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January 10, 2012

One important component of our ethos at NextView is the idea of being part of a “Tribe“. There are two sides of this idea.  One is the idea of being a participant and a contributor to the community that we are involved in.  We aspire to do that in a number of ways, but that’s for another post.  The other idea is the concept of collaboration and shared ownership between the partners of our fund.

This collaboration manifests itself in many ways. The most simple is the fact that we are an equal partnership, and thus, are economically equal. But it goes much much deeper than that.  One practice that we instituted early on was to create a co-working culture, much like what you see in the startups we invest in or the shared workspaces where startups are birthed.  Our “offices” at NextView are mainly little phone-booths for taking calls.  If we are not on a call or out of the office, we find ourselves surrounding a large, antique table in the center of our office.

We intentionally made this table the centerpiece of our space and we policed one another to stay out of our offices unless absolutely necessary. I think entrepreneurs that visit us the first time are a little confused when they open our door to see us huddled together.  It may seem weird for a VC, but it definitely isn’t weird if you visit the offices of a startup.

This may sound a bit corny, but I’m convinced that this works and makes a difference.  In fact, I think you can see it in the data.  Earlier in the week, I wrote a post sharing some data about our early portfolio. However, there is one other stat that I didn’t mention that is very unique for a VC firm and I think reflects some of our efforts to promote internal collaboration.

Of the 16 investments that we have made, in 5 cases the “lead” on the investment was different than the “source”.  What this means is that one partner was the originator of the investment (or the owner of the first touch-point with the founders) but another partner led the investment internally.  Leading an investment at NextView means that that partner quarterbacked the evaluation and due-diligence process and is the point person for our firm during the actual deal process and on an ongoing basis with the company.

All VC firms track who “sources” a deal and know who the “lead” is. What’s unusual here is that in over 30% of our investments, the “source” and “lead” are different people.  This is very rare.  In some cases, a fund may have one partner with disproportionate deal flow because of their high visibility or “celebrity status”. But that’s not the case in our fund.

I think this is important for a couple reasons.  First, even though we have a fairly tight focus as a fund (internet enabled innovation, seed stage, select core geographies) we all have different areas that we are particularly excited about.  I think entrepreneurs benefit from speaking with VC’s that have thought fairly deeply about their sector, and aren’t just broadly a firm’s “internet guy”.

Second (and this is obvious) this is a highly personal business.  We are different people, and different types of founders may find that they have more chemistry with one person vs. another.  While we all work together to try to impact our portfolio companies positively, you want to have the best possible fit with the investor who is actually the “lead”. After all, you’ll likely spend a lot of time with this person, and will have both very happy and very tough conversations with them over time.

Some final parting thoughts:

  • I would argue that a change in the internal “lead” of a deal is usually bad news in most cases.  The worst thing for an entrepreneur is to lose their champion within a firm, whether it’s during the pre or post investment process. If something like this is happening to you (even with our firm) I think it’s fair to press on why this is happening, and make sure that it is for a reason that is advantageous to you and reflects only stronger commitment on the part of the fund.
  • When we do change leads, we try to make them happen as early as possible in the process. In 4 of the 5 cases we’ve experienced, the transition happened at the time of the 2nd meeting.  The later it happens, the more time and effort it takes to built rapport with an investor and the longer it takes for the investor to feel like a real “owner” of the deal internally.
  • One reason why this practice is typically rare at most firms is that it takes a lot to feel emotional conviction over a deal.  Also, some firms are very competitive internally, and so those investors take deal “ownership” very seriously.  A partner would be reluctant to hand-off a good deal lest they forfeit credit if things go well.  Ironically, another partner would also be less willing to take a hand-off lest they get only partial credit for the success but full blame if things go wrong. This dynamic isn’t always at play, but one way or another, feeling deep ownership over a relationship and investment decision is a big deal and hard to achieve or pass around.

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