Why Culture is Key for Raising Capital and Driving Growth

Hi everyone. So my name is Jonathan. So I'm a VC at ID Invest, which is one of the largest pan European VCs based in Paris. So we invest about 200 million euros annually, series A and B across Europe, sometimes in the us. And I'm going to talk today about building a good culture as a good culture in a company is one of our main criteria when we invest. So first a couple of definitions. Myth and truth about culture. What culture is? So first myth when we speak with entrepreneurs is that culture is exterior. So it's 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 good culture is actually organic. So I build a company, I will have a culture in my company. Anyways, it's going to 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 going to 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 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 blah, blah, blah, which basically means that culture is shared among all the people in your 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. And I took a few examples to show that. So Harvard approved that. So research approves. They did a big study in 230 companies with 1,300 executives in seven different verticals showing that companies which had at least two of these four values had a very high employee engagement. So purpose, learning, engagement, enjoyment and caring. And there is a clear correlation between the employee engagement and the results of your company. Other VCs and very renowned VCs all over the world say it. So Ben Horowitz 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 show that people with a lot of experience tell you that they have worked with tens and tens and hundreds of companies and that yeah, culture is everything. And the more analytical slide, let's say 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 SAP 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 tool, sorry 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 this kind of study to attract talent because talent want to work for a great place and not for. And not only for a great salary at least. So I tried to do this five minute 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 good culture. And I spoke with a couple of companies in our portfolio that you can see 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, they the customer is the most important thing in the company, blah blah, blah. 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. Second piece, take your pen and just write it clearly. A good example of this is what HubSpot did in the US basically building a 120 page deck with a culture code. Here are kind of the seven big things that I wanted to implement at 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 in all your processes, in how you work in the organization, communication, etc. And so this was the second P. The third P is proclaim. So spread it every day and in your processes, for example recruitment and boarding engagement. 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 like UiPath this morning, you know, from 100 employees to 1,000 employees in 18 months, you have to spread, you know, 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 he was looking for this very particular talent, technical talent that was scarce for months. And he ended up hiring a guy who had the talent, but which was not the perfect cultural fit. He finally hired him, he stayed like three months or four months and then he was invited to leave the company because the culture fit was really, really bad and the product was roadmap, didn't like go very fast because he didn't want to, didn't communicate very well with the rest of the team. The atmosphere was not really good. And so first they lost like four months, 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 scarce talent, 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 say, but on Fido, for example, AI background check. SaaS based in the UK had this onboarding days, the first Tuesday of every month. And they basically tell the employees, we, 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 were pretty scarce 10 years ago, five years ago, but now you have so many tools, like PCOM for example, which allow you to track your employee engagement, your employee happiness, to get feedback, an NPS from your employees and to get feedback in real time so you don't have to wait for the annual survey, you just track 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 tools. The fifth 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 he actually built Waze because he wanted to build a place where he wanted to work in. So he 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 he didn't imitate. It 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 examples of great companies with different cultures. So Zappos is more about enjoyment, like having fun every day. Disney is more about caring. So, and here are, 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 differentiation for your company. So last point and last slide is what can be trusting for SAS founders today, or founders, generally speaking, is how does a VC 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 show that if you're making an effort, if you're done making an effort, if you 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's the first thing. The second thing is we do due diligence, right? So we speak with your clients, we speak with your partners, we speak with 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 culture and your employee engagements. So we go on Glassdoor, we go on Google and we just type the name of your company, Glassdoor. And if you get two stars with tens of reviews, then it's kind of weird. Or we use data from softwares like Pecan Culture, M Glint, which some startups use as a KPI, they track during their board, and we have it and they send it to us. And so we can track that. So 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. If you want to discuss culture and fundraising, just email me.