Venture Capital Boards – Driving Change Across the Built Environment: An interview with Rahul Parekh

Welcome to the first instalment of our venture capital boards interview series, where Beaumont Bailey, in partnership with BETA, speaks to investment leaders from across the world of VC funds that partner with businesses across the global built environment technology space.

Venture capital funds take a more active role in their investments by providing guidance and often holding a board seat. VC funds, therefore, play a hands-on role in the management and operations of the companies in their portfolio. The objective of this series is to better understand the makeup of the VC board or advisory panel, and the role it plays in both the growth of the VC fund itself and the fund’s portfolio companies. We’ll also be exploring the importance of diverse representation across a board and how larger corporations can take guidance from VC funds when exploring their own internal structure.

About Rahul

Rahul Parekh is a Partner at 2150, a venture capital fund that backs tech entrepreneurs who are reimagining and innovating what they call the Urban Stack. 2150 specialises in ‘Constructive Capital’, backing and building companies that tackle environmental challenges within the built environment. Rahul has been on both sides of the table having founded and exited a VC-backed business. Before joining 2150, Rahul co-founded EatFirst, which he ran as CEO for several years before the company was acquired in 2020. He was also a managing director in Rocket Internet’s investment team, focused primarily on fintech and urban mobile on-demand businesses. He is passionate about working with founders that are solving the world’s biggest problems and is particularly excited about the climate fintech sector and its potential to speed up decarbonisation within the urban environment.

Hi Rahul, thank you for speaking with us. To start us off, could you tell us what you think are the key requirements of a VC board or Advisory Panel?

It’s my pleasure. So, the need of the board from a VC perspective is to ensure good governance at the company level. The management within the company should be dealing with the day-to-day, whereas the board steps in either when things are going wrong, with management or with strategy, or when things are going really well, and they need to think about additional financing, M&A, or transactions within the wider business. For those matters, the board can provide advice, guidance and support to early stage founders that may not have experienced these topics before.

So, what should the make-up of a board look like in terms of experience, background, and diversity?

What I’ve found tends to work well when it comes to building a board or advisory panel for a start-up or scaling business, is to have a balance between company representatives and investors. If this balance is met, it means the business has a range of unique perspectives on-hand when advice or guidance is required.

Diversity is of course important, as a diverse board also offers different perspectives. Where boards didn’t necessarily have female or ethnic minority representatives previously, there’s been a shift to actively bring in these viewpoints and diversify boards and advisory panels across the VC ecosystem.

Investors at VC funds like ours have experience in investing in early-stage start-ups, which founders typically don’t have themselves. Having these investors on the board enables start-ups or scale-ups access to advisors with experience they may not have, which in-turn will help them navigate unfamiliar territory with more confidence. The influence and involvement of investors on a board or advisory panel will often depend on the level of experience the founders and their team have themselves.

As VCs raise more with each round, does the role of the board change and do profiles need replacing at certain stages?

Early stage VCs at the board level have experience in building teams, management structures, pulling in the right people and how teams need to evolve as you scale, which is an important aspect when you’re first growing after the seed round.

As businesses grow, this focus shifts towards how you scale – what operational processes do you need to put in place? Organisations might operate across multiple geographies, so investors will need to be good at dealing with international expansion. Overtime it’s not uncommon for the need of a board to evolve and the makeup of the board to change as a result.

What can VC boards learn from larger corporates as they scale and grow?

Early-stage companies tend not to deal with M&A because they’re not at that stage yet, so learning about how to deal with M&A and integrating with other companies earlier in their journey would be beneficial. Secondly, emphasising a focus on how VCs can evolve strategically as their business environment changes would also benefit.

Vice versa, what can large corporate boards learn from VCs?

Agility and entrepreneurialism. I think one thing VC boards do very well is adapt to a changing market and reacting to the forces around them. For corporates, that feedback loop takes longer and so change is typically slower.

What role does the VC board or advisory panel play in driving industry change?

I think that’s a really key point. Some of these early-stage businesses genuinely have limited time and resources to focus on sustainability goals, but they need help realising that it becomes important as they grow, in terms of their brand, fundraising, and their ability to scale and attract great people.

One thing that we try to do is build in a sense of developing an ESG strategy very early on, so VC boards can have a lot of input over governance on the ESG side.

What is your focus for the next 12,18 and 24 months?

We’re seeing a lot of interesting technology being developed, so what we want to see is A, more capital going in to support these new technologies and B, more government support as well. The industry now is still very nascent, so there’s huge potential for growth. Our focus is to bring in experienced individuals to be advisors for companies within the VC space and help that ecosystem develop.

What are your thoughts on the recent Mansion House Compact announcement?

I think it’s a positive development in the UK, having big companies mandated to invest a certain percentage in alternative investment will encourage other private pools of capital to do the same. Although a lot of that capital will go into later stage businesses and companies that are less risky. What we need is that capital to feed down into the earlier stages because that’s where the innovation is happening. I think it will take a while before we really see the impact, but I look forward to seeing the change it makes.

If you would like to discuss any of the topics raised in this piece or if you need support with your leadership resourcing strategy, please get in touch with George