It seems like community has been one of the hottest words of the last half of 2021 and now, 2022. Almost every company regardless of size recognizes the importance of community and now, investors are also keen to the benefits of investing in startups that have strong communities, either irl or online. Startups have been built, rounds have been raised, and success has been found through community and inversely, venture funds have also used community to stand out from other funds and to help their portfolio companies.

Through my roles at GSV & Brex, I’ve seen how vital community-led initiatives are for the success of a company. You see more and more community-led jobs appear with the rise of DAOs’ emphasis on ownership/involvement & as more companies prioritize the benefits of community as they scale up their operations. In my view, community building sits at the intersection of sales, go-to-market, and marketing. Great community builders inherently do all 3 without explicitly doing them. This organic experience leads its users to know about the company and even use its products without feeling “sold” on it. I like to say, the best form of marketing is through networks. Community builders leverage networks and are usually the “superconnecters” in their spaces.

The benefits of being community-led & focused for startups have been well documented in a variety of startups that have found success with some even becoming unicorns. At the early stage, we have companies such as Wander, Kona and Pallet emphasize community and with all different approaches on how to foster & build community. As Wander targeted consumers, Kona targeted businesses, and Pallet targeted both businesses and job seekers, the 3 companies utilized uniquely different approaches and have found success in each of their approaches.

Wander, the newest of the bunch and having raised over $27.3M, is a startup that allows people to book smart homes in order to capture the nomad lifestyle market and allow people to travel & work from unique locations and with a high quality work experience. Understandably, their platform had to become community-driven in order to attract the right audience to their platform hence they launched a Founding Member tier that was able to get the power users and the users most likely to refer their friends to the platform which granted a Wander hoodie, ability to invest in the round, and other perks.

Another startup that emerged in the last year was Pallet, a job platform meant to enable communities & creators to build their own talent network and find jobs. Whereas the traditional methods such as Indeed & Linkedin rely on employers to post, highlight and promote jobs, Pallet took upon a new approach with community at its forefront. They approached community builders in the startup space to curate jobs that their own network might be interested in and let them create pallet boards. Essentially, they solved what might be a job board’s two biggest problems. Getting jobs on a site & getting interested applicants through community. Communities and community builders like Meagan Loyst of GenZVCs, Packy McCormick, and Gaby Goldberg have all contributed by sourcing high-quality roles while bringing Pallet their audiences of followers.

Companies have also built their MVPs through the power of community. Kona, a company that came out of Techstars LA and raised $1M building for remote teams, established a sense of product-market fit before writing a single line of code. Instead of dictating their vision for a product, they spent the first months interviewing remote team managers to figure out pain points in order to create a product that helped solve a ton of the manager’s pain points.

Community doesn't go away as companies get bigger. Communities change naturally over time and as a company grows, the shape and composition of a company’s community do as well. For companies like Brex, I’ve witnessed firsthand how they’ve approached building communities from the ground up. Brex has employed XIRs who are former VCs & founders build their community of founders & investors. Through building recognition through building on the ground communities, Brex has essentially put an amazing spokesperson for their customers aka founders & VCs on the ground. These spokespeople not only promote the brand, but build community, help founders with everything from intros and pitch deck feedback to get customers onto Brex without selling, an action that makes them seem more authentic than salespeople.

The landscape of venture capital today pales in comparison to that of 2010. Just 10 years ago, funding favored the VCs as you typically had less capital in the markets but today, startups have all the power. The rise of money in the ecosystem, megafunds, equity crowdfunding, and crypto raises have given startups a ton of options in terms of funding and has effectively, hurt regular funds. Of course, your A16Zs, Sequoias and other megafunds will be unaffected by this change but for 1st time and emerging fund managers, they need to do everything they can to convince founders to take their money and avoid missing out on valuable allocation.

For emerging fund managers, building a brand is the key to differentiating in the early stage game and to build a brand is to build a community. I’ve seen more and more VCs focus on communities like First Round, Behind Genius and more. First Round utilizes community managers to effectively add value to their portfolio companies through events, the First Round Network of providing founders access to top experts, and more. Behind Genius Ventures & Paige Doherty (one of my favorite people in the space and whose fund I am an LP in) wrote taking a community-first approach to fundraising with diverse LPs, optimizing small checks and engaging in the community & early LPs to help further the fundraising effort along.

For me at DayDream Ventures, I’m taking a page out of Paige’s handbook when I raise my eventual 1st fund. Funds under $10M can have 249 LPs and I intend to hit as close to that number as I can, optimizing both for institutional large checks but also emphasizing smaller community-oriented checks of strategic investors who run communities, are GPs or founders as they are the crucial ones in helping with the success of a community. For every 1 LP we have, say their networks can yield 5 helpful connections. That equates to 1,245 2nd degree connections from our LPs but once you delve deeper into it and those 2nd-degree connections send you connections to their network, the network effect comes into play, creating a robust community that is crucial to the success of a fund.

So how do startups who want to create a community successfully do so? I chatted with Andres from Community Round and talked a ton about “Minimum Viable Community” aka, what are the things a startup should do in order to optimize for community. For startups especially in the consumer space, their goal is on how to understand their clients accuratley. Startups want to have a spectrum of the least interested person to the most involved in order to capitalize on

a) prioritizing for the needs of the most dedicated users & getting them to become defacto brand ambassadors and

b) figuring out ways on how to get the people who are the least interested to become more interested.

For example, at Brex, you can have customers who are long Brex and will promote it to all their founder friends and on the other side of the spectrum, have founders who only used Brex because it was convenient for them and would switch to competitors if a better deal was offered. Now, if a company could identify accurately what end of their spectrum each customer was on, they would be poised for major success.

I chatted with one of my DayDream Ventures portfolio companies, Abstract, and its CEO & founder Patrick Utz on community last week and we honed in on the Orbit model for community management.

The Orbit Model is another framework for the creation of high gravity communities which are ones that attract & retains members through an outstanding member experience. In it, there are 5 fundamental concepts such as gravity- the ability to retain and attract new members, love- a member’s level of engagement and impact in a community, reach- a member’s influence, presence- a member’s activity, and orbit levels- the way to categorize all your members. The goal for startups looking for the Orbit Model is how to increase reach + love in order to bring customers closer to the center of gravity (the startup) to drive new members to the community + create a set of power users and ambassadors.

I really think the rise of DAOs & Web3 really was a great catalyst in more startups realizing the need for communities. DAOs really value ownership, engagement (voting) and involvement. So many DAOs are appearing with low barriers to entry, so DAOs compete on community and their backing. DAOs have already begun to create a talent war for top community builders where now, regular C corps have to compete with DAOs and crypto to scoop the top talent, further legitimizing community builders as the next 6 figure job opportunity.

One of the biggest successes of DAOs & Web 3 projects falls sorely on the strength of a community as evidenced by projects like Bored Ape Yacht Club and Friends With Benefits DAO. As more of these communities thrive and succeed, more traditional companies will follow suit in this pursuit of creating thriving communities.

Where does the future of community lie for both startups & VCs? I think over the next 5 years, the best companies and funds are both ones that optimize for community. The best emerging & first time fund managers are going to have to rely on community to be able to compete with the Tiger Globals and A16Zs of the world to get allocation. The future unicorns of the world will also be ones that optimize their community as ambassadors, advisors and lifelong customers to their brand. Community roles are going to become a hot commodity. Every company will be hiring and competing with everyone else for the top community builders in the space. Community is going to be paramount for success.

Thank you for Oliver & David from DayDream Ventures, Andres from Community Round, Patrick from Abstract and Linda from Common Room for your help with this article!