Venture Capital vs Venture Studios: an interview with Marc Wesselink

While the venture capital industry has been the catalyst of innovation for years, there is a growing uncertainty about whether traditional VC models can adapt to the changing needs of modern-day startups.

Today we are sitting with Marc Wesselink, Managing Partner and Founder at Venturerock, a global investment and venture building ecosystem that changes the way we invest, build and scale ventures. With years of experience as an entrepreneur and venture builder, Marc is sharing with us his learnings from building and scaling companies and why it is time to change the traditional venture capital model.

Hi Marc, can you share with us what led you to embark on this mission to change the way we invest in early-stage startups?

Certainly. Throughout my journey in accelerating hundreds of startups, I have witnessed first-hand how the inefficiencies and shortcomings of the classical VC model pose challenges for all stakeholders in the venture capital ecosystem.

For starters, let’s look at the General Partners of VC firms. About 90% of their time is wasted on tasks like fundraising, startup assessments, compliance issues, and legal contracts. This not only drains their resources but also diverts their focus from adding real value to portfolio companies.

Then there is the core of the business model itself. VC firms primarily rely on management fees rather than performance fees. As a result, there is less emphasis on driving performance and more on simply managing the fund.

And for investors, the statistics speak for themselves. About 95% of VC firms deliver less than a 3x multiple on investments, falling short of the market benchmark and making investing in a S&P company for 10-15 years a more attractive option.

All these make it imperative that we seek a better way, one that would benefit all stakeholders involved.

These are indeed some powerful statistics, Marc. Do these shortcomings of the traditional VC model impact founders?

Absolutely. Approximately 90% of a CEO’s time is dedicated to fundraising in the first 5 years of their startup journey. This intensive focus on fundraising diverts their attention away from crucial aspects of building and scaling their business, such as product development and customer acquisition.

Additionally, startups often find themselves needing to do multiple fundraising rounds to secure the capital they need to grow. Most of the time founders work with convertible notes since it is a fast way to invest in a company. Many mistakes are made during that journey resulting in substantial dilution of founder shares.

As if these challenges weren’t enough, founders receive minimal assistance from VCs, as they are typically preoccupied with sourcing new investments or fundraising for their next fund. This lack of support can leave founders feeling isolated and overwhelmed, with little guidance on how to overcome challenges and achieve their growth objectives.

And what about the impact on Limited Partners?

LPs face significant challenges too. For starters, their capital is typically locked up for 10-15 years. As a result, their natural preference is to invest in more liquid asset classes like public stocks and real estate, which offer greater flexibility.

Furthermore, LPs have limited control or access to real-time information about their investments in VC funds. This lack of transparency can make them wary when investing, leading them to prefer Closed End funds to mitigate risks.

And let’s not forget, LPs need a minimum of 20% IRR just to keep up with inflation. But with the traditional VC model, that’s often a tough ask.

Building on these challenges, how does Venturerock plan to create a more functional model for investors, founders & LPs?

Since day-1, we have been on a mission to digitize venture capital. We are introducing a Digital Investment Structure that allows for continuous fundraising similar to an Open-End fund, making it super easy for LPs to step in and out after initial lock-up for 3 years. In addition, we are digitizing the captable, shares & legal agreement as well as all the KYC/KYB/AML/ATF processes to ensure transparency and security.

But that’s not all – we have implemented evidence-based investments. That allows startups to showcase their progress through a structured venture development framework of 72 proof points. All progress data of portfolio companies is visible in real-time so no hidden agendas. We allocate investments based on auditable, real-time performance data. This means founders can focus on growing their business instead of chasing funding, General Partners of a VC can now focus on adding value, and Limited Partners can step in and out at any moment.

We recently introduced our own advanced venture building co-pilot, that is built on top of our proprietary venture building methodology, leveraging real-time performance data and the power of machine learning, LLM, and GPT technologies to empower founders with anything they need around venture building.

Exciting indeed! Looking ahead, what are Venturerock’s plans for the future and what can we expect to see from the company in the near term?

We are bringing all these and more into a single venture investment and venture building platform that aligns the interests of investors, founders and all stakeholders. Via the platform investors will be able to invest in only 3-clicks, powered by radical transparency and digitization.

If you’d like to learn more about our how we are transforming venture capital or sign up to be one of the first beta testers of our Platform – reach out to Marc via LinkedIn

We are just in the beginning of this transformation. Stay tuned!