By Margot Kane, Chief Investment Officer at Spring Point Partners, and Jennifer Kim, Investment Officer at Spring Point Partners
In a people-focused business such as venture investing and entrepreneurship, relationships are among the most critical elements of success and competitive differentiators. For investors, strong relationships provide an early pulse on pertinent developments in the industry and open new doors so that they can adapt and ultimately win successful deals in an increasingly crowded market. Meaningful relationships are also, dare we say, a key contributor to work satisfaction among investors, given they are at least one level removed from the action of building a company. But what happens if instead of limiting relationship building to individual silos such as investor to founder, investors intentionally foster relationship-building within a larger, more inclusive community?
Emerging investors Mac Conwell from RareBreed Ventures, and Pilar Johnson and Bobak Emamian from Debut Capital, graciously share their personal insights and remind us that cultivating broader community with clear intentions and values returns compounded learnings, networks, and solutions to maximize success in early-stage venture. Particularly for many first-time, female and BIPOC investors who commonly resonate with the systemic barriers they face around resources in venture capital, harnessing community with a shared purpose can be an effective strategy to uniquely position both investors and their portfolio founders for success.
Take, for example, Debut Capital. The company’s goal is to build a strong community for Black, Latinx, and Indigenous founders to feel safer when raising capital. With trust and learning as their guiding principles, Debut’s founders Pilar and Bobak have designed a space where new founders not only engage on a level of transparency rarely experienced in venture capital but also receive proactive collaboration from them. This, in turn, creates ripple effects within the community they are building and positions the group’s ecosystem as a competitive advantage for everyone in it.
Could a dedicated and intentional focus on building community be not only a differentiator, but also an asset in venture capital? Here’s what these investors say:
Developing community with intentionality first requires building trust among members. Every early-stage investor knows the pain of having found out too late the struggles a founder may face. Creating a trusting rather than transactional partnership can pave the way for more honest conversation around the concerns and needs of founders. Further, it enables investors to help devise successful game plans for the inevitable challenges founders face growing a business.
During reference calls, founders who worked with Mac, Pilar and Bobak referenced the value of their ability to build emotional connections, while also noting the more typical technical, strategic and investment capabilities they bring to the table. By prioritizing trust and community-building, these investors made founders feel supported in a more holistic way, receiving emotional and moral support in the moment as well as the more technical support and introductions needed along the way.
The value of a shared community generally lives in members’ perceptions of the social capital of that community, and investors who show willingness to leverage their social capital on behalf of their founders are more highly sought after. Founders care about social capital as much, if not more, than the dollars received. They are building a business for the long run and will need a village of support along the way; meanwhile, many investors will come and go. When there is an influx of funding resources for startups, founders can be more intentional their choice of partners. Between a VC who simply writes a check and a VC who will fund and leverage their social capital, founders will choose the latter– especially in the early stage where every introduction counts. In a downturn environment when reducing risk and managing scarce resources becomes paramount, an investor with a robust network can leverage their social capital to access scarcer investment capital, sector experts and founders close to the industry to quickly learn about market trends and inform strategy.
A community-oriented approach is inherently appealing, especially to the next generation of founders who are increasingly community-minded and not particularly enamored with the traditional bastions of capitalism and venture capital. People, now more than ever, are seeking community. They desire safe spaces to share stories, experiences, and information that can be mutually beneficial. Moreover, they seek opportunities to contribute to an even greater purpose. For example, during the pandemic, many young people who identified as female, non-binary, or BIPOC (and their intersections) found breaking into the cutthroat tech industry even more difficult. One group of friends set up a server on discord called Gen Z Mafia to communicate and connect with other young people seeking to break into tech. Inherent to their mission was to create an environment aligned with their values of inclusivity and collaboration, as a kind of counterpoint to the exclusive and elitist culture of tech.
Compound learnings can advance performance. As the portfolio grows, particularly for smaller venture capital funds, the investor’s ability to scale their direct value-add is limited. Many emerging BIPOC fund managers are not earning sufficient management fees yet to support a large operating team and sourcing network. Designing a community for their networks to share learnings and lessons can be immensely valuable for founders to shorten the learning time and make strategic, profitable decisions in an increasingly crowded and competitive market. In addition, startups are being born in every direction and every corner of the world (and internet). Collaborating on harnessing knowledge of the latest trends and high-quality startups puts investors ahead of the game, while cultivating strong community with founders means they are more likely to refer other founders to your orbit, growing your funnel and reducing acquisition costs.
Margot Kane, Chief Investment Officer at Spring Point Partners, says the organization was excited to back Mac, Pilar and Bobak in their inaugural funds “because they demonstrate common characteristics of successful community builders and problem solvers: they exhibit high levels of humility, vulnerability, and openness to continual learning. Our sense is that these qualities have the potential to ‘grow the pie’ for all, in partnership with successful, high-growth companies, investors and founders.” She notes that Spring Point was initially connected to Mac, Pilar and Bobak through referrals from their own community of diverse investors, including Kathryn Finney at Genius Guild and Kesha Cash at Impact America Fund. For investors seeking to diversify their own portfolios, building a community of underrepresented investors and founders is critical. Doing so has resulted in a rapid change in Spring Point’s portfolio from 28% underrepresented founders and fund managers to 56% women and BIPOC founders and fund managers between 2019 and 2022.
And as Brené Brown reminds us, “Vulnerability is the birthplace of innovation, creativity and change.”