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Digital Transformation
How Venture Capitalists manage their Portfolio
DSP-Partners I Darmstadt I April 2015

2.
Overview
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 Big Corporations often struggle in their Quest for Innovation and Agility
 Their Journey towards Digital Transformation could benefits from fresh
Thinking outside traditional Industries
 DSP-Partners interviewed Venture Capitalists to synthesize Learnings that
Incumbents can draw from Venture Capital Players about successfully
growing Start-ups

3.
Digital Transformation Thoughts:
How Venture Capitalists manage their Portfolios .1
3Source: DSP-Partners, Interviews with VCs
 Strong expertise: Investment professionals have either long experience in VC, as
entrepreneurs, Start-up founders or managers in Digital companies
 Strong Network: VCs need strong networks (mission critical) to (a) source new
deals (b) manage/advise their portfolio-companies (c) find management (d)
additional financing rounds (e) exit their investments
 Good reputation: No politics; it is not good to be seen as a VC who is difficult to
deal with; founders of previously financed start-ups serve as reference for the VC
 Large throughput: VC companies screen large quantities of start-ups every year
for potential investments along defined criteria: need traction, need a trusted
referral, need to be in focus areas
 Focus: Different approaches as some VCs focus on start-ups in dedicated
segments (e.g. Media, SaaS, B2B Software, Consumer etc.) while others have a
broad spectrum
 Strategy: Strong sense of own strengths and weaknesses; depending on the deal,
they decide upon being lead-investor or co-investor; managing a large portfolio

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Digital Transformation Thoughts:
How Venture Capitalists manage their Portfolios .2
4Source: DSP-Partners, Interviews with VCs
 Hands off: Typically VCs manage their portfolio companies via the quarterly board
meetings and monthly KPIs and management-calls (1/2 h per week), no day-to-
day management; involvement in situations such as search for new management,
search of advisory board members, financing round, special topics where they can
bring in their expertise or network, management support; Coaching of the
founders (except when in crisis like running out of cash, legal, HR/Press)
 Pragmatic: few formalities, no “business procedures”
 KPI-/Milestone-driven: The start-ups’ traction is measured along growth oriented
and operative KPIs such as customer numbers, revenue, conversion etc. on a
monthly basis along a KPI-sheet; key financial focus is on the “cash-wall” and
milestones to steer timing for fundraising
 Focus on people/teams: Investment-decision are more based on the quality of
the team than on the quality of the product (early stage)
 Fixed budgets: In early stages, when an investment-round is closed, a capital
increase takes place and the money is secured, at later stage, sometimes
Milestones are set for payout of funds/loans

5.
Contact
Stefan Behrendt
Founder I Managing Partner
DSP-Partners
www.dsp-partners.com
www.twitter.com/stbe
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