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The value VCs can bring to a startup’s board

When a startup opens itself up to investors, the benefits aren’t just monetary. Aside from the capital that they raise, founders and co-founders can welcome venture capitalists with valuable experience and insights into their fold.

In this article, we look at some of the ways GGV Capital managing partners have contributed to the success of portfolio companies through their presence on startup boards.

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They can provide help on strategic direction

Southeast Asia “super app” giant Grab started as a simple ride-hailing service in Malaysia in 2012, but it now offers payments, food delivery and other services across hundreds of cities in the region. Helping fuel Grab’s success was its decision in 2016 to develop a payments platform, making it easier and more convenient for customers to use the app. Pushing for it behind the scenes was GGV Capital managing partner and Grab board member Jixun Foo.

“Every time I went to a board meeting, I looked at their numbers and looked at where they were, I would emphasise––not quite pound the table––but emphasised the importance of the e-wallet,” Foo said in a Forbes report.

He pointed out how digital payments can provide critical customer and customer behaviour insights. “An e-wallet has got huge strategic long-term value,” he noted.

Board members can also have a strong impact on startups by being able to convince top talent to come and join them. That was the case at cloud-infrastructure company HashiCorp, whose co-founders Mitchell Hashimoto and Armon Dadgar wanted David McJannet, who had been senior director for marketing at VMWare, to become CEO after advising them.

In a live interview at Evolving Enterprise, McJannet talked about how he was persuaded to take on the role partly through the efforts of GGV Capital managing partner Glenn Solomon. 

“What actually happened, Glenn probably won’t tell the story, I was like, I don’t really want to do this. And Glenn bought me a beer and said: if you do this, I’ll put in $15 million behind you, whatever number to de-risk it for you. So I said, okay,” McJannet recalled.

Taking McJannet in turned out to be the right choice. From joining at a time when the startup just had 30 or so people in 2016, he has led the firm through hypergrowth. It recently made a successful debut on the NASDAQ, raising $1.2 billion and reporting more than $200 million in revenue in 2020.

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They can provide important connections

One of the benefits that board-member venture capitalists can provide startups is connections, whether it be to potential investors, suppliers, talents, or clients.

In an interview with GGV managing partners Hans Tung and Jenny Lee for the VC’s Evolving for the Next Billion podcast, Yan Li and Token Hu, co-founders of high-performance scooter maker NIU, talked about the crucial introductions that investors paved the way for them.

Yan Li said he was introduced to Jenny through other VCs who sit on NIU’s board. When GGV Capital became a big investor, Jenny also took a seat on the board. 

Meanwhile, Hu very much appreciated the introduction to Tony Fadell, the inventor of the iPod, co-inventor of the iPhone, and founder and former CEO of Internet of Things pioneer Nest following NIU’s debut on the NASDAQ.

As Jenny is good friends with Tony, Hu met and talked to the engineer about design. “He gave me really good feedback, which is that design should have a tyrant. Right now, a lot of companies are talking about when you design a product, it should go through all the surveys, focus groups and everything. I have been in the consulting industry for many years. Those things are your gods, but the final product should be from your life,” Hu said, recounting the conversation.

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How to decide on investors to take in

In a Next Billion podcast episode, Fadell, also Principal at Future Shape, an investment and advisory firm coaching deep tech startups, explains that there will always be good people and bad people, good businesses and bad businesses, good leaders and bad leaders.

“In the world of capital, it’s the same. Entrepreneurs should only take money from people they respect, from people who can add value, not just the brand name. It’s about a person-to-person relationship with a partner or mentor. It’s not just the firm, it’s the person you’re going to have on your board,” he points out.

He concludes with this: “Obviously, there’s always business relationships, but at the end of the day, it’s got to have a personal relationship because it’s all about trust.”

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