By Eugene Malobrodsky

Despite 2023 being labeled a “bloodbath” for venture capitalists, the industry remains optimistic with more than half of VCs reporting they plan to raise in the next 12 months. But to gain the confidence of LPs, VCs need to set themselves up for success beyond cash reserves. Although it takes a lot of time and energy, setting up an entrepreneur collective should be on a VC’s 2024 to-do list.

Obviously, a network of entrepreneurs offering mentorship to portfolio companies will give venture investors a better chance of success, but it’s also hugely advantageous to a fund’s reputation and financial standing.

Here is why venture investors should build an entrepreneur collective within a specific niche or mission, and generate returns in spades.

Exclusive deal flow

As the founder of a niche collective, you will have an exclusive preview to the next big name(s) in the field. If your collective establishes itself as the place where VCs and prominent entrepreneurs share knowledge and contacts, over time the most promising startups will be advised to go to you for support.

Creating a channel to these high-potential companies in your sector gives your firm a sense of being in on the secret, which is something LPs are hungry for.

Build credibility and trust

Going above and beyond to support a subsector of entrepreneurs establishes you as a “giver” and gives you a competitive edge as a VC. It can also mean getting awarded board seats at the startups you’re mentoring — even without a cash investment — bolstering individual investors’ experience, profile and credibility.

Financial benefits

Granting your own startups access to mentors from different circles increases their chances of a handsome ROI.

But even without investing cash, being an influential part of a startup’s journey early on could get you allocated advisory shares.

Advice

The collective knowledge of entrepreneurial networks can empower not only startups but investors themselves. This is especially true when those networks unite people under a shared mission or set of values. We can’t underestimate the will of people to pass on their knowledge for the greater good.

Attract future LPs

While some entrepreneurs will be happy to stay in the advisory lane, others may be enticed to back you in future funds when they see what goes on behind the scenes. Founders, too, may surprise you by coming back as investors once they exit.

How to set up an entrepreneur collective

Forming a collective is not without its challenges. When building our immigrant unicorn founder collective at One Way Ventures, I spent countless hours reaching out to contacts, pitching mentors and organizing the logistics of connecting successful founders to early-stage founders.

You need a glue that compels successful entrepreneurs to volunteer their time with your collective: a values-based argument on why a specific group of founders needs your help; a “secret sauce” to finding star startups; or a broad goal to improve entrepreneurship in a specific industry.

Our collective’s glue is its shared mission: Supporting the minority of startup founders from immigrant backgrounds.

Each mentor who joins the collective is an immigrant who has founded a unicorn. They are excited to help founders with whom they share personal experiences, and who can benefit uniquely from them as a person.

Connecting entrepreneurs, founders and investors during this turbulent period for startups is an invaluable service not only for your firm to confirm its reason to exist, but to help under-supported sectors of entrepreneurship thrive in the future.

Eugene Malobrodsky is managing partner at One Way Ventures, a VC firm funding exceptional immigrant founders. He is also the founder of the Pathfinder Collective, a network of immigrant unicorn founders elevating immigrant entrepreneurship in the United States.

Illustration: Dom Guzman