Our latest investment thesis (obsession): Community

Historically, Flybridge has not been a purely thesis-driven investor. Yes, we always have a few investment themes around significant, top-down trends but we have also left ourselves open to companies and entrepreneurs that inspire us across a range of sectors. And we have always had a bias for focusing our energies locally, with a particular emphasis on startups based near our two offices in NYC and Boston. This investment approach has led to a series of productive investments and mini-themes, such as developer-driven cloud platforms (e.g., MongoDB, Crashlytics, Firebase), machine learning (e.g., FeatureLabs, Narrator.AI, ZestAI), applied AI (e.g., Aiera, Datalogue, Kebotix, Proscia), and the future of work (e.g., Chief, Codecademy, Splice, Wethos) among others.

In recent months, we have been thinking about societal drivers over the next decade and the resulting investment opportunities that will arise. In parallel, we have observed a pattern in our portfolio, particularly in our most successful companies. These observations have inspired us to sharpen our focus on a new investment theme we call, simply, Community.

Community-driven companies harness the power of a highly engaged, connected, and passionate ecosystem of members to drive adoption, growth, and success. Community-driven founders are compelling storytellers who articulate a mission that a global community of members, customers, partners, and advocates can organize around. In short — as we articulated more fully in a recent Harvard Business Review article — we are seeing community become a competitive advantage and we are excited to invest in companies and entrepreneurs who share our vision for the power of community.

Two secular trends make this opportunity more salient than ever (in other words, why now?). First, as Robert Putnam so powerfully described in “Bowling Alone” and further supported in subsequent research by many scholars, there has been a precipitous decline in social capital, particularly in America. Participation in our civic organizations such as religious groups, labor organizations, and non-profit organizations has dramatically dropped in recent decades. The downside of a more mobile, connected population with access to infinitely personalized media sources is that there is a profound decline in powerful, in-person communities and face to face engagement. The rise in remote work exacerbates these trends.

Second, there has been an explosion in the availability of tools capable of organizing global communities independent of geography. In much the same way that broadband proliferation, AWS, and smartphones enabled a new class of applications and business model transformations that have led to the creation of game-changing companies, the prevalence of platforms sitting on top of fundamental building blocks like Slack, Discourse, Asana, Github and even social networks have dramatically reduced the friction required to coordinate people and tasks, making community building easier than ever.

The big insight for us as we analyzed our successful portfolio companies — and others such as Salesforce, Peloton, and the early days of WeWork (where Jesse was on the founding team) — is that companies that successfully build communities both virtual and in-person are able to execute on a magical business model, leading to outsized results and (from an investment standpoint) returns. Here’s how we see it: when a company is able to make the transition from simply delivering a product to building a community, they unlock an extraordinary amount of competitive advantages. Specifically:

• Enthusiastic members help acquire new members, resulting in lower customer acquisition costs and a tight viral loop.
• Members are loath to abandon the community, resulting in increased retention and therefore improved lifetime value.
• Members support one another, resulting in high gross margins due to a lower cost of service.

The result of this is very real network effects: as engagement grows, the community gets smarter, faster to respond, more globally available, and generates more value. We will expand on the Playbook for Community success in subsequent posts. In the meantime, the whiteboard version is shown below:

We believe the community model is applicable across a wide range of companies and business models including developer and creator communities, professional communities, social and commerce communities, and those that bring the community together not just online but in real life. Some examples in our portfolio that helped inspire our thinking include:

• MongoDB — a community of developers
• Splice — a community of music creators
• Chief — a community of women leaders
• Codecademy — a community of learners

In short, we have high conviction that now is the time to lean into Community as an investment theme. As our friends at USV note, an investment theme allows us to operate and focus on working on what matters most to our team and, ultimately, will result in greater success for our entrepreneurs and our investors.

One of the challenges for a seed-stage investor focused on Community is that we are often investing prior to any significant evidence of the magic described above. Given our experience with large, successful, community-driven companies, we thought we would share some of the Community characteristics we look for at the earliest of stages, which is when we most typically invest:

1. Do the company’s founders place Community at the core of their approach, identify deeply with their own potential members, and understand that Community must be embedded across all aspects of the business? Put differently, is the community core to the business model or is it more of a dressed up user group?
2. Will customers view themselves as “members” versus customers or users? For example, I am a user of Facebook, but a member of the Reddit community.
3. Can we see the company passing something we call the “laptop sticker test” or the “LinkedIn profile test” whereby members would proudly show their membership in the community via a sticker on their laptop or note their participation in the community on their LinkedIn profile?
4. Is there enough enthusiasm about the community and its mission that members would gather in real-life at a conference or meet-up?
5. Does the company leverage “movements” and “callings” broader than their own offering?
6. Do the company’s voice and positioning statements evoke feelings of loyalty, passion, being mission-driven, tribal, trust, strength, caring, and empathy?
7. How influential is the community to the product roadmap and using what mechanisms?

One of our most recent investments, Tastemakers, brings these attributes to life. Tastemakers is building a global community looking to experience and share the world created by people of African descent. Apart from more traditional characteristics such as a large market opportunity (initially, 40M black millennials living in the US and, over time, hundreds of millions of global travelers of color), an attractive business model (see Bookings.com, market cap), and a compelling founding team (CEO/founder Cherae Robinson is a force of nature), using the framework above we were drawn to Tastemakers because:

1. Cherae is a leader who embodies the customer. She is a passionate adventure traveler who has built a tour operating company and lead experiences herself. She has a clear vision for translating her passion into the development of a compelling interconnected community.
2. Members of the community are passionate about their experiences with the service, actively sharing amazing photos and videos on social media. While not exactly a laptop sticker, when Jack Dorsey himself tweets about his transformative experience on the beaches of Ghana while taking part in a Tastemakers’ experience, you know the company represents something bigger than just a transactional customer relationship. (Jack has even decided to move to Africa for a period of time.)
3. By tapping into the sense of identity, shared cultural heritage, as well as rising disposable incomes and proud self-expression of people of African descent around the globe, Tastemakers is clearly tapping into a movement broader than themselves. Riding the visual social sharing wave of Instagram, Twitter, Facebook, WeChat, and Tik Tok also helps.
4. When Tastemakers created the MVP of their service, it was clearly more than just another travel service. Instead, it represented an authentic rallying cry for a community that was “disrupting the narrative together” and “building a world in which we value people on equal standing no matter where they are born or the color of their skin”.

In sum, if you are a founder like Cherae (or Elliot of MongoDB, Carolyn & Lindsay of Chief, Steve of Splice, Zach of Codecademy, or many, many others) and are passionate about building a community and using it as a competitive advantage, we want to talk to you.

Check out our community at www.flybridge.com