Image may be NSFW.
Clik here to view.
Silicon Valley VC firm, Felicis Ventures recently made the news in Forbes with their founder development program supporting leadership coaching and other development programs.
So what’s new I hear you say?
Firstly, the partners at Felicis Ventures point out they were inspired by fields like professional sports where coaches are a regular fixture in helping high performance athletes deal with the pressures and psychological struggles they may face. In this respect they are markers for a growing trend of acknowledgement and support for people suffering from high stakes stress. We are coming from a low bar in which such suffering has long been stigmatized so I am by no means trivialising this move by Felicis.
But secondly, venture capitalists are in the business of giving entrepreneurs money so, again, what’s new? Yes, but in the vast majority of instances this funding is dilutive of the existing shareholders, meaning it is not provided without some form of quid pro quo, mostly via equity in the investee company, a seat or seats on the board of directors and a whole lot of influence on key decisions in the operations of that business.
So here is what makes the Felicis pledge so radical. They are providing 1% towards founder development on top of the dilutive capital they invest and they are taking this out of their own management fees.
The way VC works is various institutions, high net worth individuals and corporations provide the investment pool – these limited partners get a return on investment of about 80% less a 20% carry that goes to the VCs for their efforts in successfully deploying the investment pool. The more successful, the more carry for the VCs. In addition, the VCs get an ongoing management fee during the time they are deploying and managing the investment pool. This is called a management fee and is around 2% per annum. This fee is what the VC firm uses for operational costs during the life of a fund, which can range up to 10 years.
So for Felicis to slice a chunk off of these fees and provide it to the entrepreneurs they invest in is a big deal. And to do so without any directly-correlated increase in their shareholding in an investee company makes it unusual in the VC space.
But hey, it’s a smart decision.
Here’s why: they are essentially signalling to these startup leaders that it is ok to check in on themselves and ensure they are tracking right emotionally and mentally despite the rigours of running a high growth business; they are doubling down on their investment in these entrepreneurs with a personal investment in their well being; besides hopefully adding somewhat to the success of these investments this signalling also points to Felicis playing the long game of investing not only into a company, but into its people; it shows they care and when their investees turn into serial entrepreneurs and are deciding who to invite in as investors in their next company, you can bet they will seriously consider Felicis.
Smart, right!
So how does this play out amongst the Felicis portfolio?
Canva is one of my favourite startups (disclosure: my son Josh works there) and also a Felicis investee company. They are a growth rocket ship and have a full-time coach on board with plans to bring in more. In their ad on LinkedIn for an Internal Coach for their Manila office they say:
“…looking for a unique person to execute with key stakeholders a world leading internal coaching methodology for personal coaching, group coaching and team coaching…we do not believe in top down management, we believe in helping all of our teams to reach their goals and to deliver value to our community through coaching and mentorship.”
What this points to is that the Felicis 1% pledge has had a wonderful cascading effect: Canva is not only focusing on personal development among the founders and leadership, but also across the company.
What do other VCs say about what Felicis is doing?
Brad Feld of Mobius Venture Capital in Boulder is both a veteran venture guy and a supporter of coaching for entrepreneurs around depression and mental health. He has blogged that he is delighted to see the article in Forbes: Acknowledging the Value of Coaching and Therapy for Founders.
And this is really what it is all about: Felicis, in one bold move, is making massive strides towards destigmatizing coaching and therapy and boosting their portfolio while they are about it. Well done, guys.
Mahendra Ramsinghani, who runs the Secure Octane seed fund, also has an article in TechCrunch on this topic titled Investors are waking up to the emotional struggle of startup founders. As someone who at one time wrote research notes on the Gartner Hype Curve I love his use of the curve for plotting the phases a startup goes through. Way cool!
As many of you know, I’ve also been a big supporter of coaching and leadership development for entrepreneurs over the years. In fact, I was so convinced of the importance of this work I left Gartner in 2015 and set up Exoscalr to focus on working with high performance leaders and their teams. It is fantastic to see further recognition of this rewarding approach to supporting the people building the future.
Image may be NSFW.Clik here to view.