Growth Sprinting — Making VC Work for Founders
By Orson Stadler
“I can say that I like a challenge and you tell me it’s painless” — Kendrick Lamar
‘Hire A-Players!’ potentially takes the award as the most value-less ‘value-add’ advice for start ups. It is this sort of advice that catalysed the writing of potentially the most iconic start-up founder-focused book: ‘The Hard Things About Hard Things’ by Ben Horowitz. Whilst this concept of ‘Value-Add’ has existed in VC since the genesis of the asset class, it has only recently stopped becoming a differentiator but a must-have, as capital alone has diminished in perceived value for entrepreneurs, with Angels, Corporates and other non-traditional capital sources offering an ever-growing supply of cash.
Mustard Seed has always strived to be more than just capital, but until recently, our Growth Strategy remained unchanged from the offering that supported a portfolio of just three. With a portfolio now totalling sixteen, soon-to-be-thirty, it has become obvious that a more systematic and outcome-driven approach is required to deliver a venture experience, that is:
i) Consistent — The VC product from funding to investment management is incredibly inconsistent within Funds, as a Company’s relationship with a different member of the same team can drive a focus on a meaningfully different set of outcomes and strategies, that can dramatically alter the trajectory of the Company (for better or worse).
How do we ensure that Mustard Seed team members are able to deliver a product that takes full advantage of the diverse strengths of our team and network?
ii) Measurable — Mustard Seed looks to continually track and evaluate the performance of our portfolio’s products; however, we were not previously applying the same rigour to our own product, which led to a lack of accountability in delivery.
How do we measure the effect of our efforts, and improve our ‘product’ based on both qualitative and quantitative feedback?
iii) Scalable — Mustard Seed looks to invest in over >10 new Companies per annum over the next three years, the need for a product that will meet the demands of this growing family will only compound.
How do we build a product that maintains the intimacy of our approach to date, whilst supporting a portfolio four times the size?
iv) Targeted — When analysing where the Mustard Seed team’s time was being spent, there was a clearly skewed allocation of resources to a subset of Companies, with target outcomes often dictated by short-term and temporal ‘need’.
How do we create a balance of attending to extreme temporal needs (i.e. bankruptcy), whilst delivering a product that encourages and facilitates long-term value creation across a broader number of Companies?
“Focus on me, f-f-focus on me” — Ariana Grande
To meet the challenges outlined above, Mustard Seed has implemented a ‘Growth Sprint Framework’, built on four verticals identified as the key determinants of value creation in our portfolio. Each of these verticals have been allocated as an area of focal responsibility to a senior member of the Mustard Seed, as per below:
i) Thought Partnership: (Henry Wigan) — Mustard Seed has built special relationships with all our Founders, and we believe that consistently challenging management to implement a strategy that enables Companies to raise the next round is a key part of this relationship, as it has a knock-on effect across the other three verticals (both in identification and implementation);
knok had initially been an ‘open marketplace’ with doctors providing healthcare as individuals (with no consistency in price or doctor profile), with Mustard Seed working intensely with the Founder to reposition the business model into a direct to consumer business which has achieved 7% WoW growth in appointments since investment.
ii) Commercial Introductions: (Alex Pitt) — A unique characteristic of ‘impact’ Companies is their ability to mobilise good will to deliver commercial outcomes, and we look to leverage our broad network to provide differentiated access;
Winnow Solution’s expansion into the UAE was catalysed by its acceptance into the Dubai Future Accelerator programme through Mustard Seed’s extensive MENA network including senior leadership at Mubadala and Kestrel Global.
iii) Fundraising: (Orson Stadler) — As a Seed-Stage investor, Mustard Seed is always looking to secure follow-on investment for our portfolio from our favourite VCs, as failure in this vertical will have the most direct negative effect on our Companies’ survival;
TAB (the artist formerly known as Crowdsurfer) recently closed a funding round with participation from Thomson Reuters following a successful introduction from Mustard Seed (with this introduction previously manifesting itself as an integration of the TAB Dashboard on Thomson Reuters’ Eikon).
iv) Talent: (Teddy Kim) — Access to great people looking to drive meaningful outcomes is another unique ‘dividend of impact’, and we are constantly looking to connect the world-class talent we encounter on a daily basis to our portfolio;
what3words’ Strategic Partnerships Director, Alex Perez-Fragero, was successfully placed into the Company following an introduction from Mustard Seed.
These verticals are integrated into a three-month ‘Sprint’ plan (co-created with the Founder) targeting the delivery of a transformative outcome, with the Mustard Seed team tracking progress towards each vertical on a weekly basis via a Trello Board system, with an anonymised example outlined below:
“You are the type that can make me prioritize” — Drake
Each of these Sprints represents a significant resourcing investment, which would be an unachievable challenge to maintain across an entire ever-growing portfolio. Therefore, each quarter Mustard Seed focusses on 25% of the portfolio to drive prioritisation and consistent high performance; with this subset of the portfolio selected via a ‘bidding’ process by each team member, leveraging a stack-ranking of each of the proposed Sprints. The scoring system utilised by the team is outlined below:
Through this appraisal system the Company is given a score of 0–30 by each team member, with the scores aggregated and finally ranked to generate that quarter’s Focus Sprints.
An anonymised set of results is included below, which enables us to quickly identify areas of contention that need to be addressed ahead of any final selection.
It is also important to note that when submitting and selecting Sprints, we try to ensure that Sprints are viewed in the context of Mustard Seed’s engagement with a Company on a longer term longitudinal basis than what can be achieved in this single quarter by asking the question:
How much will this initiative move the needle for the company at this stage vs other sprints we could do with them in the next 2–3 quarters?
Focus on immediate outcomes is reinforced by preventing back-to-back Sprints for the same Company. Note that this also helps avoid ‘recency bias’ during the selection process (i.e. consistently choosing the same Companies quarter-on-quarter due to the increased strength of the relationship and (hopefully) increased momentum in the Company).
“With the faith of a mustard seed you can move mountains” — Twista
At the end of each Sprint, the degree to which the target was achieved as well as the contribution of each of the four verticals is graded by the Mustard Seed team, with the Founder providing feedback via an NPS system. As we look to continually iterate on this process, with the Q2’18 Sprint likely to feature a few new grading processes and categories.
At Mustard Seed, we are firmly committed to a culture of iteration and improvement, and see the outcome-driven Growth-Sprint process as absolutely instrumental in making us better, and doing justice to brave founders seeking to make the world a better place.
Orson Stadler is a Venture Associate at Mustard Seed. Learn more on our website.
Special thank you to Amelia Townsend (Unilever Ventures), Camilla Dolan (Burda Principal Investments), Gareth Jefferies (Northzone) and Zihao Xu (Octopus Ventures), who are real practitioners of value-add in the VC community, and helped to make this article better.