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Tuesday, February 7, 2023

Move over operators, consultants are the new nontraditional VC

Operating experience has become a buzzword over the last few years as venture capitalists pump up their resumes in a quest to set themselves apart from other sources of startup capital. Now, it seems that we are seeing the next evolution of that trend.

This year has seen a wave of startup consultant firms looking to raise venture funds of their own to take stakes in companies they are already working with or that align with their practice. In theory, this makes total sense because both consultants and venture capitalists have the same goal at the end of the day: helping companies grow.

“Most come on board because we provide the capital, plus. What is that plus? The plus with us is storytelling.” FNDR CEO James Vincent

But why are so many consultant-led venture capital funds launching now? It’s a particularly rough time in the broader venture market, and economy in general, in addition to being one of the toughest periods for emerging managers and first-time fundraisers. It’s worth noting that all of these funds are raising outside capital as opposed to investing off their balance sheets.

For one thing, the startups they were already working with were asking them to.

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