260. The Fund that Started on Twitter, Why Community-driven Startups Win, and Embracing the Underestimated (Lolita Taub & Jesse Middleton)

Lolita Taub & Jesse Middleton of The Community Fund

Lolita Taub & Jesse Middleton of The Community Fund join Nick to discuss The Fund that Started on Twitter, Why Community-driven Startups Win, and Embracing the Underestimated. In this episode, we cover:

  • Background of Lolita & Jesse
  • How did the two of you meet and ultimately decide to launch a fund together?
  • What’s the thesis at the Community Fund?
  • Conflicts or issues running multiple funds that invest at similar stages?
  • Why did you create a distributed investment team of 13?
  • How did you select them?
  • Approach to investing in cold reach outs?
  • How does decision-making work?
  • What does a great founder look like to you?
  • You invest in community-driven companies… what does that mean, and how do you define community-driven?

Guest Links:

Transcribed with AI:

Introduction 0:02
welcome to the podcast about venture capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is the full ratchet.

Nick Moran 0:18
On today’s episode, we are joined by Lolita Taub from San Diego and Jessie Middleton from New York City. They are the co founders and general partners of the community fund launched in September of 2020. The Community Fund is a 5 million early stage fund that invests in community driven companies through an investment partner team. Simultaneously Lulea is acting as interim head of sales at candlelight. And Jessie is a general partner at flybridge, Lolita and Jessie, welcome to the show. Thanks

Unknown Speaker 0:45
so much, Nick. It’s awesome to be here.

Nick Moran 0:47
It’s great to have you both. Let’s start. Maybe, Jesse quickly, can we get a sense for your background? And you know, what brought you to flybridge and subsequently Community Fund?

Speaker 1 1:00
Sure, yeah, I’ve been in venture capitalists for now, about four and a half years when I joined my partners at flybridge. Before that, I was on the founding team of a company called WeWork, which you and many of your listeners may know. I spent about six years there leading everything from our first sales team to business development to launching many of our markets. And my last role there was heading up corporate development and making some of our first acquisitions. But before all of that, I was actually a, an engineer a technologist, and and got to travel the world doing network security work. And so I started as an engineer, moved into a business role and then eventually into investing in companies full time. Okay,

Nick Moran 1:37
and you’ve been at flybridge. Now for how long? About four and a half years? Four and a half years. Okay. Very good. And then Lolita, can you tell us your sort of background in your path to tech? Yeah,

Speaker 2 1:49
sure. So, I my story actually starts with my parents who came to the US for the American Dream for their children. So I’m Mexican American, first generation, first to go to college and all that good stuff grew up in South Central. So LA, is my hometown. Originally, I actually went into tech right out of college, I worked in corporate tech, so IBM that went to Cisco. And so I went from corporate to startups. And it was when I got into my first startup, that I noticed a huge discrepancy in the founders getting funded and also the demographic of VCs. And I thought to myself, there’s such a great opportunity to make a lot of money, why aren’t there more? People investing in underestimated founders? And why aren’t there more investors from underestimated backgrounds, and it’s just so happens, it’s my personality to say, Okay, well, I’m gonna go and become a VC. And so after, after all that time, I went to get my MBA with the intention of becoming a VC and check writer, out at a business school in Madrid, in Spain, very fun. And I broken out there, that early stage, investing at a actually it was their first fund as well. So it’s really interesting to be part of that team. And then when I came back to the US worked at backstage capital, where I really got to hone in on this investment thesis of investing and underestimated founders. Currently, as you said, Nick, I am wearing two hats. I’m an operator during the day. So I run a sales team at a series eight startup, which I’m very proud. They just actually announced this morning, a partnership with the City of Baltimore, and part of our work is to take people from underestimated backgrounds and give them the opportunity to become developers. And then we hire them and put them to work as we from a business perspective, address the trillion dollar tech talent gap market. And then with Jesse, I get to have tons of fun looking at community driven companies. And we actually just launched with our team. I think this is week two, actually, and we already have our first deal. We’re working on our next one. Super excited. Awesome.

Nick Moran 4:10
Okay, so cool. So tell me how this came together. Right? You’re you’re working at candlelight and Jesse your GP of flybridge you know, how did how did this sort of how did the two of you come together? And then we’re, you know, where did the the idea for the community fund come from? Want

Speaker 2 4:25
me to start All right? Well, it all starts it all started with Twitter as many things do start

Speaker 1 4:32
best things and the worst things on the internet

Speaker 2 4:38
Yeah, so you know, just go i I’ve never taken my foot out of the investor world. So I’ve been creating, supporting investing in the underestimated community of founders and also aspiring and current investors. And so as as COVID hit and this whole social movement came about, right I was really thinking about ways of supporting the underestimated community of founders and investors. And I put out a tweet that caught Jesse’s eye. And it was really a call to action for active investors to share their investment criteria for underestimated founders to then reach out cold. And, and get some money, hopefully. And Jesse, he DM to me, and he’s like, Whoa, I got like 50 Plus deals from this tweet, Who’s this lady? I need to like, keep an eye on her. I think that’s what happened. I don’t know. And then we really like right after that we’ve just, you know, connected saw that, that we both understood the value of investing in, in really great founders that may not be seen or have or have the the VC industry have access to because of where they come from the communities they come from. We aligned on that. And the fact that there’s a lot of money to be made from these trillion. Like, I think if you look at black, Asian, Latinx, Native American, like the purchasing power is like $5 trillion. So like, why not, and we’re moving towards this minor, minority majority world. So anyway, Jesse also saw the opportunity in this and he’s like, hey, it would be really great to leverage all of these different communities in the reach. So we have even broader differentiated deal flow. How will we make like a business partnership here and make something great happen from a community perspective in community investing in community companies? And I was just like, Yeah, let’s do it.

Speaker 1 6:35
I’ll tell you, like I so so a little bit of background. flybridge is is a seed fund that I run with my two partners, Chip, and Jeff, and we invest in what we call community driven companies, we could talk a little bit more about what that actually means and what we look for. But these are businesses that are sort of either Community First, its founders that build up some version of a community that lead into a product and solution or the product is a community. One of the unique things about our model, though, is a few years ago, we saw this opportunity to expand our reach to elitist point, while we sit in New York and Boston, my partners and I and they went to Harvard. And you know, I had been a part of a very fast growing venture backed company there. There’s a community we’re plugged into. And then there’s most of the rest of the world that we don’t know anybody, right. And it could be demographic, it could be socio economic. And so a few years ago, my my partner chip along with a friend of our firm, and a Palmer decided to sit out and build something called X Factor ventures, which was our first take on expanding our network. And X Factor is a fun comprise of 22 women founders of venture backed companies that we have then created upon given check writing power, and they run this fund together to invest in other female founded companies. That’s been an exciting journey. Over three years, they’ve seen over 4000 deals, they’ve made over 50 investments. And quite honestly, we’ve looked at the numbers we probably saw. I think if chip, Ronnie probably telling me, my number is too low. But I think we saw maybe 500 of the 4000 deals that they saw, right? These are people building companies that are billion dollar opportunities that are just outside of our wheelhouse. So as we extend that idea and that strategy of expanding our network, I sat down to think about where do we go next. And when I saw a leaders passion for connecting underestimated founders and wanting to move towards writing more checks, and building a career as venture capitalists, I just thought just through a persona on Twitter, that I should reach out. And so I DM there, we got on the phone a couple of times, and ultimately through a series of conversations led to this place where he said, Let’s build a fund. That is the most sort of diverse set of networks of operators. So we went across the country, you’re in the middle of the country and the leaders on the West Coast, our partners spanned the country. They span a vast, different set of demographics than typical venture funds, which is really important. And we came together with this team and sort of set out to continue to invest in a really broad set of founders. We’re the sole lp in this fun to start with. And so I also live are two hats. Yeah, fly virgin, my partners and I. And so I also wear two hats during the day I’m looking at running $70 million venture fund where we’re leading seed rounds. And when I’m wearing my sort of nights and weekends out with Lolita right now, we’re thinking about how do we invest even earlier? How do we invest even more diverse across a massive network of people and we just look the other day and our our team’s current network spans at least 150,000 people across LinkedIn and their communities they build and I can tell you that mine is only about 5000. So I’m definitely getting to see deals from far and wide that I otherwise wouldn’t

Nick Moran 9:51
see any challenges when you’re investing at similar stages like conflicts or you know, I’m flybridge wants access to similar. How does that work?

Speaker 1 10:05
You invest the same question that every partner in the fund has asked me, the short answer is no, we we, we invest in similar types of companies, we tend to be able to write, you know, million to $2 million checks. So if there is a company that the community fund sees, there are sort of three possibilities. One is, it’s just too early for us. If flybridge we don’t see the opportunity, yet, we we haven’t de risked enough, you know, to put a million or $2 million in the company is raising a small round. So the community fund can lead that deal, no conflict. The second and what I hope continues to happen is the community fund a partner their sources, an amazing company and idea that we otherwise wouldn’t have seen, the partners get excited about it, too, people step up and lead that deal. And the founders say, This is amazing, can you help me raise the rest of my round, and we as flybridge have the opportunity then to invest alongside the community fund, if they’re raising more capital, and we feel like there’s opportunity there. And then the third option is, and what has happened often with X Factor is, you know, X Factor invested early, the Community Fund will invest early, and three or four months later, we get to see the inside track along with the partners that the community fund. And when they go to raise their next round, we’re ready to go we’re ahead of the game this in the venture business, we call it a pre emptive round. And so we’re able to step in, you know, months before the outside world might see what’s happening. And so it’s very, I hate this term, but synergistic. There’s probably little conflict that will show up and the only real question is, how to we as a fund as flybridge gets to understand the vast amount of founders that will come through the community fund, and that’s where Lolita and the rest of our team are really stepping up. And

Nick Moran 11:43
you guys will have the ability to invest in any potential portfolio company of the Community Fund, you don’t have geographic restrictions. flybridge are

Speaker 1 11:55
no, we we along with can even tend to be us focused. And it’s only because where resources are not because of a structure with their LPs. So I just did my first deal in South Korea. So so we can go far and wide. But I would say for the first year, Lolita, right, we’ve said, we said like, let’s try to hone in on the US and maybe a little Canada, because we do have a partner up there.

Nick Moran 12:16
Got it? And can you guys tell me about this distributed team? This investment team? I’ve heard you’ve put together 13 individuals are across the country. Give us a sense for you know, how are they sourcing deals and selecting deals and how are they chosen?

Speaker 2 12:33
Yeah, I could take this one is super proud of what we managed to do. And one month neck, we

Nick Moran 12:39
must be busy. I can only imagine.

Speaker 1 12:43
We literally on jobs. We’re doing it we’re doing this at 6:30am

Speaker 2 12:48
actually get to work. That’s right. That’s that’s kind of the thought there. I am doing this at 630. So I can get to work after this. No, so super proud of this. So in the thread of of thinking, how do we differentiate or deal flow, expand our reach beyond communities that are status quo? In VC, we opened up an application to the world and invited the community it’d be part of of bringing in our candidates. And so we had over 450 candidates apply. And man it was tough Nick, choosing between them because they were they were community driven, you know, with really high potential if not already investors, definitely differentiated deal flow. And it was really tough, but we had to make that first cut and then ultimately we ended up with 11 which, which we are super proud of after one month. So that that was incredible. And I can actually I have a list here of our investment partners that want to give him a shout out because they’re so cool. We have a Lea storis co founder at Drift Cheryl Campbell’s from Republic Olympia may from fast, Melissa more from the Lean Startup co Hassan bought the who whose company was acquired by snowflake and now he’s working at snowflake. Oh, well, we have we have Sonia Nagar she’s an angel investor previously ran a big fund as well. We have Aaron Samuels, who’s a co founder of blabbity, Mike swift at major league hacking, Cara Weber at rrid. And then we have the two founders of squire Sung and Dave, and all of these folks, I mean, you look at their backgrounds. From a demographic perspective. They’re very poignant. But when you also look at the structure of what their areas of expertise is, from a functional perspective, you start to see really the added value in having such a diverse team we have from product engineering to go to market to branding and marketplace expertise. And so we’re really balancing out basically, hey, when we’re looking at deals we have Have this brain trust of perspective as well as reach into deals that we may not see. And so the way you ask Nick, how are we? How are you looking at deals, there’s really two ways. One is there’s our existing networks where we’ve been tracking our own founders, then we also opened up a submission form on our website, because we do want to be open, we do want to be inclusive. And so we literally have a form, if you’re a founder, you can submit to us of your community driven company. And we actually given the option of selecting an investor on our investment partner team in the form, because we want to promote and encourage our founders to look at the backgrounds or have an investment partners look at who could add value to their company. And then ultimately, we then on the back end, have a plugin that Jesse put together. Thank you, Jesse, on Slack, and we’re literally looking at deals together and tagging each other to help with with input. So it’s been really cool. There’s still things to be figured out as we’re in their first year and our first couple of weeks. But so far, so good. Yeah,

Speaker 1 16:10
we’ve we’ve received over over 200 submissions already, in the last, you know, week and a half or so. And parsing through them has been quite interesting. And we’ve had some really exciting ideas, you had some ideas that are probably too early. But you know, what’s what’s been most interesting, I think, sort of this idea of the Community Fund is twofold. One is to make amazing investments and make a lot of money. As Lily said, we’re investing early, we’re investing often until we can back a founder when they’re raising their first couple $100,000. And so we want to be there at the ground floor. The second, sort of the flip side of all of that, though, is our team. Everybody that’s on the team has an interest in investing in their career, they either want to invest as angels more actively, or they want to be venture capitalists, a couple of our partners have done that before, as Lily just said. And so one of the unique things about our model is that it’s a completely open deal flow, and all the economics are equal. And so deals are done together. This is not a like I want to push my deal through because I think it’s better than everybody else’s, we we have this opportunity to see deals that come through to collaborate with each other, which is happening a ton on Slack. And then on our weekly deal flow calls. And then at the end of the day, something it’s important for founders to note, if they were looking at pitching houses, you really need two partners, right? You don’t need all 11 or 12, people just sort of thumbs up, that would be basically impossible. But I think that, you know, if two partners lean into this and say, Wow, this is the best thing I’ve seen, you know, in the last year, I think this has billion dollar company potential, the deal gets done, and so too low at this point, we’ve already done our first deal, and just the first couple of weeks. And that was a deal that came to us right at the beginning of building the fund. So it happened that quickly. And that is because the team worked together, jumped on board did the diligence and signed off and

Nick Moran 18:00
got it and so that the economics are equal across the 11 or 13. Folks that are investing.

Speaker 1 18:07
Yeah, so So the way we have it structured is that all of the teams use all of the upside from every deal. And so there’s no deal by deal economics, which I think is important many, many older venture if on top of that they have different levels, they have, you know, the deal you do you see more carry, we do this at flybridge. As well, we’re flat. And I think it’s important you want the entire team focused on the success of the entire portfolio is one thing. So if you know Sonia is the best person to help a company but she didn’t leave that deal. I want her to feel just as empowered with just as much economics to step in and help that founder. And the other side is that, you know, as deals are being done, you don’t have this sort of jockeying for position, like I’ll push your deal through this week, you know, and you’ll see some higher economics there, but helped me on my next deal. And so really, we can hopefully get let the cream of the crop rise to the top

Nick Moran 18:59
in. What do you do? You know, from a practical standpoint, what do you do with the folks that don’t engage? You know, they, they learn that they have priorities that may be more important to them outside of the the investment side of the business, you know? How do you handle folks that get into this with all the right intentions, but But ultimately, you know, kind of become stragglers, and they’re, they’re hanging around, but they’re not doing the work that that others are doing?

Speaker 1 19:26
Well, fortunately, in the first two weeks, we haven’t had that. But But I can tell you we look, we’ve learned this playbook to build these network funds, App Library, just X factors. The second one we did after funding called the graduate Syndicate, my partner just started. And so one of the things we took from that is people have priorities that will shift and many of these are founders or operators, they may go through fundraising or life events. So one of the things we set out to do is to say let’s keep this fair and so let’s ask you to commit to a year’s worth of time. So every year we’ll all have the opportunity to look at and reset, who’s on the team who’s making investments. And so while it is a $5 million fund over over three years, we’re technically if you want to get into the weeds of the paperwork that was just filed, it’s an annual vehicle. And so the deals that are done that 30 deals made in the next 12 months, sit in the single fund with this partnership. And if somebody along the way, you know, six months and says, Listen, I can’t do this, I think of it as we’re all partners and adults who step up and say, I need a break. And that’s totally fine. We’ll, we’ll all work with each other. And then the next year, you may say, Look, I’m going to take the second year off, and we think it’s a unique way to let people step into this industry and step out when their life changes in

Nick Moran 20:41
from a cheque size standpoint, is that the same for every deal? You do? Or?

Speaker 2 20:45
Yeah, we’re writing 50k checks across the board. So it’s pretty simple. Okay, one thing, one thing I really like about, the way we’re approaching it is that we are literally taking all the learned lessons from X Factor. And there’s actually another another fun that was started by one of the partners at fly bridge. And we’re thinking how do we proactively address these things. And because all of the members have been and are continue to be community driven folks who are building community, they’re also very mindful of engagement. I’ve seen this and just my one on one conversations in the last two weeks of how do we keep our team engaged. So you have this, this team of people who are funded, who are funding these these amazing future unicorns that are really mindful of community. And I, I’ve seen everyone engaged, I’ve actually been really impressed, Nick, because everyone’s on on Slack every day, basically. So you know, fingers crossed, this continues, because I love that camaraderie. And to be honest, this is a really great opportunity to not just give an opportunity to to people who may not come into Vc and opportunity to explore and build their track records, but also an opportunity for us at the community fun to start changing the narrative of what a VC looks like, and what kind of companies we fund. Well,

Nick Moran 22:13
and you’re giving so many folks experience, and the ones that really lean into it, you know, they’re gonna have opportunities for sure. So how do you handle situations? You talked about how you embrace sort of the cold reach out? How do you handle opportunities, where, you know, startups come in, there is no lead investor, you guys are cutting 50k checks? Are you helping them secure that lead? Or, you know, how does that work? And I know it’s early days, but I’m

Speaker 2 22:40
like, How do I answer that we were two weeks. And I believe it is always helpful

Speaker 1 22:46
to founders. So it’s really no different what she was doing before it started.

Unknown Speaker 22:49
You know, thank you, Jessie. I’ll notice

Nick Moran 22:54
just everywhere online, you are, like, one of the most respected and helpful people in the early stage community for sure.

Speaker 2 22:59
Thank you, Nick, I really appreciate that. I was feeling the love yesterday, I wasn’t having the best day and the community just kind of rose up and said those words. And it just made me cry. But it made me feel special to on that know, Jesse sent me a box of doughnuts. And it was like the most specials, favorite thing I’ve gotten from like anyone I’ve ever worked with. So thank you. But to answer your question, Nick, about how are we helping these founders that may not fit within our thesis may or may even not really be VC fundable? Right, because let’s get real, there’s only such a small percentage of companies that are really set for VC funding. Personally, one thing that that I was using prior to the community fund, and even now, and the community fund has really embraced this as well as if you are a fit. And you know, we’re going to try to figure something out that we are not holding our investment partners to, hey, you must do these things for all of these companies, because it’s just really an overwhelming amount of work. And we all are doing the community fun on top of our main gig. So that would be very unreasonable. And so what we promote is engage with the founders as much as you want as much as you can. We do within our form submission, for example, we do set expectations in terms of if we’re not, if you’re not a fit, we’re not going to reach out, we will and we put we don’t put it in those terms, we put it in the opposite terms, right, where we say if we if you are fit, we’re going to reach out to you. Yeah. So so we have that in terms of I think it’s really important. I think founders, what I’ve learned is they don’t mind so much the you passed, but they just want to know what you actually thought of them or if you are gonna engage with them. So if you set expectations, that’s been really helpful. The other thing is the the startup investor matching tool that I’ve been leveraging prior to and even now, if there are startups that don’t fit our thesis is oftentimes that’s what happens. Founders will reach out to VCs, and they’re not exactly the right fit tool to send them over to the startup investor Matching Tool, which my husband, Josh and I build It’s over a weekend. And now we’ve been running it for five months. And what it does is really connects in startup founders with investors. And we have a program that matches these investor spaces with startups. And then we’re just making introductions and I’ve made hundreds of them. There’s been 11 checks written with a total value of over 800,000. It’s a drop in the bucket. But it’s something that that I do serve as a tool. I do use it as a tool to hey, if we can’t be helpful, here’s, here’s what can potentially help you. And then I try to be helpful in other ways to it, Nick,

Nick Moran 25:34
that is some list Lolita, please. We’d love to see some sounds good. We’ve you know, we we really embrace sort of like cold reach outs and stuff as you guys have written about, and I think we’ve done seven, seven of 31 deals were cold, and actually are to lead like to have five series B’s that are our best returners in the portfolio. We’re both cold. So

Speaker 2 25:55
really, Wait, have you written about this? You have to write about

Nick Moran 25:59
this? Because I talked about it on the show. Of course, he is talking about it now.

Speaker 2 26:03
I guess. So. But I mean, I feel like I want to, I think that’s a tweetable there, because there’s so many haters on the block, right? With cold outreach, you have some investors who are like, if you cannot find a way to get a warm intro to me, then you must not be good enough. But what’s missing in that is that, you know, not everyone started off with social and financial capital. So it’s really hard. I mean, part of the reason why I’ve been able to get here to me, Jesse, is because I’ve very much leaned in to creating a community on Twitter, because I don’t have a trust fun. Because I do have to have a day job, you know, these kinds of things. And so you have to start from scratch. And what do you tell people who don’t have the connections who are very new, who have the potential, I like to use the word underestimated founder to mean, these are founders that have the potential to build unicorn companies, but have been overlooked because their resumes don’t have Harvard or Stanford, or that they worked at if AGMA. Not everybody has access to that. And so I think that it’s wrong. And really, I think you’re missing on that whole fiduciary duty to your LPs, as a as a partner, if you’re not looking at the broader community, there’s a whole world out there that’s untapped. And I’m just glad that my partner here, Jesse and I, and, and the coal Community Fund, we’re going to be tapping into it and doing everything we can and partnering with really great with a great ecosystem that really has risen within COVID, and the social movements and everything else. 100%.

Nick Moran 27:41
Like, I don’t want to talk poorly about some folks, but it’s, it’s the lazy persons game to invest in resumes. And it’s easy, right? If you’ve spent some time at notable tech companies, if you’ve lived in the valley, if you went to Stanford, it’s it’s just a much easier sell. And it takes a lot longer. And it’s a lot harder to really get to mindset, you know, looking beyond the paper. And I think so I

Speaker 2 28:10
mean, it’s, it’s easy, it’s easy to say, Hey, look at this resume, let’s just invest because, you know, it’s easy to say no to deals, what isn’t as easy is to to look at deals and say hey, I have the conviction that this is going to be this amazing company. I mean, I think a great example of something where we’re this kind of applies is is with the Kalin Lee’s founder, right? He went to 100% He went to raise VC, and everyone turned him down and now he raised about like, he’s like, Well, whatever because like I have those 50 Anyways, he’s like he is but that’s the thing right? And you have like lat I think it was last week Morgan from ingressive Capital who had her first exit big huge accident right paystack That was bought by Oh, is it on I’m forgetting who bought them. But they had this $500 million exit and and and this is the these are founders from Africa. You know, these are underestimated founders and you’re starting to see this trend of one of our partners actually or two or partners, three of them, Squire and when you look at squire when you look at Drift these are half billion dollar almost half billion dollar valuation companies and you know, their black and Latin x. So there’s a big market out there, we need to keep our eyes open and not just look at it or resumes.

Nick Moran 29:40
Totally, totally. So what is a what does a good founder look like to you? Right for the audience out there of people listening that maybe seeking capital, maybe launching an early stage business, like help us understand what you guys are looking for. And you know, how you select The I know it’s early, but how are you going to select the investments that you end up partnering with?

Speaker 1 30:08
Yeah, I mean, I can give you sort of the, there’s two sides of this right there. There’s the founder. And then there’s the sort of company and the thesis. So, so, you know, when we think about sounder, though, and this has been the case, you remind your career, my venture career, and I think follows through one of the things I push on the team community fund with is founders need to have deep passion for what they’re doing. But I think that more important than even just passion, which, which is quite important, is they have to have the desire to do a part of everything, right, they have to be, they have to have the desire to get into the weeds of the early days of the company, and learn to do some of everything. And so one of the worst ways the one of the easiest ways the immediate shutdown, is when a founder comes in and says, like, I’m looking for this one skill in order to like, solve my problem, right? Like, I have the idea. And I’m looking for a developer or I have, or I’m a developer, and I’m looking for a designer, I think then in the early stages, and you’re talking about the precede, you need people that are willing to step up, they’re willing to take the time and learn. And when we were building a community fund, I mean, I have released a total price for this, she was online every day, like designing like graphics for our launch, like she’s got a full time job running a sales organization, and is building a fund and she’s like, Screw it, I’m gonna go online, and I’m gonna find a way to make this right. And she does a really cool platform do it. And that the same thing when founders are building companies, I think that you need to come to the table with I used to call it in the early days we work, I would say, Everybody should sort of understand the first 20% of every role. So even if you’re in marketing, you should have some knowledge about what the developers are doing, what the architects are doing what the designers are doing. You might even want to take the chance to learn from them and start to do what they do, but at least sort of understand what they’re going through. Because they think the empathy for the rest of your team and the challenges your business is going to face is probably one of the most important things in success through these sorts of as we all have seen the design the like valley of death, right? The like, the business is going great, and the press comes out of there, fundraise, and then oh, crap, we missed every metric. If you’re if you’re not aware of what everyone’s going through, you quickly fall apart and you walk away. And so I think on a personal side, founders that really embrace that tend to be much more exciting in the earlier stage. By the way, I will note, when you get further along that your series B companies, I truly hope that the founders have hired well, then they’re not doing the first 20% of every role anymore or won’t work either. But at the stage that we’re investing in the community fund, you need to be doing that.

Nick Moran 32:38
It’s It’s funny, you mentioned that because one of my founders a guy named John Rinaldi jiobit He, he says, his most important job is to continue firing himself from jobs. So he’s got to find people that are better at specific things than he is and over time, you know, move from I guess player to coach to GM, you know, you kind of have to go on that transition as you you raise capital and run a bigger organization.

Speaker 2 33:05
Yeah, for me, neck. There’s a couple of things that that are really important to me. First is I like to do business with good people. So no hassles type of policy, i No matter what a deal looks like, I have to have good people. I love seeing scrappiness so very much what Jesse’s talking about the resourcefulness? How are you getting done, what you’re getting done and with, with how much of resources and this is very top of mind because I love I love thinking about the relativity of where a founder is starting how much they’ve done with what they’ve had. So so there’s this concept of scrappiness and grit are really important. And then I also love to see a founder that has vision, vision to build a unicorn, because there are two different types of perspectives of oh, well, to see where this goes to, I want to intentionally go out there and make this the biggest thing I can write. So those are my three in terms of the community fund and how we decide though, we are very autonomous. We, as Jesse mentioned, we have a buddy system. So you’re like, hey, I love this deal. We do an investment memo, we do have an investment memo process, we have a buddy system, if you can convince one other member of the team, that this is the deal to be done, because it’s going to generate us great returns. We’ll do it and we literally just went through our first deal. So I can tell you about about the process there. And that’s exactly what we did. And then we’re just like, Alright, cool writing our first check. Let’s do it. And so we’re trying to make it pretty lightweight. But make sure we’re doing our due diligence, getting our DD docs, you know, all that good stuff, and then just executing so we’re saving every person who’s involved time and being very thoughtful and intentional about our process, because we are writing 50k checks, right? It’s not Like we’re writing to Jesse’s point, sure, millions of dollars type of taxes. So that’s what it is. I’d also like to answer the other side of the question. Yes. What is community? Yes. What

Nick Moran 35:10
is? Yeah.

Speaker 2 35:12
Oh, Nick, what do you think it is? Actually, let’s make this fun. Well, I

Nick Moran 35:16
mean, on the spot. There, there’s, there’s different ways to answer this. I think some venture capitals talk about network effects. But I think that’s probably only one portion of what you guys are doing. We on our website, we talked about a bunch of different themes that we invest around one is called UGV. So that’s user generated value. So that’s where the users fundamentally are creating the value of the platform. And so I think that there could be a lot of different definitions, and it depends on just the scope, I think,

Speaker 2 35:46
Nick, maybe he should share deals like I think there might be a lot of alignment. So also,

Speaker 1 35:53
also, you can take the UGC content, we’re just gonna drop it over the community fun site, because we could really use that.

Speaker 2 36:00
I love it. I love it. But instead of users, we use members. So a few elements. And I’ll have Jesse, like elaborate on this, right. But there are so many ways to look at what is community driven mean? On one on the flip side, if you look up community, there’s there there may be words of philanthropy and all these things. But in the VC scope of things we’re looking for is companies where the customers identify as members. And these members have an ability to create value for each other. So some of what you were talking about Nick, and they start the marketing sales flywheel. They’re able to influence the product, if it’s if the community is not the product itself. There are instances where the community can be the product, or there are instances where you have the community built around a product. So those

Nick Moran 36:51
with your model.

Speaker 1 36:54
We right. Yeah, well, intentional. And part I think, as we continue to discuss this, you know, we’ll we’ll hone in on the best way to sort of separate out the different concepts because I think that what this really comes down to is there is a better business models and what’s existed over the last decade or two. It two decades ago, advertising was the driver, right? It was buying search, ads, television, radio, you name it, in the decade after, so call it 10 years ago, social was on the rise, one to many, right. So companies got really smart. empires are built Buddy Media got really smart in how the brand can talk to the consumer, the brand can talk to the customer to the user. I think the downside, the upside of that was far less expensive to develop, it could be a lot more organic. You know, you think about I was talking about how Louisville made us lots of content and graphics, you do that really fast, you throw it on Twitter, on Facebook on Now Instagram. And all of that was great. The cost of advertising over the last decade has risen because it’s become so noisy, you can build a brand so easily. And this is true in the software world open source software led to easier and faster software growth. This has happened in the consumer world you can print consumer products now literally, you can 3d print a product and ship it to a customer and in a matter of hours. And so as the rise of the cost to reach customers went up this idea that there’s a many to many relationship and this is where I think you’re talking about user generated value. The many to many relationship happens on a on a number of dimensions. One is to relate as point acquisition, people who are a part of the community drive, lower cost and faster acquisition I just took my fifth peloton ride in my life, and I get the hype i i wouldn’t do it for years and I just did my fifth one and I’m bought in. But the idea that every single person that’s ever written a peloton, I’m fairly certain has told like 100 friends that they’re doing it and they love it is part of the value. It’s not that peloton got great at marketing on Facebook, it’s that consumers got great at telling their friends about their experience. So the marketing effects are lower cost higher growth rate. The second part though, is margins increase, Lolita mentioned that products are developed by the community. All of a sudden you’re not going out and spending a million dollars to make a product and then test it in the market. You’re actually building the product right alongside your customer. So your customer is influencing the look the feel and and tick tock stars like influencers have gotten amazing at that right? They go out and as I’m making a new track, tell me what my first note should be. And literally they’re making music with their with their audience. And the enterprise does the same thing. We were early investors in MongoDB, which is an open source database platform that’s now worth 16 plus billion dollars. When it started their original users were contributors of code, right? They were the creators of the software with The people that wanted to use it. And then the third and final thing is that your operational costs go down, you’re able to do so much more with so much less and so I just saw him on this peloton kick. So I’m gonna give another example that I saw this morning which was even one of the peloton Facebook groups by the way, not an investor in peloton wish I was. But just like avid user and customer now, but But this morning, somebody posted that their delivery was delayed in a Facebook group. And literally 100 peloton, members writers responded. And by the end of the thread, the person still didn’t have their bike. But they were like, Man, I feel so loved here. Like other people who have this problem, I’m going to download the app, I’m going to do a workout on the floor instead because they’re going on my bike yet, like who’s gonna ride with me. And all of that came together with zero input from the company, right? And that idea that you can do that you can increase support and lower costs, you can increase margins and lower costs and you can increase growth and lower costs is what comes out of the effect of a well designed community strategy for a company.

Speaker 2 41:01
Yeah, and something that that I think is super cool is that the timing in the market is great, right? So you have COVID definitely has helped with we need community we feel lonely people are feeling lonely before. And so having this aspect of being able to go to a community that helps you solve a problem or helps you achieve a goal is definitely something that that that the world is asking for more and more. And then you have on the technology side the platforms that are enabling it to make it so easy to create the these communities right So Jesse can’t stop telling me about peloton on a daily basis. It comes out of his mouth like every conversation. I might just have to get a peloton. No, but you know, they’re using Facebook, right? So there’s, whether it’s Facebook, or slack, or whatever it is, it’s so easy. So you have people who are wanting community, you have the platforms to do it. And then to Jesse’s point. Everybody from a company perspective is trying to figure out how do we have our distribution or go to market or sales strategy aligns that we can have that scale at a lower cost. So lower CAC, you know, you’re looking at a lower cost. And then this beautiful thing where you have people who are the advertisers like Jesse peloton to pay you.

Unknown Speaker 42:23
They don’t have to, that’s the beauty of the model the beauty.

Speaker 1 42:31
We saw this, by the way, I will bring in an example that comes closer to home, which is we were early investors in chief food we co lead their seed round and CIPA this platform to empower women in VP roles that above to give them a community education growth and opportunities sort of level up. And Chief has grown from zero to 1000s of users in a matter of a couple of years. And in wildly positive economics, by the time they raise their series A they actually haven’t spent any of the dollars from the seed round, because membership grew so fast. And people paid up front now, cash flow model gap model different but the point being the bank account was still there. And what was amazing. And one of the reasons that was the case is the early members of Chief felt so strongly tied to the the community that if you went on to a place like LinkedIn, you would see on every member’s profile, it would be their day job. And then that their chief member listed right along with it. And then the fact that they went to Harvard or Stanford or you know, U of M, it didn’t really matter. That was the third that became the third part of their identity when it came to their professional life. And that flywheel led to if you searched for cheap on LinkedIn, you will see hundreds of employees because LinkedIn doesn’t have an doesn’t have a structure for community members. But when you actually click in you’ll find out that the company is less than 100 employees, there are just hundreds of people have it listed as a part of their life. And so that enables you the next person that goes but does this chief thing I just heard about my friend just posted they went to the clubhouse and and you know, went to an event and they search online and they find not just articles, they find hundreds of people who they look up to. And so that idea can happen across lots of different verticals and that is one that I am proud to say I was an early investor in so I’ll advertise that one too.

Nick Moran 44:20
Well, what do you guys know you need to get better at for

Speaker 2 44:24
me I have just dove into this DP role so I loving learning from Jesse chip Jeff and I want to do more of that. And we’ve started to get a lot of LP inbound and interest and investing in our fund right now. We’re just one one solo LP as Jesse mentioned earlier, so I’m really curious and excited to learn more about raising from a ton of different LPS so welcome. I’m happy with you. If you have intentions to invest in us in the future, we’re not raising but I I love building relationships with people. And like I said, with like, with founders, I hope that the LPS that we have for fun too, will be wonderful human beings who are progressive and want to make a lot of money.

Speaker 1 45:12
Awesome. For me, my current struggle is remote work, I’m still not used to it, I’ve never really enjoyed it. And and so as you know, from the beginning of this call, I had to go find headphones that would work that sounded better than the air pods that typically use but, but in all honesty, I think that the big thing is, communicating the same level of conviction, across zoom or across a phone call when you can’t meet someone in person, is something that I continue to find ways to improve for myself, because I want to back founders with the same level of conviction and passion that I had before this pandemic changed the way we all work. And I, it’s really hard to get that across the wire. And so I think something I want to continue to work on is better engagement, Lolita, and I have learned over the time of working together how to how to better work together since we sit on opposite coasts, and we we’ve actually never met in person. And we have a fun together, right? So like, like, how do we communicate better in that way. And so I think, continuing to do that, because my belief is that we’re never going back to a five day a week, office environment, just even post vaccine and everything else. I think we can do a lot from afar. But it means that we need to adapt and how we work how we get to know people. And so I think for me, it’s just that’s been a constant struggle for the last, you know, seven months or so as, as I’ve completely shifted where I sit every day as everyone else in the world.

Nick Moran 46:37
And finally, guys, what’s the best way for listeners to connect with you and follow along with the progress of the Community Fund? Well,

Unknown Speaker 46:43
where it all began? I think Twitter right.

Nick Moran 46:49
You guys want to throw out your your URL?

Speaker 2 46:51
Yeah, yeah, our handle is actually and I’ll also throw in the the website if you guys want to learn more about our investment partners as well, the the URL is the community.vc. And on Twitter, you can follow us at the community VC. I’m also happy to connect with you guys at Lolita tal that’s ELO li ta ta UB.

Speaker 1 47:15
And I am at sarcasm misspelled online, which is in my handle for many years. And it’s at src, ASM, but feel free as well. As Lily just said in the beginning, we want to be super inclusive. So you can email me just the letter j@flybridge.com. i My inbox is open. It’s really messy. But I try to get back to as many people as I can, in a timely fashion. And so I think everybody should feel comfortable in submitting your startup if they if they’re thinking about investment and reaching out to us for help or advice wherever we can be helpful. Well,

Nick Moran 47:49
best of luck to you both with this new endeavor. It’s very exciting, and it’s very, it is very inclusive, and I think it’s something that’s much needed. And I’m glad to hear the two of you are doing it because you both have sterling reputation. So thank you for spending the time here today. And, you know, best wishes with everything.

Unknown Speaker 48:06
Thanks so much, Nick.

Nick Moran 48:13
All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot him an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening