📈 Measuring Impact: KPIs for VC Platform
📈 Measuring Impact: KPIs for VC Platform
Practical steps to set impactful KPIs for VC Platform Teams
Perhaps you've just landed your dream job as a Head of Platform and want to hit the ground running, or maybe you're a few years in and need a better way to measure your impact across the firm. While KPIs are crucial in this regard, setting the right ones can be daunting. Unlike more traditional roles, there is a lack of established benchmarks for VC Platform, making it challenging to know where to start or how to compare performance against standard metrics.
Today, I'm sharing my framework for setting KPIs in the VC Platform role.
Next edition, I'll present data (survey here if you’d like to contribute) on what dozens of VC Platform teams are measuring and how they define success. My goal with these two pieces is to increase transparency around measuring VC Platform success and to simplify the process for teams to set their own KPIs. I firmly believe that "a rising tide lifts all boats," and the more we can elevate VC Platform, the better.
Navigating the Challenges
I understand how frustrating it can feel to work tirelessly without visible recognition or understanding from others at your firm. Measuring the impact of your platform efforts can be particularly challenging due to the unique and multifaceted nature of the responsibilities. Here are some key challenges:
Diverse Objectives: Platform teams often pursue a wide range of goals, from community engagement and educational programs to operational support and networking opportunities. Each of these impacts startup growth and the VC firm's success in different, often intangible ways.
Long-Term Impact: The results of platform initiatives often take time to manifest. For example, the true impact of customer introductions or network-building efforts on a startup’s success might only become apparent years later. This delay complicates the direct and immediate correlation of specific activities to outcomes.
Qualitative Benefits: Many benefits provided by platform teams are qualitative, such as improved founder satisfaction or enhanced community goodwill. These benefits are inherently difficult to quantify.
Attribution Complexity: It can be challenging to attribute successes directly to platform team activities. For instance, if a portfolio company achieves a significant funding round or growth milestone, it might be due to various factors, including but not limited to the platform team's support. Disentangling the specific impact of the platform team from other influences requires complex analysis.
Customized Support: Platform teams often provide tailored support to startups based on their specific needs and development stages. This customization makes it hard to standardize measures of impact or compare the effectiveness of interventions across different companies.
Despite these challenges, I assure you that KPIs are worthwhile. They will help you and your team better identify areas of success and those needing improvement, providing a clear, quantitative measure of performance and impact to share with your partners. When done well, KPIs can create alignment across the fund, ensuring that different team members work towards the same goals and objectives.
Understanding What Matters: Aligning KPIs with Firm Objectives
Before diving into specific metrics, it’s crucial to align with your partners on what success looks like at the firm level. This alignment ensures that the KPIs reflect the firm’s overarching objectives and goals. For example, after discussions, you might find that the overarching goals are to:
Invest in 10 high-quality Seed deals every year across healthcare and fintech.
Win desired allocation in 75% of deals in H1
Achieve a 60% graduation rate from Seed to Series A
Maintain strong founder approval and engagement in 2024
These goals should be specific, measurable, achievable, relevant, and time-bound (SMART). KPIs will serve as the metrics that guide your team towards achieving these goals.
Critical Success Factors
Once you have the goals, your job is determine the critical success factors. Put another way - what is essential to achieve your goals? For instance, in order to achieve a graduation rate of 60% from Seed to Series A, a critical success factor might be revenue growth for the companies or quality of investor meetings.
KPI Framework
Once you have the critical success factors, it’s time to determine your KPIs. Ideally, you have some baseline numbers to work with, such as:
How many deals you see per year
Conversion rate through the investment pipeline
Close/win rate across deals
Sources of deals
Graduation rates / fund-through rates
Quantitative/qualitative feedback from portfolio founders
If you don’t have any of these numbers, your first round of KPIs might need to focus on benchmarking. It’s challenging to set realistic goals without any baseline data. For instance, if you’ve never reported on founder experience and NPS, choosing a random target won’t be very helpful.
Once you have some baseline numbers, you can start setting time-bound KPIs. Let's use the portfolio support goals as an example. Effective KPIs here might revolve around founder resource utilization and NPS (i.e., what percentage of your portfolio is engaging with platform services/resources and their net promoter score). At Forum, we ask the following two questions to gauge this:
On a scale of 1-10, how likely are you to recommend Forum Ventures to another founder?
On a scale of 1-10, how much do you agree with the following statement: "The resources provided have helped accelerate my business,"Â with 10 being strongly agree and 1 being strongly disagree.
It's incredibly powerful to be able to tell your partnership that 80+% of your portfolio strongly believes that platform resources accelerated their business.
Next, you're going to establish your leading indicators and levers.
Leading indicators predict future outcomes and are useful tools for measuring how your team is trending towards a goal or KPI and provide an early warning if you’re falling behind. For example, a leading indicator might be the engagement rate in a newly launched mentorship program, indicating future success in fostering startup growth and ultimately graduation to the Series A. These numbers are typically not shared with the broader firm, but will help keep your Platform team on track and determine if the initiatives/tactics you deployed to achieve a KPI are trending in the right direction.
Levers, on the other hand, are actionable tools or mechanisms that a platform team can adjust to directly influence outcomes. These might include intensifying outreach efforts, modifying support programs based on feedback, or reallocating resources to more impactful initiatives. By manipulating these levers in response to insights gained from leading indicators, you can proactively manage your KPIs, drive better results, and more effectively support your portfolio companies' needs.
Communicating Value: Quantitative & Qualitative
Almost as important as setting KPIs is regularly communicating the outcomes associated with these KPIs to both internal stakeholders and external audiences. Make it easy for your partners to draw conclusions between platform and outcomes that are integral for the fund.
By establishing clear metrics across key areas like sourcing or portfolio support, platform leaders can demonstrate their indispensable role in driving the firm's overall success. And just as we advise our founders, we, too, must be storytellers. A compelling narrative that connects our activities to tangible outcomes can resonate deeply, making the abstract data more relatable and impactful.
Weave together data, stories, and founder testimonials to create a holistic picture of platform for your partners. The combination of narrative and numbers is powerful and a great way to reinforce the importance of our work.