The Common Partnership founders Phin Barnes and Dan Portillo imagine their option to products and services supplies a extra direct get advantages to founders than the everyday VC agency’s.
The Common Partnership
Undertaking capital companies usually get started out with cash. As they get larger and compete extra for picky marketers, they upload extra bells and whistles — advertising lend a hand, recruiting products and services, felony give a boost to and the like — over the years.
At a brand new agency referred to as The Common Partnership, founders Dan Portillo and Phin Barnes are taking the complete opposite manner. Their wager: that high quality marketers gets extra significant cost, buying and selling their fairness for give a boost to in a extra clearly-defined change. It’s a fashion they are saying is operating — however with barriers. So now they’ve raised $240 million for a brand new fund to offer long-term capital, too.
The capital will permit The Common Partnership to again startups over extra long-term classes, the agency’s leaders say, whilst additionally doubling down on its rising winners as they develop. The GP’s new fund is the primary outdoor capital for the agency, which took its new identify in February after Barnes joined. Its earlier finances had been raised from billionaire Reid Hoffman, a spouse at Greylock and previous chairman of LinkedIn; Hoffman stays an investor on this fund.
But it surely’s now not a shift within the core fashion that Portillo and co. have operated since 2018 beneath the agency’s authentic logo, Sweat Fairness Ventures, with a workforce of 25-plus pros as of late in other folks, product and go-to marketplace and a portfolio of greater than 50 firms together with Coda, 8 Sleep, Grafana Labs and Nuro. As a substitute, the fund is a “fourth pillar” possibility for founders, the agency says.
“In project, there’s the buyers, then there’s everybody else. And right here, there’s us, after which there’s an investor,” Portillo quips.
Portillo’s trail to launching Sweat Fairness in 2018 wasn’t standard. The son of immigrants from Cuba and El Salvador (each turned into U.S. voters), Portillo was once the primary in his circle of relatives to wait school at UCLA. Stuck via the tech malicious program, he left early to paintings his approach up the recruiter ranks at quite a lot of startups culminating in Mozilla, the place he was once vice chairman of skill till 2010. The next 12 months, he adopted former CEO John Lilly to Greylock, the place he spent seven years as its skill spouse till 2018.
Whilst at Greylock, Portillo and his body of workers had been an ace up the sleeve for the agency’s buyers, serving to rent the primary 10 staffers at photo-sharing app Instagram, he says, to lend a hand protected that deal – one among 17 that Greylock secured via its skill workforce. However as Andreessen Horowitz led the business right into a duration of staffing up in products and services purposes akin to recruiting, felony and gross sales give a boost to, Portillo felt the ones purposes had been ripe for unbundling. What if as a substitute of the use of a fragment of the agency’s charges, the two% to three% of a fund’s raised capital drawn yearly and used to hide salaries and bills firm-wide, to pay for such give a boost to, a agency used all of its finances?
Sweat Fairness Ventures’ fashion: make investments the entire cash raised from its backers into its body of workers and products and services, then supply them to marketers for explained tasks or engagements in trade for fairness – a barter as a substitute of a conventional test. “Undertaking was once by no means in reality designed to ship products and services,” Portillo says. “My workforce at Greylock was once about $2 million a 12 months to run, throughout a couple of finances. Right here, I may spend $2 million on a unmarried corporate.”
The fashion proved a success with startups like Finix, the bills infrastructure corporate that has raised greater than $100 million to this point from buyers together with Bain Capital Ventures and Lightspeed Undertaking Companions. CEO Richie Serna met spouse Anthony Kline after they lived as roommates in a seven-bedroom rental in Chinatown with different startup recruiters (Kline later led recruiting at AppDirect and Stripe). After Finix’s Sequence B funding spherical, Kline and Sweat Fairness helped Serna in finding greater than 10 key hires together with a CTO, COO and VP of Other folks, in addition to engineering leaders. Finix extensively utilized Sweat Fairness Ventures to determine a reimbursement technique and construct a go-to marketplace workforce.
“Probably the most issues that founders say is that there’s no VC that may make your corporate, there are most effective VCs that may damage your corporate,” Serna says. “I feel that TheGP is no doubt difficult that adage, as a result of they’re in truth aspect via aspect with each and every in their portfolio firms, doing the true grimy paintings that it takes to construct the trade.”
However Sweat Fairness’s fashion had limits. Startup founders know that their fairness of their corporate is their most respected asset, person who appreciates a great deal as they prevail. Buying and selling fairness for products and services can come at a price that makes it most effective smart in smaller, high-impact doses. And it’s now not so simply scaled, the best way conventional VC companies have raised multi-billion-dollar, multi-stage finances. Within the Sweat Fairness manner, fairness in reality value sweat. The agency pursued special-purpose cars to again its winners, however the upside of being a backer of an rising breakout was once capped in comparison to a agency that doubles down on its professional rata rights to proceed pouring in money.
Input Barnes. A former inventive director at And 1, Barnes based a health startup in 2003 ahead of interning at First Spherical in 2008. He made spouse via 2012. Barnes’ departure closing 12 months fueled hypothesis he would release his personal fund. As a substitute, he teamed up with Portillo, whom he had met as a co-investor and board member in an augmented truth startup got closing 12 months via Discord, referred to as Ubiquity6.
For Barnes, the new cycle a chance capital making an investment, recognized for a quick tempo of commitments and “reasonable” capital that made sexy pricing and pace to devote key differentiators for buyers, was once much less interesting. “The enjoyment I were given from deep partnerships with a smaller selection of extraordinarily gifted founders, specializing in with the ability to carry out their very best after which give a boost to them with the easiest, that was once the item I in reality sought after to seek out,” he says.
Barnes and Portillo don’t imagine TheGP’s fund adjustments its manner: “It’s now not value-added products and services to generate profits greener,” Barnes says. However providing a fund permits TheGP to extra flexibly succeed in possession stakes it will need to paintings intently over the long-term with a startup (10% to fifteen% total, as opposed to the 20% to 30% of an ordinary Sequence A agency or startup studio, he provides).
Such an possibility is sensible to Phaedra Ellis-Lamkins, cofounder and CEO of Promise, a startup that gives interest-free financing for presidency debt. First of all skeptical of TheGP’s equity-swap fashion, Ellis-Lamkins raised a $25 million Sequence B led via the agency introduced in February after working one hiring project-for-equity with the agency. She’s now used the TheGP to rent a head of engineering, head of product, leader useful resource officer and a number of other engineers to this point.
Startups that obtain funding from TheGP don’t obtain limitless give a boost to, its companions say. However founders like Ellis-Lamkins will check out. “My task is to push the bounds and be thankful, and recognize after they inform me that we’ve reached the restrict,” she says.
The GP’s founders hope that founders will likely be extra receptive to the sort of dating as of late, as valuations have shriveled and the capital being introduced to startups is coming much less freely and with extra strings hooked up. Founders having a look to preserve money and fairness would possibly see The Common Partnership as a excellent industry for the longer term, Portillo hopes.
“We provide an engineer that they most likely wouldn’t be capable to have the funds for, or who would devour up a imagine quantity of runway,” Portillo says. “It lets them construct extra, quicker, with no need to devour up as a lot in their runway.”
Correction: A prior model of this tale mentioned that Dan Portillo graduated from UCLA. He left with out a level to pursue a occupation in tech.
