Venture-capital investing often resembles a competitive blood sport, with hundreds of firms battling to get into the best deals. There are only so many good deals to go around, and the hottest startups don’t always pick the firms with the most money. Promising companies often choose their investors based on the firm’s reputation, the services it offers—such as help with PR or recruiting—or its Rolodex of industry power players.
For firms to stand out, it helps to have a few successful entrepreneurs and tech luminaries as partners, advisers or investors. Many successful executives invest heavily in startups and venture funds. Village, a new Bay Area venture firm that launches publicly Monday, took that idea to the extreme. The firm has recruited a long list of “featured luminaries” as investors.
They include Amazon CEO Jeff Bezos, Microsoft co-founder Bill Gates, Facebook CEO Mark Zuckerberg, former Yahoo CEO Marissa Mayer, Alphabet Chairman Eric Schmidt, Walt Disney CEO Bob Iger, LinkedIn founder Reid Hoffman and former NBA star Magic Johnson. There’s also Mike Bloomberg, American Express CEO Ken Chenault, Spanx founder Sara Blakely, IAC Chairman Barry Diller, former Cisco Systems CTO Judy Estrin, VMWare founder Diane Greene, Twitter founder Evan Williams, LinkedIn CEO Jeff Weiner, former Symantec CEO John Thompson, and Pinterest CEO Ben Silbermann.
The mere association with these people is enough to give a reputational boost to the firm and any young startup it backs, but Village aims to go beyond name-dropping rights. The firm’s investors have “committed time and energy to the Village network,” according to a firm blog post. Village will not specify exactly how much time or energy Zuck, Marissa and Magic plan to spend helping its early-stage startups with mentorship, introductions, and business-development opportunities.
Hoffman, a partner at venture firm Greylock, says Village’s approach is a response to the growth of seed investing in the last two decades. “To match this growth, seed investing needs additional strong networks,” he says, “Village is approaching seed investing as a coordinated network: to provide the earliest capital and help, and then to connect those companies to great venture-capital firms.”
Village is not the first firm to ask its investors, called limited partners because they typically don’t play a role in day-to-day dealmaking, to become actively involved with its portfolio companies. Slow Ventures, a firm founded by former Facebook executives, touts the active role its investors play in its portfolio, for example.
The arrangements raise the question of why limited partners would need a middleman like Slow or Village, which charge a 2% management fee, to invest their money. But proponents of the model say their investors, typically successful entrepreneurs, want a way to stay connected to up-and-coming entrepreneurs without having to take 20 coffee meetings a week. Says American Express’s Chenault, “I love sharing the lessons I’ve learned in my own journey, and look forward to doing so with entrepreneurs and technologists in the Village network.” Likewise, Spanx’s Blakely notes, “I love being an entrepreneur and I love supporting fellow entrepreneurs.”
Village also has a novel strategy for identifying and investing in startups. The firm has tapped a team of “network leaders,” including ServiceNow CEO John Donahoe and former US CTO Megan Smith, to source deals and write checks without seeking approval from the firm’s actual partners. The idea is to capitalize on the fact that these leaders are often the first people an entrepreneur calls when seeking fundraising advice. “Decentralizing some decision-making to these “go-to” people means today’s founders can get fast fundraising decisions from folks they know and trust,” the Village founders wrote in a blog post. The network leaders will receive a portion of the firm’s proceeds on successful deals.
That doesn’t appear to leave much to work for the firm’s five partners: Ben Casnocha, who co-authored two books alongside Reid Hoffman; Erik Torenberg, an entrepreneur; and venture investors Adam Corey, Anne Dwane and Ross Fubini. They’ll direct their energy toward follow-on investments and building the network. Village’s first fund, which has a reported $50 million target, has not yet officially closed.