Collaborative Fund

One of Collaborative’s investors recently asked me a couple of probing questions which got me thinking about how far we’ve come since launching the fund roughly one year ago, and how much potential and hard work lies ahead in 2012. His questions were:

• How do you feel about your original investment thesis?

• What do you think about others crashing the party? 

• Given demand, why don’t you significantly increase the size of the fund? 

In the spirit of transparency, I’d like to share with you my responses:

How do you feel about your original investment thesis?

Collaborative’s original investment thesis was:

Collaborative = (people x stuff) + new technologies^creativity

The fund focuses on two themes: the increasing importance of values as they relate to the decisions we make about who we work for, what we buy, and how we spend our time; and the shift from an economy based on hyper-consumption to one based on Collaborative Consumption. These two forces present a significant opportunity for new technologies, products, and services to reinvent how we do business, consume personal goods and services, and transform our daily lives.

In short, Collaborative backs the “Shared Future.”

A couple of key things transpired since Collaborative’s initial closing (Thanksgiving of 2010):

First (and most importantly) people continued to adopt and embrace ways to collaborate at a staggering pace—using services such as Airbnb, Kickstarter, and TaskRabbit, among others.

Second, more and more entrepreneurs successfully extended the ideas of Collaborative Consumption across a wide variety of sectors — including everything from sharing cars (Getaround) to home-cooked meals (Gobble).

And around mid-2011, investors began to take note. Ron Conway touted Collaborative Consumption as a new “mega-trend” of similar size and scope to social networking (Facebook) and real-time data (Twitter). In addition, Shasta,Menlo, Redpoint, and other prominent VCs have started applying focus to these themes as well. 

Collaborative Consumption might be in the spotlight, but the Fund’s ambitions go well beyond that. Collaborative Fund’s future is not just in peer-to-peer sharing of resources.

The core values of collaboration include creativity, transparency, responsibility, and accountability to one another—these values are changing the ways employers work with employees; businesses work with customers; and individuals work with one another. For example:

Simple is redefining the relationship between banks and consumers. Massive Health is building tools and feedback systems to help us monitor and take better care of ourselves. Neither of these companies enable what you would traditionally think of as “Collaborative Consumption,” but they embody Collaborative Fund as much as TaskRabbit or Kickstarter.

There is a common ethos among our portfolio: the more financially successful they become, the better it is for the world. They all lean more towards for-profit focused businesses that inherently create social impact versus more philanthropic, yet for-profit businesses. A subtle distinction, but a very big difference.

This, paired with Collaborative’s emphasis on strong aesthetic and functional appeal, we believe, is a recipe for success. With powerful new tools like CSS3, HTML5, and reliable standards, web design has matured and is playing an increasing role in defining products and services. Take a look at Skillshare, where the look and feel define a winning user experience. 

All in all, I feel good about our original thesis. We put an early stake in the ground and created a disciplined and focused brand that stands for certain core values.

What do you think about others crashing the party?

It is exciting to see other smart investors recognize this opportunity. From a competitive standpoint, it will force Collaborative to prove our worth. In today’s funding environment, talented entrepreneurs have the luxury of working with investors they really believe can help them succeed. In addition, we are seeing entrepreneurs gravitate toward investors whose values are aligned with their personal and or company’s mission. 

Given demand, why don’t you significantly increase the size of the fund?

This fund is, in a sense, a lean startup; we’re entering into a new market and validating the idea with founders. I want to first prove that we have a brand and investment strategy that is correct and show that we can return significant capital before evaluating the idea of increasing the amount of capital we are investing.

Right now, as you know, we have no institutional capital invested in the fund, only exceptional individuals. I believe this allows us to be more agile and aggressive in pursuing our mission. 

Our strategy remains consistent—we will continue to invest in people and businesses that fit the core thesis of the fund and support them in building what we believe will be lasting, successful businesses.

On that note, we’ve been busy recruiting new talent - both for the fund directly, as well as for our portfolio companies. 

First, in the fund: We’ve recently added some new investors to the Collaborative family: Scott Heiferman, Ron Gonen, and Chuck Templeton. Scott has built an incredible company based on the very concept of collaboration - Meetup! Ron co-founded RecycleBank, and Chuck pioneered an Internet-based collaborative business (OpenTable) before there was such a thing. They are a great addition to the existing Collaborative team of investors.  

Second, in the companies the fund invests in: We know that finding exceptional technical talent is tough for startups, and trying to couple that with the right cultural fit is even tougher. That’s why we are teaming up with Code for America to create a jobs program that matches up CfA fellows with Collaborative Fund portfolio companies. I’ve had the pleasure of getting to know the founder, Jen Pahlka, over the past year and have tremendous respect and admiration for the organization her team is building. The program is a great fit — the caliber of talent is high, and our missions and cultures are aligned.

Onward in 2012.

-Craig