Embracing Your Community as a Strategy
5 years ago I sat at our annual meeting bored beyond belief. It wasn’t just that I have ADD making boring meetings excruciatingly painful — it was that the format was tired, unimaginative, uninspiring and not very useful. We did what many VC funds did — we presented our annual results, we stood up and talked about our portfolio companies, we invited a few to also present and then we had dinner & drinks at some posh restaurant.
I have been evangelizing to founders for years to be more thoughtful about how startups update investors and run board meetings so I would be pretty hypocritical if I wasn’t willing to try and be more effective myself.
So I decided to change up our format a bit. Here’s a short sample of what we now do. I had a few objectives in mind
- I wanted to encourage more of our Limited Partner (LPs, or the people who invest in VC funds) to attend our annual meeting in person
- I wanted to give our LPs a more tangible sense of the amazing inspiration & energy that we feel in working with our portfolio company founders by having them actually interact with each other rather than just see a few talking heads
- I thought it would be useful for our LPs to “see us in the wild” as in how we really are as people and humans rather than the artificial bots showing Powerpoint slides and wearing a tie once / year
- I imagined that if I could run an event like this I might be able to persuade some LPs who hadn’t invested in our fund to come to Los Angeles. I knew that many LPs nationally were not yet convince about the power of the LA tech community and I figured if they could experience it for themselves they would be as convinced as I had become
So what we decided was to run our annual meeting as a conference. And if we were going to have our LPs see us “in the wild” then they had to also meet every other VC in town because we spend as much time with other VCs as we do with anybody else.
So we planned a Technology Summit. We would invite every VC in town, as many high-calibre LA founders as we could (whether we invested in them or not) and all of our portfolio companies. Before making this change I called our LPs to ask for advice and input. 75% thought it was worth trying but they had never heard anything like this as an annual meeting, 24% thought it sounded goofy but was worth a try at least once, “why not?” and one investor told me it was a very bad idea and it made him concerned about our fund.
He literally told me that he thought we were making too many changes: Our brand, our offices, adding new staff and now our annual meeting!?! Enough was enough.
I told him that I had observed every LP on their computers doing email and that clearly they were bored, to which he replied, “We like boring Powerpoint presentations. It’s how we evaluate your companies.”
As it turns out LPs supporting our changing to adapt to changes in the entrepreneurial world was a way that we decided to evaluate which LPs we wanted to have as our partners and we decided not to work together in our next fund.
So we started the process of reinventing our annual meeting 5 years ago and as we approach this meeting next week (please don’t crash our event — we have limited resources but we’re publishing 100% of the video on YouTube afterward and you can see some previous year’s videos — still very relevant — here) and reflect on what we’ve learned along the way the experiment has been fascinating.
In Los Angeles the venture community is very collaborative. It’s not that we don’t occasionally compete for deals but we’re far more likely to find ways to work together than we are to compete to exclude others. When we were rebuilding our LP base one of the single most helpful person to me as a friend, sparring partner and reference was Dana Settle of Greycroft.
So of course it was natural that we would invite other VC firms. I heard people say “I can’t believe you invite other VC firms that will meet your LPs and LP prospects — who does that?” I dunno. We were pretty self-confident that some LPs would really want to work with us and others if they didn’t want to invest we could still be friends and colleagues. And the more LP money that would pour into LA the better for the entire ecosystem. So if we could help other funds get off the ground, more startups would be funded locally and more deals we would have first crack at over non-LA funds and better for all of us. Amirite?
I believe this strategy has paid off in spades. In our last fund raising exercise we were fortunate enough to be significantly over subscribed and we still invited every LP we had met along the way to come and debate with us what the future of venture capital looked like nationally and in LA. And over the years some of the LPs who came to these events invested in other LA based firms and like Dana was for me and others we became strong references for the other funds we most respected.
And I’ve noticed over the years many of these funds have invited us, too, to their events.
Our format is simple: We do one day with just LPs and VCs so that we can first network amongst our peers and learn what the changes in our industry are. It’s important that we stay current in and debate others on what is actually happening: In late-stage financings, in IPOs, in M&A, in crowd funding, etc.
We do a second day with as many founders of VC backed startups from Los Angeles (and some from other geographies) and senior industry execs as we can accommodate (about 700 in all). We bill it as a mixture of the best of what LA has to offer: Creativity, Startups and Capital. As you’ll see in the agenda, we bring up issues like “diversity in tech startups” and “anti bullying” and “how to build a profitable business while also giving back to the community as in the case of this great organization. We run break-out discussions with smaller rooms of 75–100 led by industry executives and CEOs. So our LPs get to hear the live discussions and participate.
And of course we put a few portfolio companies on stage each year to present to us and inspire us. In fact, some entrepreneurs we find so inspirational that we put them on stage even if they’re not portfolio companies — call these “future portfolio founders — we hope!” like Danielle Fong — if you’re interested I think you’ll see why with this video.
Upstream & Downstream Capital
In the first year we had mostly LA VCs but then since that year was so successful (sorry for sounding like Donald Trump ;)) we started inviting VCs from across the country. This year we will have more than 50 LPs and more than 250 VC firms. And of course some of these relationships have really paid off for us over the years. There are some out-of-town, small, early-stage funds where we regularly look for inspiration and investment opportunities like K9 , Ludlow and SK Ventures and many others. Events like these give us hours of social time together.
And of course there are many funds where we co-invest or if they’re later stage funds we introduce them to our portfolio founders when we think there is an authentic and relevant fit. But what better than sending out email blasts to a bunch of firms when your companies are raising (as many firms do) than to just put a few that are in market on stage for a brief moment and if VCs find them fascinating they have 2 days to spend time with them.
And as we’ve seen over the years this low-touch, not-in-your-face style has worked very will for us and many of our portfolio companies. The ones that have tangible products like Osmo, Teforia, Parachute, Navdy, Ring, Seedling and others actually bring products to experience which in many ways is better even than being on stage.
We didn’t set out to build an event to help our portfolio but this has been a natural by product. And because we invite most of the LA-backed tech startups we hope that it helps funding overall in our ecosystem. We won’t get every downstream VC dollar that comes into LA and that’s ok. Every success in LA is a future opportunity for us.
And attracting capital to the region (LPs to VCs, VCs to startups, startups to job creation, startup exits to reinvestment) is why Mayor Garcetti often turns up to speak and shake hands. Mayor Garcetti has been such a strong supporter of the tech & startup community in LA and every year investors comment to me how impressed they are after hearing him speak about innovation in Los Angeles.
Building Our Internal Teamwork
And finally there is the most unexpected benefit that I’ve observed over the years. I have often spoken publicly about how venture capital is too much of an “individual sport” versus a “team sport.” In part it’s because the battles you have, the trenches you fight in, are often with entrepreneurs helping their startups and your peers are often board members from other firms so at times you feel like a group of people each individually representing a firm. Of course we try to change that and become more of a team effort but the realities of venture are that we spend time with portfolio companies above all else.
But once a year we all get focused on pulling together on the same task, a shared task, that is our Upfront Summit. We spend evenings and weekends working on shared tasks and pulling together in a shared purpose. And I find that this once-a-year activity really helps bind us together and strengthen our team and our culture. It’s funny but there’s nothing like knowing what you’re made of and developing deep relationships like the shared responsibility of completing an audacious task together as a group.
And if I’m honest that sense of shared battling-in-the-trenches to achieve something great is what I miss about startup life the most. And maybe in some small way events like our summit give me and our team the chance to experience the creativity and stresses for a brief moment every year.
p.s. I know every year we disappoint some people who want to attend our Summit but can’t. I’m truly sorry for this. We don’t charge for our Summit and it’s very expensive and we therefore have limited resources and budgets. Our first priority is to our portfolio and our investors and while we invite as many from the community as we can we have to keep true to our purpose. I hope you’ll understand and we do have many, many other events every year and we aspire to be as open to as many people as we can as often as we can.
p.p.s. To the LP who so ardently doubted me. I hope you have a little more confidence in our abilities now. I hope you’ll realize that VCs who don’t change and adapt die. We preach to our portfolio companies that disruption is good and how can we say that without reinventing or questioning ourselves or our practices? I hope if you’ve moved beyond your previous positions we can open up and discuss the future again. We have nothing against your firm. But we want our investors to be partners and partners trust us to be ourselves.