Venture partnerships – a new way to stream in deals .
Managing a consulting firm is not easy, but it’s satisfying.
By taking on “associates” (what we call clients here) we create value.
We all work towards a common goal, which is creating sustainable ecosystems for generations to come.
Sometimes, these associates become our own partners, streaming deals in and out of VDVP.
We lately received a lot of requests for partnerships.
Most of them for venture partnerships, coming from promising funds and consulting firms.
Venture partnerships – what are they?
In essence, a venture partnership could be interpreted as an affiliate deal:
- The venture partner isn’t part of the team (yet).
- The partner is expected to bring deals to the table or investments.
- He/she is expected to open doors to new ecosystems.
The venture partner as explained, could also be on board to source more funds for the VC fund , as an investment vehicle.
Is the venture partner part of the executive team?
A terrific question with a simple answer: yes and no.
On the one hand, venture partners could work with the same fund for 15-20 years and not be part of the executive team at any point.
On the other, these are associate partners waiting to be inducted into the executive team.
Sometimes the venture partners are relevant for the next fund the original managing partners are intending to create.
Managing partners must always understand the meaning of “venture partner” – not a managing one.
Finding the perfect venture partner
Like any other partner, you must first understand the level of matching between your fund and the partner:
- The partner(s) share the same vision.
- They can source in new deals.
- Having them on board creates more value (brand names).
Evaluating the long-term commitments
Some fund managing partners would like to protect their investments by making sure the venture partner(s) can actually put his/her(their) money where his/her(their) mouth(s) is(are), no pun intended.
To ensure that, a venture partnership agreement should be made.
It must explain the type of partnership at hand, whether or not equity at the fund will be dispersed and what type of compensation should a venture partner expect.
If it’s a long-term commitment with an option for the venture partner to join in as an associate partner (if he/she isn’t already one) or managing partner, it should definitely be outlined.
A hybrid contract which includes a vesting/performance clause could also be added to the agreement for such an option and to ensure you don’t sign venture partnerships (which usually requires putting that person’s name on the managing team page) with hundreds of individuals who may or may not perform well and “dilute the brand”.