What Can Venture Capital Software Do?

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As we build DocDep’s brand and promote Sonar Investment Document Manager and its related applications, we have visited quite a few VC firms and researched many more to understand their needs. Many firms make a remarkably similar pitch to their portfolio companies. They all promise to be more than just a check. The words “mentor,” “tight-knit,” and “expertise” are peppered on nearly every VC homepage. At DocDep, our mission is providing venture capital software applications that will allow venture capitalists to bring great ideas to market and generate huge returns doing so. We thought of three elements of a good Venture Capital – Portfolio Company relationship – and how venture capital software might help nurture it.

Evaluating the Potential

Of course, for every company in a venture capital firm’s portfolio, there are dozens more being carefully considered. Mark Suster of GRP Partners advises portfolio company managers to establish an early relationship with funders. If they wait until they need money, it will probably be too late. The same goes for venture capital investors – they should put in the time to get to know the people running potential investments that interest them. A document or data management software program could offer an organized channel for sharing information and communicating.

Prepare for Crises

The pitches that many VC firms make to portfolio companies promise funding, growth, mentorship and a predictably lucrative and fulfilling future for their company. But things often go wrong in startup land. The credit agency Dun & Bradstreet advised portfolio companies to note how well a venture capital firms react in a crisis. Market conditions change, regulatory roadblocks pop up, suppliers get bottle-necked. Any one of these episodes can kill a startup, which is why they will need a funder who knows how to handle crises just as well as day-to-day mentorship and strategic planning. Software can help venture capital firms rise to these occasions by ensuring that all of the information they need is well-organized and easily accessible.

Encourage “Good News” Updates

The best VC-portfolio company relationships are not rigid. They encourage informal check-ins and “good news” updates, where portfolio companies can give informal progress reports. These assure funders that the investment is performing well and deepens the relationship between investor and entrepreneur. Here, software can provide an easy channel of communication. If nothing else, it helps investors store and retrieve updates, so if a fund manager is harried during this time of a portfolio company’s “good news,” the newsletter, press release, or other item can be securely and conveniently filed for a time when the manager is ready to catch up.

Truly effective venture capital software would have to be both structured to provide organization and make workflow easier, but also allow for flexible and easy exchange of information with portfolio companies. What do you think? Is venture capital software necessary for a good relationship with portfolio companies? Or can that relationship be handled in a looser way?