Raving Fans – How Our Themes Evolve
We had our Foundry Group annual meeting yesterday. I enjoy our annual meetings – we get to spent a focused chunk of time with our investors. We have a straightforward meeting – a dinner for our advisory board the night before, drinks after for all LPs, our advisory board meeting first thing in the morning, and then the full meeting until lunch time. There’s no crazy party, no big events – just substance on our part and direct interactions with the investors supporting us. Our goal is simple – provide a clear update about what is going on in our funds, talk about what we are thinking about, and get direct feedback from our investors.
We spend the day before the meeting as a team putting the final touches on our presentation and reflecting on the previous year. We always talk about our key principles that we established when we started Foundry Group in 2007. One of these key principles is a “thematic investing approach.” An important part of our themes is that they are continuously evolving (if interested, we publish details on how we are currently thinking about themes on our Foundry Group website.) Our LPs understand this well and always like to hear how we are currently thinking about themes at our meeting.
On Tuesday, we realized that we have made several investments yesterday that have a concept in common – that of raving fans. I first thought of raving fans when I read Ken Blanchard’s book by the same name in 1993 when I was CEO of Feld Technologies (my first company). The message rang true for me then and still does today. The tl;dr version is “Your customers are only satisfied because their expectations are so low and because no one else is doing better. Just having satisfied customers isn’t good enough anymore. If you really want a booming business, you have to create Raving Fans.”
Our investment in Sympoz (owners of Craftsy) is an example of a company built on raving fans. Craftsy is a community of people who love to make things – knitters, quilters, sewers, jewelers. If you know a knitter (I do – Amy is a fanatical knitter as is my mom Cecelia) you know that knitters are “raving fans of knitting.” We invested in Sympoz in our Distribution theme, but it has this special characteristic around its community that felt a little different to us.
We classify our investment in SideTour as “Other”. We say that we aren’t slaves to our themes – we’ll occasionally do something outside of a theme if we love the entrepreneurs and have a special connection to them. In the case of SideTour, they were one of our favorite companies in their TechStars New York class and we were infatuated with the types of experiences they were talking about providing in their marketplace. As we were talking about Sympoz (which is doing extraordinarily well) and SideTour, we realized that the “raving fans” concept applies to each of them.
I had a call yesterday with another entrepreneur running a company that we passed on the seed round. We all like the entrepreneur a lot, but the company didn’t feel like it fit in any of our themes and was too vertically oriented for us. The company is doing great and as we were talking about it a week or so ago we said “it feels a little like Sympoz, but has some characteristics of SideTour.” Yesterday, when I was talking to the entrepreneur, I realized it also was about a community of raving fans.
I love raving fans as the phrase for this theme since it sets an incredibly high bar of the dynamics of the people in the community these companies appeal to. These aren’t “vertical social networks” or “vertical exchange marketplaces” – there is something deeper going on in the relationship between the people and the company, and the people and community. And it’s something that is magically enabled by the current state of technology – mobile, video, real-time social – a bunch of things have come together than make this work.
Look for more on raving fans from us as it evolves. For now, you have a little bit of a window into how we think about themes.
Update – My partner Seth reminded me that our investment in CrowdTap (in our Adhesive theme) is all about helping brands interact with their raving fans, Todd Sawicki said “dude – how about Cheezburger” (in our Distribution theme) and Jeff Malek, the co-founder of BigDoor (in our Glue theme) said “ahem!” So it seems like we’ve got a lot companies involved in the construct of raving fans!