Yahoo Finance VSC wants to craft the stories of startups, then invest in them too
VSC, a public relations firm that has helped the likes of startups such as ClearCo, Poshmark and Tile craft their stories, has raised millions to invest in the companies they work with. While its bigger fund is estimated to close at $20 million, VSC confirmed that it has raised a $7 million tranche for climate tech startups to start.
VSC Ventures will back early-stage companies with checks between $250,000 to $500,000, and also provide media relations and multimedia content development as a service. The venture arm will be run by VSC CEO Vijay Chattha and General Partner Jay Kapoor, who was recently hired by VSC off of his six-years investing experience.
For VSC, which has helped more than 500 venture-backed startups through 50 exits, 20 unicorns and four IPOs, the argument for its venture arm is that cutting through the noise can help folks get coveted cap table spots.
VSC Ventures’ debut focus, climate, is related to its competitive advantage of knowing a thing or two about telling stories. Climb, also announced today, is VSC’s practice dedicated to building awareness and action around sustainability-focused startups. The duo thinks that, as every major VC fund begins to invest in the thorny and complicated world of climate, startups will need help explaining why their solutions make sense.
“It's not just about hyping up on Twitter -- that is something everybody can do,'' Kapoor said. “It's about actually having experience working with the founders to help them with their messaging, to help them with their positioning, and actually have done that consistently over time. Maybe some platform services have a person here and there that can help companies, but that isn’t their core competency and it’s not what they're designed for.”
The investors’ own personal track records don't hurt either. Before the fund, both Chattha and Kapoor made a slew of climate-focused investments on their own, including Revel, Modumate, Zume, Poshmark, Molekule and Rocean. The firm will eventually back startups in future of work and wellness, as well.
As every venture firm appears to be going the full-stack approach, offering a suite of services beyond simply capital, VSC’s move feels warranted. These days, founders want valuable services from their investors, such as hiring help, or simply, hype. Those within the media have found themselves in a fortuitous, and potentially lucrative spot, as the storytelling skill set skyrockets in demand from aspiring entrepreneurs.
For example, Harry Stebbings, the well-known podcaster behind “20 minute VC,” recently raised $140 million for his venture capital fund launched off of his show’s success. Morning Brew CEO Austin Rief has a fund of his own. It’s happening in reverse too. Andreessen Horowitz, a more traditional fund, has put significant investment into Future, a media property in which it will publish stories about topics related to areas in which the firm invests.
Despite the blending of media and VC, few public relations firms have raised a fund, it appears.
“Many firms have experimented with equity for services since the late 1990s but abandon it quickly when the startup markets slow down,” Chattha said. “We are using LP capital to back companies and therefore are committed to this approach.”
Fear of a bubble burst aside, another reason that PR firms may not have gone into the investment game is the sheer complexity of managing clients and portfolio companies at the same time. Will there be a tension between VSC clients and VSC portfolio companies that are competing for the same partners’ time?
“We get asked this a lot,” Chattha said. “While the climate tech practice comes with money, in general, a lot of our companies are beyond where we can invest in them.” Since the majority of VSC’s current clients are Series B and beyond, the new fund will only be able to put money into a fraction of clients -- which helps the investors draw a line on who they will and won’t back. This could change if VSC continues to raise more funds in the future.
Public relations firms also sometimes work as crisis communications, helping startups better message their mistakes to investors, employees, customers and, of course, the press. One could argue that founders may feel less incentivized to be vulnerable with a PR firm about struggles if they are also their investors, the same people they are incentivized to impress.
“Because we're not the lead investor, we don't ever put that kind of peer pressure on them,” Chattha said. “We have enough skin in the game to be honest and vulnerable with them, but not so much that we're going to guide them into the wrong for their business.”
The venture arm, still in its early days, wants to be clear that it’s prepared for the startup boom to quiet down -- whenever that happens.
“We’re in an up and to the right era, but it won’t be like this forever,” Chattha said. “Every vertical has its own ups and downs... and by not being the biggest check in or the lead check in, you know, we take that pressure off.”
