to collaborate on this project. The first thing he does is to get together with the director of the film, both create the story and define the script. They are the creative part. Then comes the executive producer who oversees financing the project and ensures its healthy development.

With the capital in hand, the director goes out casting to ensure the necessary talent for the execution of the film. The actors have been trained in universities or specialized study centers, as well as the rest of the team members such as make-up and hair stylists, sound, special effects, cinematography, editing, music, production design, etc. The whole team sets out on the adventure of securing locations and filming the scenes for the film. Once the film has been shot, edited, and produced, the film studios then set about the task of distributing and screening the film in cinemas.

Just as the film world requires the collaboration of multiple actors, the VC ecosystem needs the participation of multiple counterparts for its proper functioning and development:

- Director and scriptwriter: The founders of the startups take on this role with the main objective of identifying problems and creating disruptive technological solutions with a business model that allows them to scale and be successful in the business world.

- Actors and team: These are the startup collaborators whose track record, determination, appetite for risk and desire to succeed make up a team with the necessary profile to implement and execute the startup’s strategy.

- Executive producer: These are all those investors who see potential in the project and are willing to invest by assuming the risk in order to have a financial return. Usually, these players provide not only money but also experience, contacts and everything in their power to ensure the success of the startup.

- Acting and film schools: The success of a startup is often linked to the strength of its members. Therefore, the preparation provided by universities, incubators, Venture Studios and accelerators is of vital importance for the founding and operating team.

- Film studios and cinema chains: Every startup needs the support of business partners to scale and capture market share. Sometimes corporations, governments or private entities take on this role by supporting entrepreneurs with technology, knowledge, distribution platforms, access to customers and contacts.

- Film partnerships: There are players in the VC ecosystem that support the development of entrepreneurs, funding, technologies, and innovation in general. For example, Google for Startups, Amazon Launchpad, Microsoft for Startups, Startup Nation Central, NVCA, LAVCA, Global Private Capital Association, etc.

Just as it is essential for a startup to have strategic alliances for the development of its operations, investors also find value in developing a network of allies to help them not only in their operations but also to invest and share the risk. Usually when a startup is in an equity round it talks to many investors and in case of interest may have one or more term-sheets. These offers include the equity investment of the lead investor, which is usually for a percentage of the round. Therefore, the startup needs to generate interest from other investors who can match the total capitalization of the investment round. This is known as syndication.

An important part of the VC’s business model relies on collaboration with other participants. Therefore, they often share pipelines with industry peers. It is common for seed funds to build relationships not only with their stage peers, but also with funds that invest in subsequent stages.

In both filmmaking and startups, a key to success is collaboration — no one usually gets very far on their own. It is important to create strategic relationships that will bring any venture to fruition.

“The five separate fingers are five independent units. Clench them and the fist multiplies the force. This is an organization.” — James Cash Penney (American businessman and entrepreneur who founded J. C. Penney’s shops in 1902)

Note: Please refer to the original publication at EL CEO: Emprendiendo con redes y sindicatos en tiempos de VC (elceo.com)

Hector Shibata. Director of Investments & Portfolio at ACV a global Corporate Venture Capital (CVC) fund and Adjunct Professor for Entrepreneurial Finance.

Ricardo Latournerie. VC Investor at ACV.

ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.

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ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.