Office of Innovation & Entrepreneurship
Changing Culture in the VC Industry: an Interview with Tale Venture Partners Founders
Two graduates from UCLA’s Anderson School of Management and UC Berkeley’s Haas School of Business teamed up to create Tale Venture Partners. Their mission isn’t just to invest in companies that will be successful because they churn a bottom line: they’re interested in culture and how to use company culture to help startups succeed. Even their application for startups asks questions about diversity and inclusion. We sat down with Michael Young and Ed Jean-Louis for an inside look at Tale Venture Partners.
Q: How did you evolve to become entrepreneurs?
Michael: I’ve been an entrepreneur all my life; when I was 10, I was going door-to-door shoveling snow off my neighbors’ sidewalks in the cold New Jersey winters. At 12, my first job was a sweeper boy at a barbershop. So, I learned how to cut hair and used those skills to run a barbershop out of my college dorm room. When I was a freshman at UNC - Chapel Hill, I founded an on-campus student organization that grew to become the largest organization in the business school by the time I graduated.
After college, I didn’t have a financial safety net, so I worked in traditional technology strategy, operations, and change management consulting before going to Berkeley to get my MBA.
What attracted me to Berkeley was that there’s an entire ecosystem of support for aspiring entrepreneurs. I knew I could apply my entrepreneurial spirit to tech and given the tools and resources there, good things would happen. In fact, over the next four years, I went on to launch three startups: all are still operating, two became Y-Combinator companies, and one is now valued at over $30 million.
Ed: I grew up admiring my grandmother who ran her own childcare company but my career started in traditional finance and accounting. Then I spent time at two deep value hedge funds, where I looked at opportunities across the capital structure from distressed debt to IPOs. I built a deep understanding through pattern recognition of the factors that led companies that were successful. I wanted to lend this expertise to early stage companies.
I chose UCLA Anderson because LA was still a budding ecosystem. I knew there were undervalued opportunities there, so I went to work with QueensBridge Venture Partners, an early-stage VC in LA. It wasn’t until I got a phone call from Michael to launch Tale Venture Partners (TVP) that I thought about starting a venture or becoming an entrepreneur.
Q: What is the mission for the Tale Venture fund? What type of investments are you focusing on?
Ed: Our mission is to help founders build the next generation of great companies with strong culture at the core of their DNA.
As far as investments, our first fund is focused on seed-stage Deep Tech and Enterprise SaaS opportunities in North America. There are a number of industries we’re following closely, such as industrial automation, as there are plenty of undervalued opportunities and the overlooked sectors are most ripe for disruption. However, breakthrough innovation lies in the technology and that can happen across industries. As we continue to build our platform and add additional expertise, we’ll broaden our scope in later funds.
Q: What are the key differentiators of TVP and how do they help you address the key challenge(s) you see in the VC industry?
Michael: We help founders build culture strategically from the beginning. We actually help them build a culture strategy and execute on that strategy. To understand the novelty of our approach, you have to understand the market. There’s record capital available right now and countless micro funds. So, how do we stand out?
Knowing that founders have their choice in who to take money from, we started our journey with a little customer discovery. We spoke with countless founders and VCs and the same issues would resurface: founders struggle with managing company culture and are constantly concerned with how to attract and retain the best people, especially, at a time when the average tenure for employees in tech is 18 months.
The biggest macro effect of the generational shift in the workplace is that culture is a priority and a key value driver and there’s so much data to support this. I won’t go into the numbers but there’s both correlational and causal data on culture and share price, EBITDA, market share, revenue, you name it.
From our Advisory Board to our Executive Culture Council to our TVP Knowledge Team of culture specialists, we’ve built our fund to be the go-to platform for founders who want to scale with great culture in mind.
We also have created a Culture Bootcamp for startups who want to focus on culture development.
Q: How has your message resonated with LPs? Who are the folks that you bring on for your first fund?
Michael: In terms of partner profile, we’re a great fit for high net worth individuals, family offices, and corporations and their venture arms who believe what we believe: our companies will outperform because of their great cultures. I heard Scott Dorsey say after he sold his company to Salesforce for $2 billion, “Why did we win the market? It was completely culture. I’m 100% convinced. We didn’t have the best technology or the most venture capital. We wanted to create an environment where phenomenal people wanted to come to work.”
Now, great culture isn’t a substitute for a bad product, business model, or not having the right team. It’s about once you clear those table stakes, how will you win? For LPs who understand that, it’s an easy conversation for us. But don’t take our word for it, pick any tech headline in the past two years and that should tell you.
Q: What are the investment and achievement highlights so far?
Ed: We’re really excited about the entrepreneurs we’ve partnered with so far. One of the deals was oversubscribed and we were able to participate. Another, we were given an allocation over a more established fund. Our value proposition and what we bring to the table has really resonated with founders. We have access to a strong deal flow and we’ve co-invested with A16z, Upfront Ventures, DFJ, Founders Fund and more.
What’s also been great is how our platform has resonated with other investors (as opposed to founders). Some investors have introduced us to their portfolio companies because they could see the benefit our program would offer the founders they’ve invested in. We’ve taken a collaborative approach as it adds to our many sourcing channels.
An upcoming highlight is our inaugural Culture Bootcamp for Founders. It’s open to founders who understand culture is important and want guidance on how to execute.
Q: Why did you launch the Culture Bootcamp? What are the program requirements and objectives?
Michael: The bootcamp, which we’ll host twice a year, is a way for us to gather large amounts of data over time to help us make better investment decisions. There’s already literature out there on starting a company, getting it off the ground: The Lean Startup Methodology is accepted as the standard. However, there’s no playbook for what comes next. What happens after you find product-market fit and you’re ready to scale? So, we decided to get the smartest people on the topic, the most forward-thinking operators, academics, corporates and investors in a room to solve this problem. We’ve designed a program that provides an avenue for founders to drive value for their organizations through culture intentionally, strategically, and from the beginning. Then for Part II, we’ll reconvene in six months to talk progress, challenges, and triumphs, which is really important because as the saying goes, “what gets measured, gets managed.”
Some people have referred to the bootcamp as a mini-accelerator on culture. Others have referred to it as an Executive MBA on culture partly because we have award-winning Berkeley Haas professor who teaches in the Executive MBA program leading case study discussions. We’ve already received a number of requests from other VCs for their portfolio companies to attend. We’re focused on the community aspect of this cohort. Any founder will tell you, the most invaluable part of any incubator or accelerator is the community of founders that participants can go to for guidance, support, or just comfort in knowing that other founders are going through what they’re going through. Founders will now have that community to lean on when it comes to building culture and they will build more successful businesses because of it.
The next Culture Bootcamp is September 7, 2018, 1–6pm at Twilio. At least one founder from each company must attend. The other requirements, criteria and details can be found on our event page here: https://culturebootcamp.splashthat.com/
Q: What can participants expect to learn/take away from the bootcamp?
Michael: We’ve designed a highly selective bootcamp for a cohort of 25 of the best early stage technology companies in the U.S. that will answer questions such as: When is culture more important than capital? How does inclusion relate to revenue? How does diversity relate to product innovation? How can we turn values on paper into desired behaviors? Where can we create systems and processes that reinforce our company culture? Founders will walk away with tangible steps to integrate culture into key areas of their business.
Q: How do potential partners/sponsors get involved with you?
Michael: We want to strategically work with those who prioritize culture because they see it for what it is: a value multiplier. We’re already working with a number of organizations, large and small, on the culture building program that we designed and our bootcamp. Among them are Twilio, whose founder and CEO Jeff Lawson placed an early emphasis on culture which fueled them to a billion dollar exit; Culture Amp, an employee feedback platform that’s really a pioneer in culture data; and Intel Capital. Intel Capital has a unique model for Corporate Venture Capital groups in that they take a board position for every investment and affect diversity and inclusion in all of their portfolio companies and their managers are measured on that. We really like that approach.
Q: What resources at UC helped your entrepreneurial venture?
Ed: The biggest resource for us has been the UC alumni network. This not only includes Anderson School of Management and Berkeley Haas School of Business alumni, but also alumni from different schools and departments at UCLA and UC Berkeley as a whole and others throughout the UC system.
In addition to the alumni network, we’ve been able to leverage faculty at the different schools, attend events like the fireside chats and demo days hosted by Startup UCLA, and forge relationships with a number of key stakeholders in the UC tech ecosystem such as UCLA Ventures, Berkeley Skydeck, and the UC Office of the President.
Q: Are you currently involved in UC’s startup community? How are you involved?
Ed: Michael and I were very involved in the UC startup community during our MBA programs and have continued to be since we graduated. We’ve built relationships with organizations, incubators, and accelerators on both campuses and frequently attend startup events and demo days held on our respective campuses. Of course, we are always engaging with UC entrepreneurs building innovative and compelling businesses. This has allowed us to remain connected to the schools and position ourselves to find the next great business started by a member of the UC community.
Q: How did you two come together to form Tale Venture Partners (TVP)?
Michael: I have significant startup and operating experience which creates a base level of empathy with founders. However, to have success as a firm, I knew I needed someone with a deep understanding of finance and venture capital to compliment my product background. Ed was at QueensBridge and was a prolific investor with early investments in unicorns Ring, Dropbox, Lyft, PillPack to name a few, and he was a good friend so I heavily recruited him to spin out and join me.
Ed: We actually met in early 2014, through our membership in both the Robert Toigo Foundation and the Consortium for Graduate Study in Management. Michael spent Christmas with my wife and I in LA — our first Christmas away from home — and we developed a relationship over the years. So, when Michael came to me, it wasn’t really a hard sell. It felt organic to partner up.
Q: Do you have any advice to other UC entrepreneurs?
Ed: I’d say it is important to have strong conviction. We kept pushing to pursue our aspirations with almost an irrational confidence. In the beginning, many people did not see the value in what we wanted to build. It was easy to get discouraged from the initial feedback, but our validation came from the entrepreneurs that we talked to. The vast majority of those conversations have validated what we believed the market needed.
Another piece of advice: think outside the box. There were times that I had a very clear vision of how things ought to turn out but things didn't work out according to our plans. When you get to a roadblock or wall, it is important to explore how to get over the wall, how to get around or through the wall. This is a really good mindset to have.
Michael: My advice would be to leverage the UC community and reach across schools. It’s bigger than just the school you went to. The UC system is 10 different academic institutions in one. That’s a powerful network. Don’t be afraid to cold reach out to people on LinkedIn. If you’re part of the UC family, they’ll likely respond.
Be sure to check out TVP's Culture Bootcamp.
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