First Round Capital Poster

How can venture capital firms help startups?

Money, sure. Mentorship, often. Credibility and validation, yup yup. Community? In the past few years, it increasingly seems so.

Name a VC that was founded in the last 10 years, and there’s a good chance they have someone on staff who’s focused on community.

Andreessen Horowitz, First Round, Quotidian, First Mark, True Ventures, Galvanize, Workbench, Y Combinator, Techstars, Spark Capital, 500 Startups (disclosure: investors in my company, Feast), Union Square Ventures, Work-Bench, Rothenberg Ventures… the list goes on.

These are just a few of the VCs who all have at least one full-time community-focused partner or staff member and have developed elaborate community strategies to bring more value to their portfolio companies.

Curious about this trend, I interviewed some of these leading VCs and community professionals to shed some light. Why the focus on community? Why now? And what does their community strategy look like?

I learned that not only are VCs investing more into community, they’re doing it better than many companies I’ve seen (and I’ve seen a whole lot). In this article, you’ll learn why and how.

Why the focus on community?

By creating opportunities for portfolio companies to connect with each other, the firm can scale the value they provide far beyond the capability of individual partners. It just makes sense. When the companies can help each other, everyone wins.

The job titles might be different, “Platform Manager” or “Director of Community” being the most common, but they’re all working on the same goal: To bring more value to their portfolio companies by connecting them with each other.

This isn’t just some small experiment they’re all running. Some funds have made community part of their core mission.

First Round, which runs a 10-person “platform team,” is a shining example of this community-centric mentality. “First Round is all about community. When you visit our office, you’ll see huge posters where the word ‘portfolio’ is crossed out in favor of ‘community,’” explained Camille Ricketts of First Round Capital.

First Round Capital

First Round has plastered these posters on their walls.

Kathrina Manalac, a partner at Y Combinator, explained why they focus on community, “The power of YC’s network is incredible. With almost 1,500 founders, you’re tapping into a network that has experts in almost every category — from hardware to enterprise sales to biotech. Additionally, a lot of alumni become the first customers (or even investors) of startups in the current batch.”

Other funds like Union Square Ventures (USV) have made community the core component of their investment philosophy. Brittany Laughlin, USV’s general manager, explains their approach: “Our thesis is to invest in large networks of engaged users that are defensible through network effects. We have about 50 active companies in our portfolio today who all embody that thesis. Our goal with the USV Network is to create safe, productive environments for teams to connect.”

For VCs, it seems community has become a viable business strategy both in terms of how they build their own organizations and in some cases, how they make investments.

But why now?

If the value is so clear, then why have we only now seen such a surge in community development?

Some believe that the increase in focus on community comes as a result of the bar being raised for what companies expect from VCs in the last couple years.

Danya Cheskis-Gold is a community industry veteran who now runs the community show at Spark Capital. “At the macro level”, she explained, “firms like Andreessen, First Round, and Google Ventures have all popped up in the past handful of years and really trained entrepreneurs to expect a new level of services and support. I think this is a good thing, in general. VCs are more than just a check. They don’t get less of us, but they do get more of each other, which is a way for us to extend the emotional and tactical support we know our entrepreneurs appreciate.”

Others think that there’s just a stronger need for knowledge sharing and connectivity within portfolios because founders are increasingly facing the same challenges at the same time.

“It’s easier than ever to start a business using open-source technology, cloud servers, and free business tools. Companies within a VC portfolio may be varied, but the challenges they face are very similar. When changes happen for iOS or Android, all of our companies are tackling the new parameters at the same time. If we can leverage knowledge and skills across our portfolio, it helps everyone move forward faster,” said Laughlin of USV.

So as a result of higher expectations from founders and improved tools for building companies and communication, community has become a core pillar of the VC model.

So what are they actually doing? How are they building community?

The focus seems to fall under four buckets: Events, Editorial, Physical Spaces, and Online Community

On the event front, VCs are taking things to a radical new level.

How many happy hours, conferences, or other events does your company host a year? Five? Maybe 20 tops?

First Round puts those numbers to shame. “Every year, I host about 65 intimate dinner discussions, six design summits, one CEO Summit, one CTO Summit, and quite a few smaller one-on-one gatherings between professionals,” explains Lucy Brady, First Round’s platform manager. “So that’s 65 smaller events, eight larger events, and a few others scattered in between.”

Community is a core part of First Round’s value proposition and their events are a huge part of that. “First Round has a founding principle to connect the brilliant entrepreneurs in our community to each other,” explained Brady. “We have found that while entrepreneurs are moving fast, building companies and teams, it’s hard for them to find the time to grab coffee with the CEO next door and ask about their best practices. We hold these evenings to proactively start these conversations and help everyone learn faster and gain a valuable new peer group.”

rothenberg

Founder Field Day (photo cred: Rothenberg)

Think 73+ events a year is a lot? Rothenberg Ventures boasts a whopping 100 events with creative gatherings like Founder Field Days and Third Eye Blind concerts. When asked why they invest so much into events, Rothenberg partner and chief connector Tommy Leep explains, “Relationships can be maintained via email and online, but we believe connections flourish when people meet in person. Each quarter, we host one big event like Founder Field Day for founders to learn from luminaries in our community. We host bi-weekly Happy Hours, monthly Topic Dinners and Luminary Series Talks, and Functional Forums for our portfolio.”

Spark Capital is another big player in the event game, hosting their “Spark Sessions”, which are actionable, skills-based workshops for targeted groups of entrepreneurs. Danya Cheskis-Gold gets the rest of the firm involved in each event, “Every time I host our quarterly Spark Sessions events, actionable, skills-based workshops for targeted groups of entrepreneurs, a partner co-hosts with me.”

yc dinner

Y Combinator Founder Dinner (Photo cred: Moz)

At Y Combinator, “the current batch attends weekly Tuesday night dinners where speakers come and talk off-the-record, including people like Mark Zuckerberg, Peter Thiel, Danae Ringelmann, Max Levchin, and others. We also host mini-conferences for our alumni community, which typically focus on one topic (growth, PR, patents, etc.) and feature a panel of YC alumni who are experts in the space. We bring batches back together for reunion BBQs at YC and happy hours in San Francisco and New York. There’s also a growing alumni community in London,” explained Manalac.

Union Square Ventures hosts full-day Summits for specific groups within their portfolio (ie. product managers, community managers, designers, etc.) as well as digital events, and half-day workshops for all members of USV portfolio companies. 

500 Startups hosts several full conferences that are generally open to the public, weekly mentor sessions and fireside chats for portfolio companies, random happy hours and even travels to startup communities all over the world with their “Geeks on a Plane” events.

So as you can see, events to bring the existing communities together and to reach potential investments have become a huge priority for VCs.

VCs have also kicked their content and blogging game into high gear.

Back in the day, there were only a few big VCs that blogged. Familiar names like Fred Wilson, Brad Feld, and Paul Graham basically owned the space. Today, it seems like everyone has their own publication, both for individual partners and for the VC brand. And from what I’ve seen, they’re churning out some really high quality content.

Camille Ricketts at First Round is one of the more impressive writers in the VC world today, building a massive following for their First Round Review. What First Round has done is figure out a system for pulling together content that just can’t be found anywhere else and builds a massive audience for their brand. “The First Round Review gives us a huge opportunity to gather and share wisdom from the most talented people in every area — from engineering to product to management to HR — across all of technology,” explained Ricketts.

First Round Review

500 Startups has a popular blog of their own run by Mark Saldaña, where the advice focused content is created by their marketing team as well as from founders in the portfolio, which brings the portfolio companies another great marketing channel.

Other firms simply maintain a more traditional blog like Y Combinator’s blog which is mostly articles from Sam Altman, or Spark Capital’s Tumblr, which takes a more light-hearted approach.

Who wouldn’t want their own co-working space?

To bring even more value to their portfolio companies, a lot of VCs are opening their doors into their own office space and dedicating desks to be used by their portfolio companies. The accelerators like Techstars and 500 Startups have been doing this for a while, but now we’re even seeing non-accelerator VCs buying up buildings and opening up co-working spaces.

First Round reserves office space to incubate some of the companies in their portfolio. In recent years, Quotidian Ventures in NYC housed many of the companies they invested in until they recently moved to a new space.

“It is really funny working in tech, where there is so much attention to the online space… yet we are doubling down on creating meaningful offline, in-person experiences within our physical space”, explains Jessica Lin, director of community at Work-Bench, a growth accelerator focused on enterprise companies.

Jessica spends a lot her days hosting founders fireside chats, workshops, and lunches to create opportunities for the companies in their space to connect with each other. I asked her why they provide physical space for their companies and she explained, “It never ceases to amaze me how our members can connect on navigating procurement, sharing lead generation sales tools, or other challenges unique to enterprise technology. The companies’ chances of acceleration and growth are that much greater than in doing so in isolation.”

Every portfolio needs its own online community as well, though the tools are still lacking.

Offline events are great, but in order to continue to develop scalable relationships between portfolio companies, VCs need some sort of online message board or knowledge-sharing platform.

If you have in-house developers, you can have the luxury of your own custom platform, which is what Y Combinator partner Garry Tan built. He created what they call “Bookface,” which is essentially YC’s internal Facebook. It also lists all the deals that YC companies get for different products and services. On top of Bookface, they also use basic email lists. There’s an email group that links all YC alumni which, at this point, includes over 1,400 founders and groups that cater to specific verticals — hardware, biotech, or international founders.

First Round also built their own platform that they describe as a “private Quora” which they continue to develop with the help of two in house developers.

Unfortunately, for those of us without a team of developers, there aren’t a great deal of solid community platforms out there as it is, let alone for the specific needs of VCs.

GroupTie is one of the better options today. Used by organizations like the Thiel Foundation and SoftTechVC, the platform was built by Chris McCann, who now runs community at Greylock Partners.

Dashboard is a tool that was originally built for 500 Startups that spun out into its own company, though the founder Paul Singh has since moved on to focus on Disruption Corporation. They haven’t developed the platform further.

Union Square Ventures uses the Yammer platform work, though they admit it’s not what the product was really built for and they’ve had to hack it together.

At Spark Capital, Cheskis-Gold keeps things simple too, “Inspired by the lean startup methodology, we use Google Sites, Google Groups, and email, mainly, to connect our entrepreneurs to each other and to share information with them.”

How are they tracking the success of their community programs?

Such massive event strategies, editors, office space, and online community managers don’t come cheap of course. VCs have to justify the expense. So naturally, the next question is: How do you track community success?

Turns out, their metrics aren’t as revenue-driven as you might think. They aren’t trying to draw a straight line from community to return on investment or number of investments made. They’re focused mostly on community experience, and they have faith in the value that community will bring them and their portfolio in the long run.

Across events, online communities, and workspaces, the goals are clear and pretty consistent across the board: connections, education, and marketing.

1. Connections: Increase the quantity and quality of relationships between members

Like any community, a huge focus is on building relationships between members.

At USV, they focus on three specific things: “Value, Volume and Velocity of meaningful interactions within the network,” explained Laughlin. “There is a balance; these numbers need to compliment each other. If you only focus on volume, you may incentivize the wrong behavior. The timeline to measure ‘value’ can take a long time too. So finding the right mix of these V’s for each type of medium is important.”

For Rothenberg, it’s all about connections, explains Tommy Leep. “We measure success by the number of interactions we facilitate and by the outcomes of those interactions. We help founders get funding, we help smart people find jobs, we help luminaries advise founders, we help partners access knowledge and opportunities, and we help startups grow.”

Put succinctly, “Every time we bring founders from different batches together, exciting things happen — new ideas are spawned, deals are made,” said Manalac from Y Combinator. 

2. Education: Sharing knowledge, stories and experiences

Through events, content, and creating opportunities for knowledge sharing online, each of these firms hopes to bring the most value to their companies by bringing in experts and surfacing the existing experts within the portfolio.

Lucy Brady explained First Round’s approach to tracking the success of their events, “We religiously collect feedback after events, asking attendees if they learned something they will use tomorrow and if they were overall satisfied with the gathering. If they learned something useful and new, and enjoyed themselves while doing it, we consider that a success.”

Just the same as any other company, they host events to improve their reputation, increase awareness and create opportunities to spread knowledge. It just doesn’t make sense to try to attach events to the bottom line too strictly.

3. Marketing: Building a community to spread awareness and improve reputation

Community has become a huge selling point for many of these firms. Take their investment and you’re getting more than just funding; you’re getting access to a powerful network of peers and mentors. As a founder that participated in the 500 Startups accelerator, I can vouch for how valuable the community is. It was a huge factor in our decision to do the accelerator.

Content and events that historically were kept private just for portfolio companies are now being shared publicly in order to spread awareness and improve their reputation.

As Camille Ricketts, explains, “We want [our content and community] to benefit all entrepreneurs, and we want them to think of First Round when it does.”

So where does this lead us?

Will these community professionals be able to move up the ranks at VCs? As the person who perhaps most deeply understands the needs of their portfolio companies, will that insight be brought into new investments?

Is that even their goal? For some of these community pros, they see this as an opportunity to build massive networks in the startup and Venture Capital world. Seeing how smart and hardworking all of the people I interviewed are, and the networks they’ve built, I recommend keeping a close eye on whatever they all do next.

Some bigger questions remain as VC’s continue to explore community. What happens when every VC has a community of their own and it’s no longer a competitive advantage? Will there be overlap when companies take funding from a lot of these VCs? How do they scale their community efforts, when some firms like A16Z, 500, and YC all make hundreds of investments every year?

Only time will help answer these questions. For now, it’s clear that community has carved out a seat at the VC table.

Photo Credit: First Round

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David Spinks

David Spinks | @DavidSpinks

David is the Founder and CEO of CMX. Forever fascinated by how technology can bring people together, he's been studying and building communities since he was 13 years old. He's also really good at growing hair.