Associate Kelly Byrne Asks “What Does Your Fund Stand For?”

I con­sid­er myself a fast learn­er but I don’t think I could have pre­pared for the amount of knowl­edge I would acquire since join­ing Pow­er­Plant even if I tried. I am con­stant­ly learn­ing new things and am chal­lenged to expand my think­ing on a dai­ly basis. If you read my last blog post, you know that I take a spe­cial inter­est in observ­ing and under­stand­ing those around me. To that end, there are two recur­ring themes with­in the ven­ture cap­i­tal indus­try that I’ve tak­en note of over the last six months that I want to share with you today. 

1. A “Go-Giv­er” Atti­tude Can Get You Far­ther Than You Think

There are count­less vari­eties of moral com­pass­es in the ven­ture cap­i­tal indus­try. And in a time when zoom calls have become more com­mon­place than in-per­son meet­ings, it is hard­er than ever to make a con­fi­dent assess­ment of one’s inten­tions and nav­i­gate the trans­ac­tion­al nature of many inter­ac­tions. Over the last cou­ple of years, my per­son­al expe­ri­ences in the work­place have helped me under­stand my own com­mu­ni­ca­tion style and the val­ues that are most impor­tant to me. 

Dur­ing my time in the field, I have noticed how col­lab­o­ra­tive and col­le­gial the ven­ture cap­i­tal indus­try can be, espe­cial­ly the con­sumer sec­tor. In addi­tion to shar­ing deal flow, investors of all ages and demo­graph­ics exchange ideas, resources, and time dai­ly. Unfor­tu­nate­ly, for every per­son that gives, there are many more that sim­ply take. 

In my view, the most suc­cess­ful and well-respect­ed indi­vid­u­als are the ones that find more hap­pi­ness in giv­ing than receiv­ing. Their abil­i­ty to impact oth­ers and con­tribute to the com­mon good is equal­ly as impor­tant as pro­duc­ing great work. Inspired by this approach, one of my core val­ues is to be a “go-giv­er” with­out expect­ing any­thing in return. Don’t get me wrong, a “go-get­ter” atti­tude can be a crit­i­cal tool for indi­vid­ual suc­cess. How­ev­er, I can’t help but won­der how pow­er­ful it would be if every­one adopt­ed this “go-giv­er” atti­tude or at least active­ly applied it more often.  

2. Human Cap­i­tal > Mon­e­tary Cap­i­tal 

On our first call with founders, we make it a pri­or­i­ty to ask what they are look­ing for in an invest­ment part­ner. It is crit­i­cal that we have a clear under­stand­ing of what suc­cess looks like and means to them from both an impact and finan­cial per­spec­tive, so we can ulti­mate­ly be aligned in that vision before any sort of check is writ­ten. Out of the first one hun­dred intro­duc­to­ry calls I have had with founders since join­ing Pow­er­Plant, 85% of them have explic­it­ly men­tioned want­i­ng a “part­ner” that offered some type of val­ue-add beyond cap­i­tal and 60% want­ed investors that were pow­ered by the same pur­pose and val­ues. 

What was inter­est­ing about these find­ings was how sim­i­lar they were to the trends emerg­ing in con­sumer pur­chas­ing behav­ior. In the same way con­sumers are increas­ing­ly plac­ing their dol­lars with com­pa­nies that align with their val­ues, founders are plac­ing their trust in investors whose val­ues align with theirs. Yes, those first one hun­dred calls rep­re­sent an extreme­ly small sam­ple size, and our fund caters to a spe­cif­ic audi­ence, but per­haps those founders are giv­ing us a sneak peek into the future on the impor­tance of brand equi­ty at the fund lev­el. What does your fund stand for? How is your val­ue-add dif­fer­en­ti­at­ed from oth­er funds? Is your posi­tion­ing unique and authen­ti­cal­ly root­ed in a mis­sion that res­onates with oth­ers?

With the US pri­vate equi­ty indus­try hit­ting an all-time high of dry pow­der of $920 bil­lion in Octo­ber 2021⁽¹⁾, cap­i­tal has become a com­mod­i­ty. And as a result, it is impor­tant for founders to under­stand what dif­fer­en­ti­ates each invest­ment firm from the oth­er and how each can unique­ly help them build towards a suc­cess­ful out­come. At Pow­er­Plant, we encour­age founders to con­duct just as much dili­gence on us as we are on them pri­or to invest­ment – to ask US the hard ques­tions and ulti­mate­ly under­stand what makes us dif­fer­ent. Every firm will have dif­fer­ent ways of going about this. 

At Pow­er­Plant, this usu­al­ly involves mul­ti­ple in-per­son meet­ings, a hand­ful of ref­er­ence calls with our port­fo­lio com­pa­nies, ini­tial strat­e­gy dis­cus­sions with our oper­at­ing advi­sors, and one-on-one time with our part­ners to get a com­plete under­stand­ing of who we are and how we oper­ate.

There will always be com­pa­nies that sim­ply want cap­i­tal and no investor involve­ment, espe­cial­ly in non-con­sumer-fac­ing sec­tors. How­ev­er, it will be inter­est­ing to mon­i­tor the impor­tance of “fund equi­ty” and how it may impact deal flow going for­ward.  

If you want to share any thoughts, or sim­ply want to con­nect, I’d love to hear from you on my Insta­gram or at kelly@powerplantpartners.co. 

Sources:

(1) https://www.allvuesystems.com/resources/private-equity-dry-powder-hits-new-highs-and-brings-old-challenges/