Why investing in the community is like compound interest
Guest post by Brendan Burns
The notion of community has always been important for startups. The reasons are obvious. Building businesses from scratch is a lonely business to say the least, fraught with uncertainty and often devoid of positive returns. Even when you have a tight-knit group of co-founders, the experience is stressful and inherently isolating. So, the startup world has created several constructs that help those who are trying to fight the good fight. Meetups, coworking spaces, LinkedIn groups, and various networking events all serve to bring cohesion to our disparate efforts to build the next unicorn.
Create a community where it’s needed
Perhaps the biggest impact community building can have is fundamental impact. Several well-known companies are the result of creating business models and using technology to bring disparate communities together. Sometimes massive but latent communities remain fragmented until some social construct, cause, or effective application of technology can unite them. A good example is eBay: Pierre Omidyar created eBay to market the auction technology he had developed, but the inspiration was that his girlfriend wanted a place to buy and sell Pez distributors. Talk about a niche activity for geek lovers! Today eBay is worth $ 35 billion and has assembled a huge community that is making money on the platform while building a massive business.
For those who really invest in the concept, the community can play an ongoing and vital role throughout the lifecycle of a business and is often the only bulwark protecting the founder from failure while supporting long-term success. .
Community and Covid-19
A paradox of the Covid-19 period is that the loss of community we have experienced in the physical world has accelerated the need to create community in the virtual world.
Mario Gabriele is an intelligent and engaging member of the venture capital community. After starting out at Red Sea Ventures and later as a senior partner at Charge Ventures, Gabriele’s star has been rising for several years. In addition to an increasingly successful corporate career, Gabriele has created an excellent and entertaining weekly newsletter (The general practitioner). The general practitioner quickly counted among its readers some of the most influential founders and investors in the tech world. Gabriele’s approach was to continually engage and nurture the audience, growing them steadily. He built his community.
Then Covid-19 hit, and people with stable paychecks considered themselves lucky. What did Gabriele do? He left venture capital in August and went full time to The general practitioner – and he took the opportunity to explain the decision-making process in detail and with real transparency. A fundamental element of successful communities is trust; Mario’s transparency boosted confidence. The general practitioner got off to a good start, but this approach has further grown the community. Very quickly Gabriele had more followers and subscribers. No wonder – the articles and writing were great and there was confidence.
The protective power of the community
By early fall, Mario’s investment in the community was just starting to pay off. It was about to have a bigger impact: ensure survival. Two months after starting full-time The general practitioner, Gabriele and a collaborator were putting the finishing touches on an article highlighting the investment strategy of looking for companies that continuously maintain exceptional returns, sometimes referred to as Compounds.
During the writing process and prior to publication, Gabriele and his partner shared the concept with one of the company’s executives, Durable Capital, whose work helped inspire the article. The idea itself is neither unique nor new and has been used by investors for decades, including Warren Buffett and others. After the article’s initial publication, Gabriele was contacted and threatened with legal action unless the article was withdrawn. While the accusation was baseless and the threats likely toothless, it was scary for a budding entrepreneur to be threatened by a $ 6 billion hedge fund. After a contentious call, multiple emails and a lot of soul searching, Gabriele decided to stand on principle. The coin would be put back in place, and he would seek support fromâ¦ you guessed it, the community. Gabriele posted the entire exchange in detail on Twitter, Medium, Substack, and other sites. The outpouring of support was immediate and deeply reassuring. Several notable hedge funds, including Daniel Loeb of Third Point Management, whom Mario had never met, tweeted their support. Confidence was rewarded with strength. The community had spoken.
The community is the operating system
The art world is a massive global community, and at the highest level there are many people who fly in private jets to attend vernissages, art fairs, auctions and more. glittering events. Industry has a large carbon footprint. The Covid-19 changed everything. For independent artists who previously hoped to climb the ladder of success, things got even more difficult. Working in the dark was made worse by isolation and disconnection. They desperately needed community, but how?
For several years before the Covid-19, Look at me (of which the author is CEO) had built a platform that uses competition and data science to identify the best independent artists and connect them with art consumers. Under normal circumstances, the company holds competitions open to all artists from all over the world and usually includes a physical exhibition to present the winners (for example, large-scale events like SCOPE during Art Basel Miami). This type of competition provides an opportunity for independent artists to gain high visibility where they might not otherwise.
From the start, SeeMe has invested in the community and worked hard to build trust and open access. With the emergence of Covid-19, the focus on the application of human-centered technology has amplified the power of the community.
Until now, the art world has resisted the adoption of new technologies such as data science, collaborative filtering (for example, how Netflix or Spotify make recommendations) and predictive analytics, to the detriment of their (fragmented) communities. SeeMe is working to change that by using these technologies to align community interests. When artists enter the competition, they provide digital artwork, artwork metadata, awards, and other information that feeds into an algorithm that SeeMe uses to identify top artists, promote them on social networks and market their work on the web and Instagram. Before Covid-19, the company was making steady progress and by the entry of 2020, it had worked with more than 3,000 artists from 35 countries in 2 years. Since the lockdown, pursuing a 100% virtual approach, SeeMe has seen a 280% increase in artist registrations, and the community has been instrumental in the evolution of the product.
There were also unexpected rewards. In early 2020, SeeMe had planned a fundraiser but put those plans on hold when the lockdown began. The increased exposure and vibrancy of the community has caught the attention of several major crowdfunding platforms, acceleration programs and early stage investors such as Christophe Deutsch by Lofty Ventures.
The moral of this story? Across industries and across many types of startups, investing in community always pays dividends. An important tip for startups is to make community a central part of the strategy. Build trust through transparency, engage often around product and service improvements, recognize mistakes, celebrate victories and compound for long term growth.
Brendan is a serial entrepreneur and scholar. He has launched, built and turned around several companies in the technology sector with a focus on market companies in sectors yet to be disrupted, such as art. Currently CEO of Look at me, Brendan is an Assistant Professor of Entrepreneurship at Columbia Business School and co-chair of the Greenhouse program; he is also the program director of the master’s program in art business at Sotheby’s Art Institute.