Icon: Looking Past Charismatic Would-Be Billionaires – To Diversity & Returns

The venture capital industry is an easy whipping post. And rightly so. Many VCs today still treat diversity as checking-a-box, an opportunity to make pledges without real results. Others tout their “founder first” ethos only to veer quickly when it matters (like the deal terms). Despite that, there are some VC firms who walk the walk of impact. One of those helping lead the way is H/L Ventures co-founded by Oliver Libby. Today, we explore how they’ve leveraged diversity and impact as a competitive advantage, and why it can be yours too.

Brendan Doherty: Welcome, Oliver. So let’s start with H/L Ventures – what led you to launch it? Why do founders choose you over other capital?

Oliver Libby: My partner, Eric Hatzimemos, and I co-founded H/L in April of 2009, during the depths of the global financial crisis. We were hoping to find a new and better way to co-build companies with inspiring founders. I’ll say that looking back from now to then, even though all the core DNA was present in what we wanted to build, we would never have predicted what H/L became. 

Doherty: How so? 

Libby: Well, looking back, there’s a few observations I see now. For one, we were building a venture studio-centric model before many even existed. Also, that impact and diversity would become crucial to our theory of building better companies, and that working with our founders daily would be the hallmark of our thesis. We also believed then and now that traditional VC needs a big reboot. All of that propelled us to launch H/L and it’s been a labor of love going on 12 years. 

Doherty: Glad you’re still enjoying it so much. So what does a holistic approach to company-building really look like especially during COVID?

Libby: The last year has only intensified our commitment to what we’ve built, but our concept and the scale of it has absolutely enhanced over time. This idea of daily active engagement is not just a slogan for us. It animates our entire approach. We have a near daily cadence with founders and their teams over calls, text, e-mail, Slack. We’re constantly present in the lives and work of our founders so they feel supported.

Doherty: Could that go too far and overburden the founder?

Libby: It’s culturally set up to not be intrusive. We’re not trying to get in their way but to serve their needs. This is especially true in darker times. We encourage founders to come to us transparently when times are tough. 

Doherty: What about in the deal terms or economics, do you support founders there?

Libby: Well, most of our holdings are in Common Stock, right alongside our founders. So our incentives are aligned. Also, our platform of advice, drop-in team members, experts-in-residence – it’s all designed to be relevant to almost any need our portfolio companies might have. Our expert and services network alone totals more than 200. Also, we don’t go away – unlike an accelerator or incubator, we’re there for the whole entrepreneurship journey. We like to be equally involved from the “napkin stage” through to the exit.

Doherty: I’ve seen quotes where you talk about the absence of focus on impact and diversity in investing. How are you addressing this and is it driving returns?

Libby: Impact and diversity are core to our culture and thesis. To be clear, we’re a for-profit venture firm striving to generate returns and be among the best in our industry. I co-founded The Resolution Project as a charitable vehicle, but H/L is unabashedly about building high-growth companies. We believe impact and diversity are powerful motivators for investors, founders, customers, and creating valuable companies. They’re not “nice to haves” or concessionary. Seventy percent of founding teams in our studio have at least one underrepresented founder, and every single company in the CityRock portfolio (our Series A-focused fund) is led by a female or BIPOC founder. Our performance supports the view that commitment to these principles drives returns.   

Doherty: What do you want to see from other major investment firms who pivot to focus more on diversity? How do we make sure it’s not just lip service or tokenism?

Libby: Honestly, it felt rather lonely the first ten years of our firm’s history talking about impact and diversity. But last year changed all that dramatically. Sure, there’s been a steady march toward more ESG investing where now it’s a huge component of global equity markets. But it’s still not much in debt and cash. I wrote a piece in the Venture Capital Journal earlier this year as a reminder that efforts to diversify VC managers – while necessary and good – are not enough. There’s been a small wave of modest funding for funds managed by female and BIPOC general partners, more interest in hiring diverse investment teams, and some promotions of underrepresented investors to partner in the VC world. That’s great, and insufficient at the same time. If the massive legacy asset management world, which is largely made up of guys like me, don’t take diversity to heart, aren’t held responsible for this by our LPs, and don’t strive to understand how good diversity can be for our core businesses, then the pace of change will be tragically slow.

Doherty: What are the top 3 things you look for when considering an investment?

Libby: There’s a whole host of things we look at, but I’ll group them into three buckets. First, we look for what any VC looks for in terms of a promising founder/team, a good idea/solution, and a large market (let’s call this Team, Product, and Market). This also includes a fun concept we call “resource magnetism.”  Basically, a lot of the VC mythos is about the charismatic hoodie-wearing would-be billionaire; we would prefer charisma-with-results, and that’s resource magnetism. 

Next, we look for impact and diversity, as we mentioned above. 

Finally, we look to discover our relevance to the company – how can we help? This last one is not marketing or feel-good, it’s actually the most important thing. If we can’t see the things we would do and ways we’d have an impact, then it’s a no-go for us.

Doherty: You’re connect with many leaders; who has influenced you the most?

Libby: My team and I have been influenced by so many exceptional people, and luckily we’ve brought many of them into the firm too! But I’ve always been formed and inspired in unexpected ways by our founders. I’m also grateful for the faith that Eric had in me to cofound H/L over a decade ago. Also, my parents and grandparents, all groundbreaking scientists, instilled the respect for impact and diversity that drives me today.

Doherty: What does work/life balance mean to you?

Libby: I confess to being a little afraid of this question! Work/life balance means a lot of different things to people and I think it’s likely out of whack for many people I know. For me, I’m blessed with two things here. First, I love what I do at H/L and it doesn’t feel like work. Of course, I work hard and have bad days and weeks but ultimately it feels more like a privilege to be here. Secondly is my amazing family and friends, centered around my wife Sabrina. She’s a leader in this industry too and really supports the mission we are on. I’m probably not a great person to ask about this, as my work and life are so blended. I’ve actually never subscribed to the idea that you don’t do business with friends or family. 

Doherty: How are you thinking about the future from a portfolio perspective?

Libby: We’re an industry-agnostic firm but that said, we have a few sectors that are constantly present in our portfolio such as sustainable energy and materials, health and wellness, future of food, fintech and financial inclusion, technology-for-good, and others. These have all been resilient to – and even beneficiaries of – the current environment with COVID-19, social justice, and economic uncertainty.

Doherty: Before we wrap up, tell me about the Resolution Project – what role did it play during the COVID crisis?

Libby: This is a great question, especially because Resolution goes to the heart of why this crisis was so bad. COVID-19 was always dangerous, but poor leadership around the world made it far worse, including here at home. Resolution is all about developing the next generation of socially-responsible, capable, experienced young leaders. There’s just never been a more relevant time to do this. 

Several times last year we activated our Resolution Fellow Emergency Relief Fund, and many of our Fellows also needed specialized funding, support, and help. We kept funding new Fellows, even in the depths of the COVID lockdown. Our fellows did exactly what we hoped they’d do by stepping forward in their communities and being of service. We now have over 600 young entrepreneurs in more than 85 countries and across America too.  

Doherty: That’s great Oliver, thanks for the interview.

Source: Forbes