Why Culture is a Key Criterion for Raising Capital and Driving Growth with Idinvest partners (Video + Transcript)

What are you doing to build and maintain the culture in your startup?

Or has culture been put on the backburner as you have scaled?

Well, it’s time to put culture at the forefront of your startup if you are looking for more funding in 2019.

Jonathan Userovici, VC at Idinvest Partners, talks about culture being a key criterion for raising capital. He uses the 5 Ps when it comes to culture.

  1. Priority – Shift your priority to be on culture from day 1
  2. Pen – Grab a pen and write it clearly. Hubspot is a great example.
  3. Proclaim – Implement your culture in every element of your business (recruiting, onboarding, etc.)
  4. People analytics – While not available in the past, it is available in many SaaS products today. Jonathan recommends using people analytics tools so you can know if your culture is starting to break from employee feedback.
  5. Personal – Make your culture personal. Let it represent your values because there is not a “one size fits all” culture that will work for your startup.

Also, if you didn’t attend SaaStr Europa, we’re doing it bigger and better in June 2019.  Grab your tickets! 🙂

Transcript

Jonathan Userovici – Tech VC @ Idinvest Partners

Hi everyone. So my name is Jonathan. So I’m a VC at Idinvest which is one of the largest pan-European VCs based in Paris. So we invest about 200 million euros annually series and b across Europe sometimes in the US. And I’m gonna talk today about building a good culture. Has a good culture and accompanies one of our main criteria when we invest. So first of a couple of definitions myth and truth about culture. What culture is so first myth when we speak with entrepreneurs that culture is exterior said basically a lot about ping pong table in the office or slide beers on Thursday Star Wars movies every other month. So it’s a myth. Culture is definitely not on the exterior. Second myth is that group culture is actually organic. So I build a company I will have a culture in my company anyways it’s gonna grow organically. So that’s true. You will get a culture at the end of the day in your company but it doesn’t mean it’s gonna be a good culture. So that’s a myth as well. So now the truth though the definition I took the Harvard Business Review definition for a few weeks ago they wrote like a big magazine on this topic. So it’s a bit boring but it’s the tacit social order of an organization blah la la la. Which basically means that culture is shared among all the people in the company and it’s enduring something you have in the long term. And what we think as investors and by experience with research with experts we spoke with is that culture is actually a product. It’s something that could be managed and that has to be managed to scale. So it’s important to work on your culture because it’s proven there is a clear correlation between culture and success.

I took a few examples to show that. So Harvard approved that. So we should research approves. They did a big study in 230 companies with 1300 executives in seven different verticals showing that companies which has which had at least two of these four values had a very high employee engagement so purpose learning enjoyment and caring. And there is a clear correlation between employee engagement and the results of your company. Other VCs and very renown VCs all over the world. Say it. So Ben in the US wrote a lot about culture. It sounds abstract yes but there’s nothing more important when you listen to suddenly from Excel in Europe. The two main two top qualities of every great leader are that they can hire like incredible talents and that they know that culture is every single year which are two things which are correlated. I put another quote from index so basically showed that people with a lot of experience tell you that they have worked with tens and tens and hundreds of companies and that culture is everything. And the more analytical slide that says you know the numbers show it. So basically the three first lines in this graph from Glassdoor show that the three groups of Best Places to Work outperform from far the S&P 500. So it’s kind of proven and why because a very strong culture allows you to hire the best people. And for me it’s your marketing to hire the best people and to retain them.

And that’s why you see a lot of people using Glassdoor great places to work best places to work and it’s got a study to attract talent because talent wants to work for a great place and not for and not only for a good salary at least. So I did, I tried to do this five minutes five-piece guide so we can get actionable things out of this talk. After this talk in your company to implement not only culture but group culture and I spoke with a couple of companies in our portfolio that you can see on the on this slide and which either working on it very hard either worked on it very hard recently so the first P is priority so we speak with so many founders especially in the early stage telling us that they have to build a product the customer is the most important thing in the company. And culture is secondary because culture will grow organically so that’s not true. You have to think about your culture as a priority from day one. The second P is take your pen and just write it clearly. A good example of this is what HubSpot did in the US basically building an 120 page deck with a culture code. Here are kind of the seven big thing that I wanted to implement the culture code in the companies but it’s actually 120 pages talking about that so you can reflect what you implement in your culture and all your processes and how you work in the organization communication etc..

And so this was a time the 3rd P is proclaim. So spread it everyday and in your processes for example recruitment and boarding engagements.

So what does it mean? It means that you have to tell it to write it to spread it in your company every day. So when you scale for you know from 100 employees to 1000 employees in 18 months. You have to spread your values and what your culture is and what kind of company you want to be. So recruitment for example I spoke with a founder a few weeks ago who told me was looking for this very particular talent technical talent that was scarce for months and he ended up hiring a guy with the talent but which was not the perfect cultural fit. He finally hired it. He stayed like three months of four month and then he was invited to leave the company because the cultural fit was really really bad and the product was roadmap didn’t like go very fast because you didn’t want to communicate very well with the rest of the team. The atmosphere was not really good at so first they lost like for a month. They have to hire another guy. And there were some toxicity left in that team and that company. So again maybe it’s a very important and scar stallion but it should fit your culture from day one from the recruitment process onboarding same thing. We have a lot of companies doing things about that that’s more like classic let’s save it on Fiero for example a background check SaaS based in the UK had this onboarding days the first Tuesday of every month and they basically tell the employees we are like that we want to do that. These are our values. These are the schemes to get a promotion because you represent this or this value. So I mean they just take the occasion to do it. And engagement same thing.

The fourth P is people analytics so people analytics tools we’re pretty scarce ten years ago, five years ago. But now you have like so many tools like Pekin for example which allow you to track your employee engagement your employee happiness to get feedback for data and peers from your employees and to get feedback in real time so you don’t have to wait for the annual survey you just tracked that feedback every day every week every other week and so you can iterate on your culture you can keep your people and you can strive. So use people analytics and it’s not very expensive tool.

The 5th P, the last one, is make it personal. So when I spoke with the founder of Waze a few weeks ago he told me that you actually built Waze because he wanted to build a place we wanted to work in. So it’s thought culture from day one and his advice to thousand founders was get a culture plan from day one. And it was his personal culture plan you didn’t imitate was just his values with his management team his founders co-founders et cetera. But there is not one model to rule them all and so make it personal from day one. Here are like a few example of great companies with different cultures. Zappos is more about enjoyment like having fun every day. Disney World by carrying so and the hero like some quotes that you can read afterwards. But it basically means that there is definitely no one model to rule them all and that you can succeed with a different culture it can actually be a big different vision for a company.

So last point and last slide is what can be tressing for SaaS founders today or founders generally speaking, is how does a V.C. evaluate culture? So we do three things. The first thing when we evaluate culture is doing our job which is basically asking questions. So what do you do about culture and asking all the questions that so that if you’re making an effort if you’re done making efforts to have a strategy if you don’t have a strategy. We also meet your team members we meet your management. We go in your office. We see things that the first the diverse thing. The second things is we do due diligence right. So we speak with your clients. We speak with your partners. We speak with a former VCs which invested in your companies. We speak with previous employees sometimes that we know. And it gives you know a very very good picture of and a good valuation of your internal culture and the third thing we do is we actually use the tools that are public today and that allow us to get some data on your and your culture and your employee engagements. So we go on The Glassdoor you know we go to Google and we just type you know the name of the company Glassdoor. And if you get two stars be with like tons of reviews then it’s kind of weird or we use data from softwares like Pika, Cultureamp and Glint which some startups use as a KPI. They track doing their board and we have it and they send it to us. And so we can we can track that.

So that’s how we that’s how we try to evaluate culture and that’s why generally speaking it’s a very important investment criteria for us because culture is important for success so thank you.

Published on January 17, 2019

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