Adam Torres and Oliver Libby discuss venture backed companies.
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Show Notes:
H/L Ventures is a firm dedicated to building start-ups at the nexus of growth, impact, and diversity. In this episode, Adam Torres and Oliver Libby, Managing Partner at H/L Ventures, explore H/L Ventures and how it’s providing hands-on support to support its portfolio companies.
About Oliver Libby
Mr. Libby began his career in the U.S. Government and later at a global managing consulting firm. Mr. Libby is a Presidential Leadership Scholar, a Steering Committee Member of the Milken Young Leaders Council, a Leadership Council Member of Tech:NYC, a Fast Company Impact Council Member, a Concordia Summit Advisor, a member of the UN Sustainable Development Solutions Network Youth Advisory Council, a founding GLG Social Impact Fellow, and a NationSwell Councilmember. Mr. Libby was previously also a Foundation Trustee and Chair of the Admissions Committee of the Harvard Club of New York City, as well as a member of the Advisory Council of the Clinton Global Initiative.
Mr. Libby has been invited to speak at Harvard, the United Nations, and numerous business conferences. His work has been covered in publications including the New York Times, Bloomberg BusinessWeek, Fast Company, Reuters, and television appearances including CNBC. Mr. Libby graduated magna cum laude from Harvard College.
About H/L Ventures
H/L Ventures and its family of funds, H/L Studio and CityRock Ventures, are a holistic company-building ecosystem that supports mission-driven founders on their path to creating and growing valuable companies. Since its founding in 2009, H/L Ventures has forged a new way to build companies at the nexus of growth, impact, and diversity. Practicing our core philosophy of daily active engagement, we support our portfolio company founding teams throughout their entrepreneurial journey.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest in the show, just head on over to missionmatters. com and click on be our guest to apply. All right. So today’s guest is Oliver Libby. He’s managing partner over at HL Ventures.
Oliver, welcome to the show. Thanks, Adam. I’m glad to be here. All right. So happy to have you on. And this is a an interesting topic to me. So we’ve had a lot of venture capital firms on in the past, but I can’t claim that we’ve ever covered daily active engagement and really what that means.
So the topic today for everybody listening in daily active engagement and how it encourages success for entrepreneurs. So thank you. I guess before we get into even what daily active engagement is, let’s take maybe a step or two back, Oliver, and tell us how you got interested and really when you got into the VC space.
Yeah, Adam, I appreciate it. And not surprising that daily active engagement doesn’t come up a lot. In the discussion of venture capital, because it is unusual in the extreme, I got started in this business a little over 16 years ago actually a hair before that informally working with startups that I had run across through my life working in government and then also being a consultant and I fell in love with early stage companies, but maybe because I was a bit of an outsider to the space, I didn’t come up through the usual either MBA track or at a venture firm as an analyst and that sort of thing.
I was very highly skeptical of the existing business model of venture capital and remain so and I thought that there were some things that we might innovate on in the model that would make it more effective and maybe even some ways a little bit less risky over time. And so that’s what got me into the space and it took the global financial crisis to have the opportunity to actually put some of that into effect.
But that’s really what got me in. Hmm. That’s interesting. so you started working with founders, let’s just say in a, in another manner and you weren’t deterred. Like how did that happen? Founders are difficult. I always, I’m always interested. Like you, you, what was it, the ideas, the founders, the personality, like what kept you in the game?
Like early on, there’s a lot, I mean, you’re talented, a lot of different routes you could have went. Like what kept you in the game with the founders early on when you didn’t necessarily have to be? Okay. Actually, it was for me. It’s quite the opposite. I think founders are in the main awesome, but they are doing something really hard.
And so in the same way as the person who might be in base camp you know, relaying information up the mountain to mountain climbers, or even better a coach who’s on the sidelines when they’re players on the field. You know, it’s interesting. I was just thinking about that. I love tennis, and it has been a big news in the tennis world, which is that Novak Djokovic and his coach of the last five years, five years Gorny Ivanicevic, are splitting up and Ivanicevic and Djokovic used to really get into it.
I mean, spectacularly on the court and in an interview after the split, Ivanicevic gets asked, you know, it because you guys clearly didn’t get along and Djokovic was a problem on the court for you? And he said, no, like, when he’s playing, I wanted to play as hard as possible. And I need to be there for him.
And so it’s a long way of saying, Adam, that founders, you know, are doing something extremely challenging. And so actually, the birth of daily active engagement comes from the very fact that if we can move in in a supportive frame, And without being in the way, provide as much support as we can, and, and that’s, that’s both tactical and operational stuff, but it’s also moral support and just being there for them.
That actually it can build a really deep bond and it’s addicting on both sides. I love it. Hmm. That’s, that’s a great comparison. So it was almost like you could see the plays sometimes coming ahead and you could see maybe where they were making some missteps and you felt that if you could, you know, get involved in.
And give them those right pointers. Cause you can’t, you can’t see the picture when you’re standing in the frame. Right. Let’s throw that one out there. It’s, it’s a Monday. So you, you’re able to then like help them grow faster or, or have a long more likelihood of a chance of actually succeeding.
Like, am I understanding that right? I think that’s interesting. I think that’s exact. Yeah, that’s totally right. I mean, look, you know, oftentimes I remember when I was a kid, I was wondering, like, how could someone be the coach of a Michael Jordan or a Robert Federer or Novak Djokovic, you know, how you can’t, you can’t play better than them.
How can you teach them? And I would never presume to say I’m a better entrepreneur than any of the founders in our portfolio. But to your point, like, I’ve probably been involved in 200 seed rounds. And even the most successful and celebrated entrepreneurs have done it. A few, one or two, three, five, maybe.
And so it’s not even that we’re better at seeing things than the entrepreneurs are. It’s that we’ve just been there and done that so much that we’re good to have around in those early times. And it’s exactly what you said, which is we accelerate and enhance their chance of success. We don’t, you know, we’re not doing the job for them.
We can’t. And I will say one of the things I know, you know, mission matters, the word is in there is. I have always only been engaged with entrepreneurs that are also. Even though they’re growing high growth, venture backable, money making startups, trying to be something with a mission. And so it’s even easier to fall in love with helping founders that are trying to do something meaningful for people on the planet.
Economically valuable though it may be, that’s something you can really get behind as well. Hmm. let’s maybe fast forward just a bit here and where did this concept for daily active engagement, like, like how did that come about? Well, in my opinion, it’s just pure logic. So for the exact reasons that we were just talking about, a really expert team that has the proper infrastructure to be present in the work and lives of founders and their startups from the earliest days should have a strong positive effect on accelerating and enhancing the chance of success of a startup.
However, you kind of had to be an outsider 15, 16 years ago to come up with that because. A lot of venture capital is kind of these myths and stories and things that we’ve all agreed are true that may really not be in this is not just in venture capital is true, but think about it. What do you think that, you know, dear listener about venture capital?
Isn’t it that you need a unicorn to return the portfolio? That’s what we call the power law. Isn’t it that you really don’t want to get in the way of the founders too much, because if you have to, you probably picked the wrong one. Isn’t it that 70 plus percent of the portfolio is probably going to be a zero, but that’s okay because you’ve got the unicorn returning it.
That’s just what it’s like in venture. Well, I’m here to say it doesn’t need to be that way. And there’s a different way to think about company building, which can really alter the math and the biggest unlock for that is daily but if you come up through the received wisdom. You can’t see it. And there’s a whole bunch of reasons for that.
I’ll let you ask me the question if you want me to go down the rabbit hole, but there’s very understandable reasons why that happened, but it is, it is a misconception. And so for me, it was just pure logic and the global finance grads would give me the chance to try it and it works. Let’s go like when you say daily active engagement, I mean, you’re not running their business.
So maybe like uncover the uncover that just a little bit further, like what daily active engagement actually mean. I think it’s extremely important to emphasize what you said. We are absolutely not running their business. We don’t take senior positions. We don’t require board seats or anything like that.
And that’s really important because that trust relationship with a founder is critical. So what does it mean? Well, engagement is a word we selected for this model really. Precisely, which is that we are available to them. We are checking in with them in unobtrusive ways. We have a weekly check in with every founder in the portfolio bar none.
We hold to it. Even if it’s a 5 or 6 minute call and it’s their call. It’s not an investor report out. Even though we’ve invested money in these startups We treat these as their agenda. What’s on your mind, what’s going on. Now, of course we track all the activities that we’re involved in. And we, we police those up on the call.
Hey, we’re working on this hiring process. Hey, we’re doing this biz dev push for you. Hey, you know, the seed round, this is what we’re up to helping you out here. Then what happens is you engage infrastructure. So this is a really important thing in most venture firms. And there are somewhere variously between six and 10, 000 venture firms in America, depending on who you believe.
The 99 percent of them are, you know, structured in the way most venture capital firms are, which is a tiny handful of partners of very few junior people, maybe a half person or a full person on what is thought of as platform, which in most, you know, venture firms is, I don’t want to say an afterthought, but it’s definitely the B team, right?
The 18 is the investors, the B teams, the platform group. Hey, we, you know, the kind of cowboys have made the picks and then you’ve got the platform people trying to kind of back, clean up do what they can with the company. We flip that. So, of course, we care a lot about underwriting and making good picks but that’s a little bit like a top chef going to the farmer’s market in the morning.
You want great ingredients and that’s what underwriting is about, but then you have to cook the heck out of the meal in order to get a Michelin star. And that’s the process of platform of daily active engagement of hard work. And so we are involved Adam in helping with business development, partnerships, fundraising, marketing and branding, talent operations, governance, regulatory, you name it.
And our team is sized and resourced from a tech stack perspective to deliver that consistently, unobtrusively. And we don’t control, we never have control of stakes in these businesses, but we build the trust bonds and we, we sing for our supper. We’re good at this. And so over time, the founders come to include us in their council of war.
And, and they come to us with transparently what’s going on in their business. That’s the rest. Yeah, and so do you think that this is what maybe keeps other firms from even taking this approach is that you do have to build the infrastructure for delivery? And that’s hard. Like, essentially, you know, you’re operating a business, not saying that running a normal VC firm is not hard, not easy, by the way.
But not saying that’s easy to pick that unicorn or what, as you described that, that traditional model, which I think most people would agree with. But you’re actually building the infrastructure or, you know, a business in this case do you think that’s what keeps others from doing it? Or is it just kind of like old school logic?
Like, I don’t, like, what would you attribute that to? Cause when you say it, you’re right. You say common sense and it makes sense, but still it is going against the entire industry. Right. It’s like, we can’t negate that. Like, what do you think holds up? Well, I think it’s a combination. So I think number one, it is hard and it’s expensive and look, we’re structured a little bit differently.
I’m also happy to talk about this. We’re a holding company. We have a number of different kinds of funds and revenue streams that make us be able to afford the unusual size team we have for the assets we manage, which are quite small, right? We’re super compact as a firm. But so it’s a combination of it’s received wisdom.
So obviously some people just, Hey, I’ve started a venture firm. Look, you can’t, you can’t imagine how many, I mean, the average age of GPs and venture firms are actually quite young. And so many GPs have launched, you know, emerging managers in the last 10 years and, you know, they kind of say like, right, what are the docs supposed to look like?
What’s the, I’m going to do a venture capital firm. What do I need for that? So the received rhythm is a good place to start. And then the other thing is, though, I want to be clear, like, we are allied and co investing with. You know, hundreds of other venture firms, literally, and we don’t think everyone needs to look like us.
Like, we think it’s incredibly valuable to have also capital sources, people who are heavily focused on underwriting who you know, provide that we are often involved in syndicates where we’re the really active VC and actually the other VCs, I think, like that. And so we don’t need them all to do the same things we do.
So it’s a little bit like you know, Okay. In a, in a, you know, military operation, you don’t need everyone to be a scout, but you do like having some really good scouts out there. And that lets the rest of the unit do what they’re going to do. We kind of function in that way within the syndicates we’re a part of.
So my argument isn’t that the entire sector needs to look like this, but there needs to be enough of us doing this work to help the founders forward. Can you give some examples of just like, of like how you’ve helped some companies in the past, like whether it’s, you know, the biz dev side or like raising capital or just things that show that you went like over and above, let’s just say the normal role of a VC.
And you don’t have to say a name of a company if you don’t want to, or you can. I mean, I’m not, I’m not saying that, but just an example or two. Yeah. So I want to say there’s, there’s a couple of levels of this. So the first level is the things you might imagine we have, you know, literally, I’m going to say thousands of examples of successful fundraising introductions or business development introductions or talent that we’ve brought into the companies.
I mean, across our 50 or so portfolio companies, we have done that for every single one of them. But the difference at this level is we do it an institutional grade. So every, every venture firm, you know, I think, you know, a priori is, is well meaning and well connected and GPs are out there making intros, trying to bring in other investors to the round all the time.
It’s just that they don’t have a. Almost 70 person team behind them, resourcing that and backing them up so they can do it consistently day in day out for every single company in the portfolio without picking any favorites or resourcing their winners and that sort of thing. So that’s the difference is consistent, generalized support.
But then the other level that’s really important is because of the consistency over time, we build a bond of transparency with the founders. That’s really different. So the stuff that’s less tangible is. I mean, just last week, I got a text at around 1140 at night from one of my founders who shall remain nameless that just was like, I don’t really crappy day.
Do you have a few minutes and I, this happens almost weekly and it says nothing about the founder, right? This is hard work. Like I said, in the very 1st answer your very 1st question. It doesn’t diminish them that they find the data have been crappy and they want to talk to somebody. The fact that we’re there and that they know we’ll take the call and we’ll usually take it within an hour or two of getting the message is special and different.
And it’s not to say other GPs won’t jump on either, but again, institutional grade, there will always be someone from my team who can do it right away. And that’s really important. The other thing is because of that trust and transparency, we can do interesting and creative things. And we bridge the gap between founders and MVCs because just to name something that’s not a popular viewpoint, but VCs and founders are allies to a certain extent, but it is oftentimes an uneasy alliance because interests are not perfectly aligned.
Most venture firms buy preferred shares and most founders own common stock. And so there isn’t the perfect overlap of interest. And there are times at which that breaks down now, because we primarily are known for our venture studio, which often is mainly in the common stock alongside the founder, we kind of have a bridging effect between And the other investors on the cap table, because we know both sides of the game and our incentives are kind of aligned oftentimes with both sides.
And that means that if there is a year like last year, where there’s a lot of creative financing that need to happen, for example, we can get in there and use the talent. We’ve developed over almost 20 years of doing this work to say, Hey, instead of a really punitive down round, what if we use the warrant structure?
What if we did it this way? And then we can convince both sides and we can, we can try and help it that way. And that’s much less tangible. You know, then like, Hey, a great corporate intro that led to a deal, that can have an effect of saving the cap table. You know what I mean? Yeah, that makes total sense.
I want to jump around a bit here. So we’ve talked a lot about, you know, from the point of view and how you’re, you’re helping companies, how you’re helping founders let’s go to kind of the beginning part of that. Like, what are you looking for in a founder before you make an investment?
Sure, I mean, I think that it will become obvious from what we’ve already talked about that there’s there’s 2 broad components to due diligence for a firm like ours. The 1st is going to be all the normal stuff you would do. So I gave you the analogy that I love about the top shop going to the farmer’s market.
You got to make sure you got the right tomatoes and or whatever you’re going to use. Right? And so. You know, team product market, you know, evaluating the model, you know, oftentimes because we both invest out of a series a fund, but also we have a venture studio, which is a big focus for us. We’re getting involved oftentimes before there’s a lot of data, right.
But we get as much of the traditional underwriting as you want. So all the normal stuff that I don’t need to belabor, the interesting and different stuff is around trying to establish what we call the relevance of our platform to call it relevance testing. And we do this in some interesting ways. So for example, the second interaction we will have with the founder, Religiously is something we call the wish list process.
So if we think that our first conversation with the founder was promising, we don’t just open a diligence process. We ask them to send us a list that is as best analogized to this, the wish list that you might send Santa Claus. Right. And we say, I like this. I like where this, I like where this is going.
Send my visa. I’m making out a wishlist. Go ahead. That’s right. And so it’s all those things, right? It’s like, Oh, what are all the corporates you want to talk to you? what hiring you to do in the next couple of years? How big do you want your next round to be and why? And, but we don’t even ask these questions.
We just leave it as a blank sheet of paper to send us everything you want. And look, it can be dispositive, Adam. Like we get back some of these wishlists. It’s like. I need 5 million in my next round and a COO. Now that may be true or not, but it’s not very creative, not very thoughtful. That person may not be so open to having our help.
It’s interesting data for us. Whereas we get founders who are, by the way, super capable. Really smart, have already gotten interesting traction. We call it resource magnetism. They’ve done a lot with a little, you know what I mean? And yet they come to us with like three or four pages worth of like Greek, really thoughtful stuff that they are open to getting help on.
And that for us is catnet, right? That’s where it’s at. That’s, you know, without taking anything away from the brilliance of the team, the product, the market, we can help. And that relevance overlay is the other thing we’re looking for. Last but not least, as you probably saw on our website, We care about the nexus between growth, impact and diversity.
So we are going to look at impact. We do look at the diversity of the founding team, or if it’s not particularly diverse, then we’re going to look at the board and the leadership team. But we do think those are powerful overlays. And that is what all together leads up to our underwriting process. Any particular sector that you’re focusing on, or area of technology, or otherwise like, or or agnostic.
We are totally agnostic. I mean, of course, we’re looking for ventures, you know, venture type returns. Although you know, it’s a little bit like you remember the, the book and the movie money ball, you know, I don’t mind a home run. I’m building my team to get on base. We think about the power law math differently.
I actually don’t think it’s very consistent. And you can look at it at a venture fund that had great returns and spot the unicorn and then kind of back fit the power law mathematically. But actually, like, if you look at, Six to 10, 000 venture firms. And you look at roughly a hundred unicorns every year.
It just as a sector wide methodology, it doesn’t really hold mathematical weight. And so then you think to yourself, well, if I want to consistently drive good returns and build great companies, how else might I do it? And you’d say, well, you get involved early, you control valuation, you add a lot of value.
And then maybe you don’t sell everything for a multi billion dollars, but you get everyone to some kind of a goal line. And by the way, as it turns out, in my experience over 16 years, you can generate great front returns using that methodology. Without having to rely on having one massive, you know, bottom of the ninth grant plan.
Awesome. Well, Oliver, I have to say it has been great having you on the show today and you definitely delivered. I’m more better educated on a, another way of VC approach, which is through your daily active engagement model. And really the venture suite that you have and this venture studio, excuse me, that you have that being said, if somebody’s listening to this.
And they want to learn more and to continue the conversation. How do people connect with HL Ventures? Well, first of all, thank you for having me. I love this conversation. I can’t get as you probably figured out. I’m a venture nerd, and I love talking about this stuff. So we welcome further engagement.
Our website, which is which is www. h l. vc is kind of a, an open book. It’s pretty detailed. So we welcome people delving into that. And then the best way to reach us is on LinkedIn. We do read every message and we’re pretty active there. So we welcome We welcome further engagement and folks learning about this.
And we thrive on partnership, both for deal flow and for helping our companies. So we do love shedding light on this and we really appreciate you featuring it. That’s amazing. Thank you. And to the audience, we’ll put those links in the show notes so that you can just click on the links and head right on over.
And speaking of the audience, if this is your first time with us, this is a daily show. You heard that right. Each and every day we are releasing new episodes for you. So if you haven’t hit that subscribe button yet, Definitely make sure you hit that subscribe button because we’ve had more founders. We have more entrepreneurs, we have more executives coming your way, and we don’t want you to miss a thing.
And if you have, you’ve been listening for a long time and haven’t left us that review yet. Come on, man. Get hit, click that writer review button on Apple podcasts. We sure do appreciate it. And Oliver, thanks so much for making some time for us. It’s been a pleasure. Thank you very much. We appreciate it.