How We Think About Values Versus Deeply Held Beliefs

Matt Blumberg, the CEO of Return Path, has an outstanding post up this morning titled The Difference Between Culture and ValuesGo read it, I’ll be here when you get back.

If you liked that, go get a copy of Matt’s book Startup CEO: A Field Guide to Scaling Up Your BusinessIt’s one of the books on my list of books all CEOs should read.

Matt distinguishes between culture and values. His punch line, which he reveals early, is:

Values guide decision-making and a sense of what’s important and what’s right. Culture is the collection of business practices, processes, and interactions that make up the work environment.

At Foundry Group, we have a slight modification to how we think of values. Supporting our values are a set of “deeply held beliefs.”  These deeply held beliefs tangibly define our values and give us a frame of reference to operate.

For example, one of our deeply held beliefs is that “we will never grow.” Each of our funds is $225 million, we have four partners and no other investment staff, and we work out of the same office we’ve worked out of since we started in 2007. We’ve had opportunities to raise much larger funds and have considered it in the past given a variety of factors. But, we kept coming back to this deeply held belief and realized that raising a larger fund would violate our brand promise of only raising $225 million funds.

Our deeply held beliefs are fundamental to our values, although we are comfortable challenging them regularly to make sure they are deeply held, and make modifications on occasion when we learn new things but only after a lot of thought and discussion, among ourselves and with several of our very close limited partners.

For example, when we started we said “we’ll make around 10 new investments a year.” This came from a belief around the importance of time diversity of investing – we have a three year time horizon for making the 30 or so initial investments in the companies we want in each fund.

Until 2013, we made between 8 and 14 a year, which is close enough to 10 (although the year we did 14 was a year where we all said “too much – slow down.”) But at the end of 2013, when the JOBS Act became official and AngelList created Syndicates, we decided to understand the phenomenon better by participating in it. So, rather than sit on the sidelines, observe, and prognosticate about angel / seed investing, we created the FG Angels Syndicate on AngelList and have done around 60 seed investments in the last 18 months.

Another example of a re-evaluation of a deeply held belief was our decision to create our Foundry Group Select Fund. Until we created this fund, we limited the amount that we could invest in a company to $15 million. We would occasionally go a little higher (the most we have invested in a company from one of our funds, other than Select, is $17 million) but, especially with successful companies, we were limited to what we could do in the later rounds. During a particularly challenging financing for Fitbit, which we believed deeply in at the time as an unambiguously successful company, we were frustrated that we couldn’t write a big check in the financing. We talked to our LPs about what we were thinking, quickly raised a late stage fund to invest on in our later rounds for our portfolio companies, and made our first investment from that fund in the last round Fitbit did in 2013. With Select, we are no longer limited to investing $15 million per company.

Matt states in his post:

“A company’s values should never really change. They are the bedrock underneath the surface that will be there 10 or 100 years from now. They are the uncompromising core principles that the company is willing to live and die by, the rules of the game.”

I strongly agree with this, although I have one nuance. It’s hard to be absolutely correct at the beginning of the journey. So, instead of being dogmatic about values you created when you were three founders in a cafe somewhere, make sure you have one layer of abstraction about how you implement them, that can be tuned over time. For us, these are our deeply held beliefs, which support our values, but can be tuned as we learn new things. But, because they are deeply held, they can only be slightly modified, rather than torn up and replaced.

  • Be flexible and proactive about certain things, but not on others. Sort of like the 10 commandments.

  • josh

    seems like it worked out for you just fine on fit, congrats on successful ipo.

    • Thanks. It did indeed work out nicely.

  • Vince

    The last line is perfect “they can only be slightly modified, rather than torn up and replaced.” I highly recommend Matt’s book…I reference it often. Great post Brad !

  • DaveJ

    I find your terminology confusing. Typically, the values and purpose of an agency (whether individual or organizational) are its most fundamental and unconditioned principles. Beliefs, in contrast, usually relate to questions about what is or is not true about the world, not about actions one will or will not take.

    So for example, you mention the belief that time diversity of investment is important (presumably to consistency of returns) – this fits as a belief; whereas “we will never grow” is a choice of action based on beliefs (perhaps “we will enjoy our work and be more efficient and effective if we are smaller”) underlain with values (possibly, “we want to enjoy our work” and “investor rate of return is paramount.”)

    Obviously I’m not debating the effectiveness of the conceptual structure you have created for Foundry Group, but it is helpful to map these concepts to the way others think of them, so I am trying to understand how it is really organized. That was also the purpose of Matt’s blog post, which made a great deal of sense to me.

  • Alan Clayton

    Simply put – Culture is “the shared beliefs and values held by the members of a group” which then plays out in their behaviour. Values are the answer to the question “what’s (REALLY) important round here”, and, if you’re serious, that should lead directly into the creation of a set of supporting metrics.
    Setting corporate values is possibly the most hideously badly implemented process in most companies. Second only to the vision thing !
    I think of values like the OS in a laptop. They form an immovable framework of rules, and conclusions made about life based on an entire lifetime of experience.
    Ain’t gonna shift much after a couple of fireside chats, or even a firewalking experience or two, although that can help !
    I like the NLP world’s contribution to this debate, specially Robert Dilts, and his model of neurological levels. Something I’ve used to help teams align vision & values, with action on a practical day to day basis.
    Great fun !

  • I love your simplicity. Adds further clarity to Matt’s blog. It reminds us to have presence of mind when impulse rises or we think ‘this time it’s different’. While only partially relevant here, I remember when Nortel became a significant weight in the TSX (Toronto Stock Exchange) Index. Portfolio managers were allowing the weight it carried to drive investment – the risk of not being there, rather than their fundamental principals.

    PS – I also highly recommend Matt’s book.

  • With experience comes operational clarity.
    It is obvious in your case.

  • That’s a great post by Matt, the bedrock part makes sense. Where I see a lot of companies get stuck is they don’t acknowledge that culture is really only a set of choices. If you make good ones consistently (including taking the hard road when needed) you’ll have an opportunity to support your values.

    Sounds obvious, but people and companies eff it up all the time. You can do a thousand good things that support your values and still screw it up if you don’t understand the difference. Todd May just wrote an interesting book that deals w/this in part, the 20 or so pages on Lance Armstrong are particularly thought provoking and unlike anything I’ve read so far about Lance’s story (which has a lot of ugly and very difficult Qs for entrepreneurs, I suspect) –