Posted on May 14, 2015 by

Value-Add[itional] Investing

It’s more than just table stakes.

I’m hearing increasingly more dialogue about value-add investing (or maybe that’s just from reading every post in my daily Mattermark emails). But there doesn’t seem to be a consensus yet on what value-add is. So, here’s how I build-up value-add investing:

Investors: Invest capital in exchange for equity (or convertible debt) of a company.

Passive Investors: Investors + crossing your fingers.

Active Investors: Passive Investors + periodic strategic guidance in the their domain/industry of expertise, networking for recruiting/sales/partnerships.

Value-add Investors: Active Investors + providing constant leadership / expertise in 1+ domain (tech, recruiting, marketing, enterprise sales, social, etc.) to extend a founding team’s capacity.

The current market dynamic coupled with platforms like Angel List and Kickstarter is making capital more accessible, and therefore more of a commodity. Meanwhile, traditional active investors’ “services” such as relationships and financial guidance are now table stakes. You need them to participate. It’s the additional application of committed expertise that makes an investor value-add.