Jesse Middleton & Lolita Taub: Investing in Community

Hey yenizens!

I’m working through more Makerpad breakdowns and today features Jesse and Lolita who have recently launched TheCommunity.VC where they believe that community-driven companies are fundamentally better businesses:

We understand the power of community. We have built communities that are hundreds of thousands of people strong ourselves and have helped founders to do the same — whether they’re trying to engage the open-source community to guide product decisions and early implementations like MongoDB or they’re building a company whose product is their community like Chief — we’ve seen it play out and we know the playbook.

It’s our entire investment thesis that community-driven companies are better businesses and outperform.

The Community VC

I had to give it a listen (like with most of the Makerpad sessions) and I took a lot of notes — let’s jump in!

To infinity & community,

— john

First Things First: Introductions!

Something really neat to hear is Lolita is also working in a sales role at a Series-A venture-backed company in addition to her role as a GP at The Community Fund. Jesse also runs a seed stage venture firm called Flybridge as well as being a cofounder with Lolita.

I think what’s neat about this is that both Jesse and Lolita are serial creators and founders, giving them some broad experience on how community can operate effectively in a variety of scenarios and sizes.

I can especially appreciate Jesse’s experience as an early WeWork staffer and watching that meteoric rise of both community and business, as well as Lolita’s experience in super-large businesses like IBM.

How Did You Two Meet?

TL;DR: We met on Twitter!

The longer story is that Jesse and Lolita saw an opportunity in an under-served, under-connected, and under-represented areas of the venture world and decided to combine forces.

Jesse reached out initially and began a chat (via Twitter DM) which eventually expanded into putting a fund together.

Do you want to build a community fund that has a community of investors, investing in communities that have been under-represented?

By the way, their operation proper is barely a few months old at this time of publishing! They’ve really been able to move fast — another natural benefit of community-powered initiatives.

Most Impactful Communities That You’ve Been Part Of?

Jesse goes first:

In the first 5 years of WeWork we built our own internal social network… and the vast majority of our members were creators and doers, people building with each other. The market cap of our members was in the tens of billions of dollars.

Jesse Middleton

Really neat to think about small communities in each and every one of their physical buildings; I know this intimately because I’ve been a customer of WeWork for two different businesses that I’ve started and I’ve always felt the community aspect and culture.

My community of underestimated founders — folks who have the capacity to build unicorn companies but who have been overlooked because of demographics or (social) stigmas.

Lolita Taub

Jesse goes on to share how they’ve used this perspective to drive how they operate their fund, listening and learning from the community to inspire and to help validate good investment opportunities.

So much of this is about being vulnerable and authentic — the ability to say that there’s aspects where I’m not as strong (and asking for help) while also being able to help with my own superpowers — it’s a beautiful exchange of value for value.

Lolita Taub

A lot of people can get behind this!

How Do Communities Form?

Jesse shares quite a bit on the formation but one of the more salient points is the fact that “communities need multiple platforms to scale.” This is a healthy reminder, especially for folks who are trying desperately to find the “perfect” or “one size fits all) solution.

Lolita shares three ways in which communities form:

  1. Form around a common purpose
  2. Form around a common mission
  3. Form around common values

Sometimes, as she shares, the community is “the product” or the community forms around a product, and the business either provides a solution to the community or the community forms (becomes) the solution themselves.

But, as humans, we all need multiple communities because we’re “multi-faceted” and multi-dimensional. Even the way we use certain tools may differ per community; for instance, Jesse shares that he may check one slack group a few times a month whereas there are others he frequents more.

How Do You Define a Community-Centric Company?

Here, the interview goes a bit deeper into the venture fund and how they look for investments and define their thesis. They as, as Lolita notes, industry-agnostic, and it could be a product, service, or community itself.

But key questions that they ask and try to answer are (via Lolita):

  1. Do the customers identify themselves as members of the community?
  2. Are those members enabled to provide value to each other?
  3. Are they providing that value to one another?
  4. Does the community generate the go-to-market strategy (i.e. “flywheel”)?
  5. How does the community impact product decisions and strategy?

Jesse shares their over-arching perspective as:

We believe that businesses that have community at the core of what they do, a pillar of their defensive moat and product / growth strategy, ultimately have better business models.

And, in short, they like to apply the “laptop sticker test”:

Are the customers willing to put a sticker on some sort of physical real estate? If so, we see this as an early-indication of a community-driven product and business.

Makes sense.

Best Ways to Help a Company Be More Community-Driven?

Lolita takes a stab and shares two steps:

  1. Identity and define the purpose of the community
  2. Setting up an environment where they can create value for each other
  3. How will you measure the community?

A very nice shoutout to Commsor, who Jesse has invested in, who calls it “Salesforce for Community Teams”.

Jesse also shares a strong reminder that building community-centric or community-first businesses is just as much work (if not more work) than building out an (enterprise) sales team and pipeline. Both can build billion dollar businesses, but, they believe that community-driven businesses are more long-lasting and more defensible.

A very nice shoutout to Arlan Hamilton of Backstage Capital who Lolita worked with previously:

[Arlan’s] been super-scrappy in building and creating community: She’s done a podcast, movie, a book… and she’s been building it in public, every step of the way, inviting them to be part of the journey.

I totally believe in building in the open and how it’s a massive competitive advantage for those who are doing it. Two big thumbs-up!

Are the most successful communities lead by extroverts?

I love how Jesse gives voice to all of the folks who found it hard to lead others in the meatspace but who have thrived in a digital one:

Yes — less extroverted people now have the power and choice of sitting on the spectrum of being completely open or relatively tight-knit.

Lolita also shares that she’s an introvert, so, expending energy to share is costly but it’s worth the project and movement that they’ve been building! Her suggestion mirrors what Jesse has shared:

Do what works for you — if you’re an introvert you can extend yourself however you want, for whatever you believe is worth it (and if it’s authentic to you to extend yourself for).

A few final questions from the audience rounded out the hour+ conversation:

  1. Is community a key for success in today’s startup world? Yes, but, depends on how well you do this and how authentic you are. Having community in your pitch deck won’t convince anyone, especially if it’s actually just a target demographic. Not everyone will have the same amount of success with community either.
  2. How to start a new community? Lolita shares, again, her tips from above while Jesse reminds folks that you have to dedicate time to community building and it takes a while. Leading by example (for authenticity and vulnerability) is very important in the very beginning. Always “like” everything that your community does, especially in the very beginning.

That’s a wrap folks!