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Bloomberg Beta Operating Manual

Contents

Our creed

We believe work must be more productive, fulfilling, inclusive, and available to as many people as possible.

Our waking hours must engage the best in us and provide for our needs and wants -- and the world we live in too often fails to offer that.

We believe technology startups play an essential role in delivering a better future. We can speed the arrival of that future by investing in the best startups that share these intentions.

Our investor, Bloomberg L.P.

Bloomberg L.P. is our sole investor. Returns that we generate go to fund Bloomberg Philanthropies, giving alongside Mike Bloomberg, to ensure better, longer lives for the greatest number of people by focusing on the arts, education, the environment, government innovation, and public health.

We appreciate many things about our investor: Bloomberg is a different kind of company. Bloomberg is a pioneer -- it created one of the original SaaS businesses, the first professional social network, and invented many practices that are now widely adopted by startups. Bloomberg now takes its profits and invests them in philanthropy. We hope startups will be inspired by Bloomberg’s example, as we are.

Bloomberg knows and respects technology and technology companies, is set up to be independent-minded, and builds toward long-term value. Bloomberg was created three decades ago on a then-controversial idea — that information in financial markets should be more widely available. Bloomberg has reached global scale and influence, with more than 15,000 employees in almost 200 locations — and yet it is still a private company, held by its founders.

Why did Bloomberg L.P. create Bloomberg Beta? Bloomberg wants a window into the world of startups to understand meaningful trends early, and know founders and companies long before it becomes obvious that they will be significant. To do this, Bloomberg wants a way to support founders and collaborate with them that doesn’t involve an ordinary commercial relationship. (Many startups are not ready to partner with Bloomberg — or any established, larger company — until they’ve grown, settled on a direction, and decided to make a partnership a priority. That can take as long as a few years after the company is founded.)

Bloomberg L.P. invested in Bloomberg Beta to open that window to startups, and set up a structure that is rare for a corporate-sponsored firm — a true fund that invests for financial return, not an “operating division.” Bloomberg knows that great founders want investors whose interests are fully aligned with their own.

So Bloomberg Beta is set up to choose its own investments, and back companies solely on their merits and financial potential, regardless of whether they have (or intend to have) a business relationship with Bloomberg. We do focus exclusively on areas that are of relevance to Bloomberg -- we wouldn’t invest in a videogame, or a consumer e-commerce site for example. One way to think of our focus: we look at the future of work.

We believe we can take the Bloomberg ethos and apply it to how we work with founders: putting our customers (founders!) first, developing deep expertise in our domain (the future of work), and convening different spheres (from every walk of life) to bring new experiences to our customers.

Ultimately, Bloomberg L.P.’s founders have succeeded at doing what we hope to help other companies do — create something extraordinary.

What we believe about the future of work

When we started Bloomberg Beta in 2013, we were the first venture fund to focus on the future of work -- and few understood what that meant. Now the “future of work” is almost a cliché, but we think of it differently than how many others describe it. We see it as more than just “productivity tools for tech workers” -- the future of work is about how everyone in the economy can succeed, and how founders can reshape business to make it more productive, humane, fair, and inclusive. To know how our fund thinks, it helps to know the views we bring into every meeting, every email we send, every thought we have about a startup. We've worked to articulate some of these beliefs -- both those writ large about the economy as a whole and the nature of how business will operate in the future.

Remaking traditional industries with technology

Once upon a time, technology startups only made hardware and software — today they often build entirely new services and products, with technology at their core. One of the most important new kinds of startups is a "hot-swap" startup, which directly replace some enormous incumbent by using technology to compete with it directly. Today, startups are entering enormous, traditional industries — like logistics, real estate, insurance, construction, education, healthcare, and more — bringing a wildly better offering than the established old guard.

Work is the soil of new technology

Our personal lives are now guided by technology — virtual assistants, self-parking cars, on demand delivery — more advanced than what we use at work. Over the past 20 years, in contrast to much of modern economic history, technology often arrived in peoples' personal lives before it reached industry.

We believe that work will continue to catch up and we’ll return to the historical norm, where technology arrives at work before it arrives at home. Work — especially knowledge work — will be the soil in which many of the most exciting new technologies will find their most interesting applications. Technology for work will write the first draft of technology history.

The impact of COVID, starting in 2020 forced companies to experiment with a more fluid workplace. Employers will expand benefits to include more support around mental health, child and elder care, and peer learning. Remote, distributed work is now considered a benefit. Billion-dollar companies can now be built with employees spread throughout the world, without one “headquarters." New service providers will arise to support these hybrid, ever-changing workplaces — collaboration tools, people management, real estate, cloud infrastructure, cybersecurity, benefits, and more.

Sudden shocks of technological change, driven by machine intelligence

We believe technology's pace, while accelerating, will affect us in a more profound way: changes, when they happen, will be far more sudden and jarring. The transition from a human society of hunters and gatherers to an agrarian one took about 3,000 years; the transition from agriculture to industry took roughly 300; industry to services took about 30. Whatever comes next will happen during the span of the careers of people working today. Now, an entire industry or category-leading company can fall off a cliff. In 1958, if a company cracked the S&P 500, it could expect to stay for 61 years — today, the expectation is only 18 years.

Machine intelligence, in particular, crosses all the areas we care about, and we were the first fund to declare it as a focus area. We believe machine intelligence will transform every industry and every function — and we focus on its effects on business. We believe machine intelligence will be like electricity: cheap, convenient, and on-demand.

The barbell effect

Market forces, management styles, and technology are enabling smaller companies to do more than ever — while also enabling megacorporations to grow to sizes previously inconceivable. As companies harness technology as a first-class capability, winners will eat more market share, and the middle-size, “just OK” companies may wink out of existence. Big companies will get even bigger, and small companies (some thinking of themselves as creators, or freelancers, and not “small business”) will make a good living for themselves, their owners, and their employees at ever-smaller sizes — and some will also be enormously successful. Creators will cross from being "companies of one" to growing enormous.

The importance of the individual

The era of the superhero is only beginning. There are now so many tools to support an individual creating, making money, and getting attention for their work. Soon we will see a one-person billion-dollar company, as many of the most talented individuals choose to work for themselves — as founders, in the creator economy, as freelancers, or in some other way. Those individuals will be the ones to create new industries and topple old ones. They will need relatively little capital (financial or otherwise). They are the ones we want to find early, support with trust as well as dollars, and cheer as they hit escape velocities.

Our challenge as a society, and Bloomberg Beta’s challenge as supporters of these individuals, is to make sustained efforts to include individuals of every background in this success, and to make sure the rewards for innovation are shared broadly among the many people who contribute to what often looks like it was just one “individual” success.

Following software developers' lead

We believe more work in the future will look like that of software developers today (automating away tasks and harnessing the flexible power of computers to get work done), and of securities traders (acting on quantitative data all day long). We believe much individual work will be done in collaboration with software that makes its own choices. As a result, many people will suffer the maker vs. manager dilemma that today afflicts mostly software engineers. These individuals will bring their own tools (more than just their devices) to work, insisting on the software and practices that make them most productive.

The new company wo/man

Careers will look less like a straight line, and more like a portfolio of activities, with people judged on their work and their capacities as opposed to their past institutional affiliations (whether educational or professional). In some cases, people will decouple income from work, and integrate their lives and their work in ways considered career limiting today. Their personal, economic, social, geographic, and demographic backgrounds will also be much more diverse than the most recognized talents of today.

In particular, the emergence of later-in-life new careers will be a social and economic phenomenon. As people remain healthy and active later into life, they will contribute to workplaces and industries in ways that are hard for later generations to imagine. Startups that employ these older communities will thrive.

What we look for in a startup

We recognize that seeing early signs of an outlier is hard, and nobody’s cracked how to do it reliably. What we want is a reason to tell ourselves that a startup has a chance to be extraordinary. There are a few areas where we search for signs: certain qualities of a founding team, an early product, areas where we think we can be helpful, and the right moment in a company’s life. Here is a complete list of the questions we ask ourselves when evaluating startups.

Founders

We look for a reason to believe a founding team is extraordinary. Not that they have the perfect skills or experiences to match the business they want to build (which is where the “team” slide in the deck tends to focus), but that they have the capacity for greatness.

What gives us a sense the founders could be extraordinary? Often times, they just have an unusual psychology -- they think they are exceptional, see grand patterns others don’t, are indifferent to norms, and may have an exceptionally high pain threshold. We are inspired by Michael Dearing’s description of the cognitive distortions of founders (post, vid). We have passed on companies because we didn’t think the founders were crazy enough -- they seemed too textbook. (And we don't mean their appearance or background, we mean their level of extraordinary determination, willingness to try, or insight.)

We believe the founders destined for greatness will be magnetic to the best available talent and capital for their companies, and we find ourselves thinking we'd want to work for them (because, if we invest, we will be working for them). They see raising venture capital as a sometimes-necessary aspect of creating a certain kind of business, as opposed to a box to be checked or a badge to be won. They'd continue attacking the problem they've chosen, in some form, whether or not they raise venture capital. They hold as articles of faith that a great company will have a strong culture, and unusual practices that make it an outlier -- and begin to integrate that way of thinking sooner than strictly necessary to continue growing their business.

Great teams have a plan to win when -- surprise, surprise -- they learn that a dozen other teams are pursuing their previously-thought-to-be-unique idea. They persevere when others (including us) tell them that ideas are cheap until they are brought to life. They both see themselves as unique and list many companies as their competitors.

So much of backing founders is about trust -- many of the companies we’ve backed are led by people who we’ve known for years, and grown to trust. If we don’t know you ourselves, we prefer if someone we trust knows you. Otherwise we find it hard to trust our impressions of you after a meeting or two; first impressions are so unreliable. That said, we’ve backed founders who we only just met -- sometimes you “just know.”

We also do background checks on founders where we search public records. Almost everyone has something turn up, and that's fine. People get sued, things happen. Some of history's best founders had complicated pasts. The issues arise when we're surprised by something important that we learn -- trust, again -- and we resolve those issues in conversation with founders.

Inclusion, diversity, equity, and justice

We are committed to making the startup world welcoming to people of all backgrounds -- from our own team, to the founding teams we serve and the companies they build. Startups start with seeing the world anew, and people with different backgrounds see the world differently — so if we want to remake things, we need to enlist people with as wide a range of backgrounds as possible. We're only willing to back founders capable of building a diverse team and an inclusive culture.

We focus our sourcing outreach on seeking founders from underrepresented communities. We define diversity broadly, including inherent and acquired forms of diversity like gender, race, ethnicity, sexual orientation, age, socioeconomic class, geography, nationality, education, and others.

We are proud of the diversity of our team (e.g., our partnership only includes one white male and our team is more than half women), though we can always do better. We believe groupthink is dangerous in venture capital, and that different perspectives demand different backgrounds. A diverse and inclusive team also just makes for a better work experience for us.

We want to do better at backing founders from underrepresented backgrounds. For example, in the last two years, 21% of the startups we’ve backed have a female founder, 17% of all founders we’ve backed are women, and 21% of the CEOs we’ve backed are women. We would like to accurately track other forms of diversity, though we avoid asking our founders to submit any mandatory data to us. Crunchbase now lists our public investments in diverse founders, however we don't manage any of that data collection ourselves, so the list is incomplete. We’ve struggled with whether to set a goal for future portfolio composition: on the one hand, we want the goal to be something we can control and achieve, and on the other hand, any goal less than 50% feels inadequate and the only goal that matters is the diversity of founders we back.

We believe progress requires an accumulation of many small and large decisions over years — trust takes time. That said, we commit to act now. Specifically:

We believe we need to hold ourselves accountable. As one measure, if a founder ever has an issue with our fund or our team, that founder can make a report to a Bloomberg representative, Deb Barker — dbarker67@bloomberg.net. We are accountable to our source of capital, and we follow Bloomberg's policies — which cover our interactions with customers (i.e., founders).

We strive to support the founders we back in building those diverse, equitable, inclusive, and just cultures. We refer candidates (including board members) from underestimated backgrounds. We ask founders if they're doing the work to educate themselves. We host "Turpentine Talks" (our roughly-monthly founder-to-founder tactical learning events for our portfolio) on the subject of building a diverse and inclusive team.

We believe a community of companies is stronger the more different viewpoints come to the table. As a fund and as individuals, we intend to work to create a more inclusive and diverse technology industry and do our part in fighting racism. For many of us on our team, this is core to how we see the world.

Product and market

We prefer to see products that are intensely successful in some initial market, over products that grow to large numbers but don’t play an important role in the lives of their users. Bloomberg itself started out as a bond price list for U.S. government bonds only. We like for a product to be the most important service to at least some of its users.

We like products we ourselves would use and understand. We’ve been technology buyers, software developers, founders, entry-level employees, and of course consumers of many media -- so the range of products we might use and understand is broad. These products often start with a specific application of a well-understood technology, not a multi-industry "black box" looking for a use case.

We believe startups destined for greatness, in their earliest days, choose...

If a product is launched, we care about how well it is doing -- the famous “traction” -- but we tend not to focus on absolute numbers. We focus on month-over-month (or, in earlier-stage cases, week-over-week) growth, ask questions about how different cohorts of users behave, and try to understand the per-user behavior (how much does any one user really value the product). At the earliest stages, we are most interested in evidence of customer love -- retention or intensity metrics, Net Promoter Score, or even anecdotal praise by customers for the product.

Stage

We strongly prefer to be the first money into a company, and to invest as early in the startup's life as possible. If a startup incorporates itself to take money from us, that's great. Should you call us if you have yet to even start a company? YES.

This isn’t so much a rational investment calculation (arguably there is less competition to write bigger, later checks) -- but it’s a matter of our style. An early investment is less of a transaction and more of a relationship. We do make exceptions for certain reasons (e.g., a founder or company we just couldn’t resist).

“First money in” doesn’t necessarily mean lead investor -- sometimes we are the only investors, sometimes one of many. Sometimes the founder sets the terms, sometimes another investor does, sometimes we do. We are indifferent on this. When we're willing to invest, we're willing to set the terms; whether other investors follow depends.

We are more than happy to invest in companies that might take a very long time to prove they are on to something -- our investor, Bloomberg, has a decades-long view and is willing to build for the long-term. We do not have a fixed time horizon to expect our companies to return capital. In fact, we prefer companies who are building for permanence.

Geography

We mainly invest in the San Francisco Bay Area and New York, though we'll consider backing founders anywhere in North America. Our roots run deep in the Bay Area and New York, where we can best discover founders, attract local experts who can help, and build community among founders. We only want to invest when we believe we can be disproportionately helpful. (We once believed we could only serve founders effectively if we were local to them; we've changed our minds. We now believe we can effectively serve founders anywhere in North America.)

The world has changed: greatness can start anywhere. We recognize that founders anywhere can learn the tradecraft of building startups. Startups depend on trust, and while that once required spending time together in person, we’ve learned ways to build trust and deepen relationships virtually and have invested without meeting founders in person.

In some places founders still struggle to access follow-on capital, customers, and even talent (especially for startups doing something more difficult with a distributed workforce, like robotics). So the bar for what it takes to succeed may differ from place to place.

We've widened our own networks by spending time in cities we find promising. Toronto was one of the first cities where we spent time. One of the ways we’ve widened our own networks is by leading several tours to newer startup markets (aka our "Comeback Cities" tours). We, along with members of Congress and our VC friends visited cities from Atlanta to Youngstown to learn what it takes to invest there. We've made investments in DC, Toronto, Vancouver, Philadelphia, Los Angeles, Boston, Seattle, Austin, Miami, and Columbus, among others.

Sources

We find investments in many ways, but our favorite is for founders we have already backed to refer other founders.

Founders are our customers, and we believe in doing more than waiting to be introduced to them -- we want to get to know them early. So we have developed a model in partnership with the Lester Center for Entrepreneurship at UC Berkeley’s Haas School of Business (based on data from AngelList and others) to predict who are the people in Silicon Valley and New York statistically most likely to become founders, who haven't yet -- our "Future Founders" group. We reach out to these individuals to form relationships with them, and encourage them to form relationships with each other.

After that, we are most likely to invest in companies that come to us through someone we trust. Several of those have come our way through referrals from the staff at Bloomberg -- this creates an instant “customer reference,” often from someone whose judgment we respect.

We don’t really find companies, we mostly find founders. We tend to ask people we trust who are the 1-2 most exceptional people you’ve met, whether in school or at work, or in some other way -- and then we get to know those people. We hope that some of those people evolve to be great founders, and we’d like to know them whether or not they do.

We also try a lot of products. Our phones have many, many apps installed. And we read. We reach out to people and companies whose products we like, or who we read about.

We keep track of companies we’ve been in touch with -- just like we’d hope that our companies do, we have an organized system for our outreach. In general, we try to run our fund with the same tools our companies use.

“Themes”

Our focus is investing in startups that improve work -- and knowledge work in particular, though we also explore investing in work across all occupations.

We have doubts about the effectiveness of theme-based investing. The best founders can surprise an investor with an unexpected take on a category. That said, there are areas our team has grown to care about and learn about. We only want to invest in companies where we believe we have enough understanding to be enormously valuable to our founders, and to have good enough judgment to support founders through thick and thin.

Machine intelligence crosses all the areas we care about, and we have treated it as our main interest area for several years now. We believe machine intelligence will transform every industry and every function -- and we focus on its effects on business. We believe machine intelligence will be like electricity: cheap, convenient, and on-demand. We want to back the founders ushering this future into the now.

Areas where we’ve invested include: content discovery, cybersecurity, data sets and services, developer tools, hot-swap startups, hardware, human-computer interaction, learning, media distribution, new organizational models, open source software, productivity tools, professional networks, real estate, technology platforms, workflow tools, workplace communication.

We avoid investments in financial services companies that intend to compete with Bloomberg clients.

Sometimes founders mistakenly assume that we avoid “consumer” companies entirely. There are many individual-facing businesses that we’d fund -- they just need to help a person at work. (Typically “enterprise” businesses sell to a company, and these individual-facing services sell to the end user directly.) Ask us if you are unsure if you fit in our scope!

We do avoid, for example, e-commerce and entertainment because they tend to serve people outside their work capacity. There are also other areas that intersect with the future of work where we know too little to be confident, e.g., retail, travel, and some aspects of local, heavy industry, and medical services. We also believe we play a role in how the future of work evolves, so we'll (politely) pass on investing in what may be highly successful companies but don't fit into a vision of a world we want to live in.

“The Deck”

A demo is 50 times more useful than slides. One is a description of a thing, the other is the thing itself. We look at your demo the way a new user would.

We cringe at the idea of founders spending lots of time making fundraising presentations. When we see “v36” in the filename of a presentation, it bothers us. That said, we do value the work founders do writing down their plans for their company, because it gives us a sense of:

If you use a presentation to sell your product to customers, we're as interested in that pitch as in your fundraising pitch (and here are our most frequent comments on pitch decks).

There is no standard format we like, but we probably spend 2-5 minutes reading a deck when we are deciding whether to meet a company. How many slides? Depends, but if you need 20 detailed pages to tell your story, that's likely more than we can absorb.

In roughly one-fifth of our portfolio companies, we never saw a deck before investing -- usually because the product spoke so loudly for itself, or we knew the team and business so well we didn’t need a deck.

In some cases, where we know the team well, we’ve helped founders (even before we decide whether to invest) write their deck for other investors.

In day-zero companies, we don't pay much attention to your milestones -- if you are in the discovery phase, trying to figure out what works, you'll generally be unable to predict where you will be beyond two months from now.

We do care about what metrics you intend to track -- what experiments are you running, what hypotheses is your first product testing -- and if there is one metric you care about more than any other.

We also ignore, in most cases, long-term financial projections -- except to the extent that they show what the “unit economics” (revenue and cost from a single user or customer) need to be for the business to work. If you fail to invent assumptions that make the overall business wildly profitable in a few years, then you probably should be doing something else for a living.

That said, we do care about the short-term financial plan, especially on the choices founders directly control. How many people do you intend to hire, where will you spend the money? This helps us figure out how much time you will have before you need more capital, and how far we believe you can get in that amount of time. We prefer to see early-stage companies spending their capital on building product.

Put another way, a five-year financial plan is mostly useless for early stage companies -- a monthly plan for the next twelve months and a quarterly plan for the next two years could be very useful.

We would love to see all of it, whether perfect or otherwise so give us anything you've already made -- financial model (and here's how we think about building models), deck, background materials. It helps us make sure our conversation is more dialogue than exposition.

In-person meetings

Once we’re meeting in person, you can often leave the laptop closed. We’re trying to get a sense of you as a founder, ask you hard questions and see how you respond.

If your product is public, you should assume when you walk into the room that we’ve spent the time to play with it.

Some things we tend to say, ask, or think in meetings:

We try to avoid some of the, shall we say, less useful questions others ask:

Founders are sometimes surprised at how quickly our meetings move; we often will take you off your story to zero in on something we believe is a key driver. This is how we’d work with you after our investment, so you can think about whether you enjoy working with us.

At any point, we’d be happy to narrate for you our level of interest -- though you might not always like what you hear. (And remember, an 80% chance of wanting to work together still means there is a 20% chance we will not want to work together.)

Immediately after we meet, a frequent thing we need to do is just think on it -- if we find ourselves getting less excited a day or two later, that’s probably a bad sign. If we find ourselves returning to the conversation in our heads, wondering what you meant when you said such-and-such, and imagining how great the product will be, that’s a great sign.

A lot of founders wonder why investors are slow to get back to them. This is an unacceptable pattern, and yet one we’ve been guilty of from time to time. Sometimes, the reason is we’re doing work on your company (e.g., calling references, who might take a few days to get back themselves). Sometimes it’s that we’re unsure and we’re giving ourselves a few days to see if we get more excited or less as we think on it. Sometimes we just mess up and forget to reply. It’s a fail when that happens. We try to at least narrate as we go with “I know you haven’t heard from us in a few days, this is what’s happening…”

We aspire to be at the extreme end of the “we communicate openly with you” scale.

“Doing the work” and calling references

If we decide we are going to invest, we often (but not always) go through a cycle of working on our own view — probing for holes in our own thinking, asking the advice of our one friend who has been thinking about this industry for 10 years, understanding other approaches that have been tried (or are current competitors), spending as much time as we can using the product, looking at financial models, etc. Many of the same kinds of things we find that founders do in the early days of contemplating creating a new company.

During this period, we try to be open with the founder about whether we will call around to ask about them. We put great faith in the value of these reference calls, and even sometimes check references before meeting a founder for the first time. We owe a debt to the friends, colleagues, and partners who are willing to share open, unvarnished views. We try to skip nonsense questions (“what are their strengths and weaknesses”) and instead focus on things that will help us decide whether to back a founder:

We recognize that references can perpetuate exclusion. For example, some people are new to the technology industry and we know few people in common with them. When we can't find references on people, we treat that as an absence of data (as opposed to bad data) — in the same way that a pre-product startup lacking revenue would be "non-"data as opposed to bad data. We recognize that references can also be biased, and we try to correct for that. We are explicitly not looking for people who are "buddy buddy" with everyone we know. Startups are about making something new work, and likeability can be a liability as often as an asset.

For references, we focus on speaking with people who we already know well enough to "score" their view (some people are more critical of everyone). We reach out to as many of those trusted references as we can find (and we sometimes ask founders to tell us who among our mutual relationships knows them best).

How we decide

We have an “anyone can say yes” policy for writing our first check into companies we back. (For follow-on investments we require consensus of everyone on our team.) Yes, any of our team members can say yes. And no, you don’t have to meet my other partners. We believe the best founders and companies are polarizing. Our best investments might have been, originally, opposed by one or more of our partners. Teams are great at gathering information and surfacing wisdom, but terrible at making decisions. We believe in individual accountability -- if anyone can say yes, then everyone feels the weight of making a decision. (That said, we do require that before anyone says yes they mention the investment to the rest of us -- that way they get the benefit of the team’s input, and it’s a good way to slow down and think for a second.)

We value each others’ opinions and seek them out. Our team is unusual in that we don’t (yet!) have any of the “partner issues” we hear about at other funds. In other funds, it can be the worst of both worlds -- founders lack clarity about how investments get approved, and in some firms the partners become resentful of one another's power to approve each others' investments and then do little to support another partners' companies.

We believe in each others’ talents, trust each other enough not to mind when someone is wildly wrong, and enjoy each others’ views. We talk as a full group twice a week, to think out loud about companies we’ve invested in or might invest in, and we meet for a full few days once every couple of months.

Because any one of us is empowered to “yes” a deal, we all share and share alike on helping each others’ deals succeed. “Before the investment, it’s your deal; after the investment, it’s our deal.”

We have posted in public our criteria for deciding whether to invest. When we talk about companies, we use those criteria.

We’ve had investments where the founder only ever met one person on our team before we invested (though, afterward we all want to meet our companies so we can help them). In practice, each of us often asks the founders if they’d like to meet one of our other colleagues because the founders will get a better feel for us, and because we like and respect our colleagues.

We've noticed something about our "anyone says yes" approach: over time, each of us has gravitated toward different styles of companies. Some of us prefer companies before they've even incorporated, others once they've committed some code (sometimes the code happens before incorporation, that's OK, too). If you get to any one of us, we'll each have a feel for who on our team is most likely to say yes to you -- and that's the person we'll try to steer you toward.

In practice, here are your odds: we have invested in 1.5% of the companies we have spent time reviewing.

Our deal memo

Before we invest, we write a brief “note to self” outlining our views. We do this so we can be as disciplined about our commitments as founders are about their commitments. We also share this note with a small advisory group at Bloomberg L.P.

In order of importance, we write about:

How long it takes

We’ve made investment decisions in the first meeting (though usually when we already knew the founder and something about what they are working on), and we’ve had cases where we get to know the founder over a period of weeks or months and watch their business evolve (often paying a higher price as we watch the founder make progress).

Our “Service-Level Agreement”

Some firms commit to giving you an answer in a certain amount of time. We commit that at any point in time, if you ask us to narrate the likelihood of investment and timeframe, we’ll give you our best guess.

The reason we don’t have a guideline like “3 meetings in two weeks” is because that smells like a transaction, and we’d rather be in a long-term relationship with you. We take seriously the process of getting to know a founder and a company, and having the founder truly know and like us.

Many of our investments have evolved out of months or years of conversation with a founder, much of which started before Bloomberg Beta even existed. Yes, some are love at first sight -- but it’s exceedingly rare. We’re not sure which will turn out better. But would you tell someone on the first date how many times you had to date them before you decided whether to get married? It’s fundamentally unpredictable at first, but it does become clear quickly.

If you’re in a conversation with us, our policy is “do ask, do tell” -- we are happy to share with you our current sense of excitement and timing. You might have to make a decision, and we want you to know where we stand. If the elevator doors close while we are thinking on it, so be it.

We intend to always give a clear “no” with straightforward reasoning. That reasoning, while straightforward, might still be subjective (“we just didn’t get excited about this and we’re not sure why”).

The deal terms

We want founders to know what to expect when they work with us before they get to the first meeting, and understanding how we think about deal contracts is an important part of that process. Our legal process is thorough, and we diligently review all documents. To help with that, we have published the templates we use for our investment documents. We recommend reading the accompanying blog post, that explains these documents.

How much risk do we take

Since we bet early, and expect the vast majority of our portfolio companies to fail to return much money, our winners need to be big. We fully expect that, if we succeed, one investment will return our entire fund. So we need to believe that every company could be that investment.

We prefer enormous growth in modest markets to modest growth in enormous markets. We believe that tends to be a more reliable signal of a company's greatness -- it is harder to serve 100 customers exceptionally than to serve 10,000 customers poorly. And we learned, in part from the example of Bloomberg's growth from one category of the financial industry to another, that deeply understanding each type of customer gives you an exceptional ability to lead an industry.

“Control”

We are not big fans of boards in day-zero companies. While we like founders having a close circle of trusted colleagues to ask for advice and we aspire to be in that trusted circle, when we imagine early-stage founders working on slide decks instead of products, it makes us feel a little ill. We'd rather be in your Slack or getting your Github notifications than having you prepare for meetings.

We also feel that the cadence of board review (every couple of months, let’s say) is mismatched to the cadence of a day-zero company (which evolves every week or two). Later on, boards can be great. If people don’t talk just to hear themselves talk, which each of us has been guilty of now and then.

More generally, we are ambivalent about whether investor control is useful at all. We’ve seen it cut both ways.

So, we generally prefer not to have a seat on a company’s board. But, that said, if the company wants us on the board, we’re open to talking about it -- and we have agreed to join boards from time to time when the founder truly wants this and has good reasons after hearing our views.

Rights we want

We care about getting pro rata rights. This means that if a founder offers another investor the opportunity to invest at a certain price, we want to invest at that price too -- at least up to the amount needed to preserve our ownership of the company.

We also want to approve of any investments you take that might get their capital repaid before ours.

We care about getting some information rights -- basically the ability for us to understand how well the company is doing, and its financials.

We go into much more detail in our public explanation of our investment documents.

The numbers

Our standard first check is from 300kupto300k up to 300kupto1M, though we sometimes go up a little higher. We want to invest enough to give a startup the money it needs to make real progress in the early days, and to attract other investors alongside us if needed. We are happy to lead, and happy to participate in rounds led by others, depending on the situation -- in earliest-stage venture, sometimes the idea of a lead means different things to different people.

In the early days of our fund, we wrote smaller checks because (like the early days of companies) we believe in burning capital slowly until you find product-market fit. (In our first year, our biggest check was $250,000.)

We have no minimum check size, and have written checks as small as $25,000, especially in what we call a "flag" investment.

We care about price. We avoid having a hard requirement about our ownership percentage. That said, we want to get return on our time in addition to our capital, so we generally want to be able to own a meaningful amount of a company over time. A good rule of thumb for us is that meaningful ownership means roughly 10%. We are comfortable taking the highest possible levels of risk and we believe that founders, and their investors, should be rewarded for that. (We also believe companies are successful when their teams also get generous equity grants that motivate the early team members to create something valuable.)

We also believe “the price is the price” -- we won’t ask for unusual discounts for ourselves with strange terms like participating preferred equity. (Sometimes negotiating over the size of an employee option pool can become a discussion about price, and we're aware of that.)

The average pre-money valuation of our recent investments was 7M,thoughtherangewaswidedependingonthecompany′sstate,withpre−moneyvaluationsrangingfrom7M, though the range was wide depending on the company's state, with pre-money valuations ranging from 7M,thoughtherangewaswidedependingonthecompany′sstate,withpre−moneyvaluationsrangingfrom2-15M. (We update this number from time to time, at a pace that avoids inadvertently disclosing the terms of any one deal. This average includes only investments where we were the first money into a company -- we lack a way to make our small number of later-stage investments comparable.)

No, not every VC wants to own 20% of your company. In fact, we think at seed stages too much ownership by the early investors can ruin the cap table -- making it difficult for the founders to make money, or later investors to own enough of the company when the company needs bigger dollars to scale.

We are flexible as to whether our investment is structured as a SAFE, convertible note (debt), or equity -- though we believe the valuation cap is the price, because almost every conversion of a SAFE or note we've seen in a successful company has happened at or above the valuation cap. We share our form documents in public here.

We believe in transparency. If a startup that takes our money wants to publicize the terms of our investment, we’d generally support that. (Of course we’d never disclose anything confidential without consent, and we expect the same of our founders.)

While we’d like to claim that the amount of work we do on behalf of a company will vary dramatically based on our ownership interest, we’re not sure that is true yet -- the reality is that the amount of work we do for a company depends most of all on how much the company needs and wants our help. If they ask us to work for them, we do what we can to help.

Other investors

We don’t care whether we are the lead investor or not. While we prefer to co-invest with others (who can help support a company in difficult times, and bring more expertise to bear), we have invested in situations where we are the only investor. We have also invested in situations where we own such a miniscule percentage of a company that it rounds to zero.

When we do co-invest, we care who a company’s other investors are, because the investors form an extended team around a company -- and we want our companies to have the best teams possible. We get concerned when we see situations with many investors, none of whom have a significant stake, because we worry that none will actually work to help the company.

Negotiating

We can commit to terms on just a handshake as opposed to a formal term sheet (which we're happy to write when founders want them).

We only want founders to hire us as their investor after careful consideration of the alternatives, with as full information as possible. So we're allergic to "exploding offers" (where proposed investment terms expire on a set date) -- in fact we have never made one. Investors and founders enter a marriage from which there is no divorce, so while it's important to choose quickly, it's also a one-way door and it's essential to choose well.

Following on

Because we have relatively big funds (compared to the size of our initial checks), we do devote an unusually large proportion of our funds' resources to following on. We will deploy our capital over the usual length of time for a fund: three years or so for all our initial investments, and then follow-on capital after that. One of the benefits of having a single LP with a long term focus is that we avoid setting a specific timetable for expected returns.

We won’t follow on in every investment, but if we are excited about putting in more money, we might want to follow on for 5x our initial investment -- or more (hence the opportunity fund). That said, there will also be situations where a company evolves in a way where -- even though it is still a great company -- it would benefit more from another investor’s capital than from ours, so we might not always follow on in great companies.

Unlike our initial investments (where we have an "anyone can say yes" policy), our follow-investments are consensus-driven decisions. Therefore, we have a much more structured process, where we typically ask founders to present their latest plans to the entire team.

“Standard terms”

We believe investors should get a “1x liquidation preference” -- in other words, if the company ends up being worth less than the value that we invested at, we should be able to at least get our money back.

We want to protect your confidentiality and ours, and usually include a standard term to accomplish that -- though the best protection is trust.

Our “products,” or, how we work with founders

We think of our “products” as offerings of support and capital to a company, and the price we charge is ownership in a company.

“Seed”

Our preference is to be the first money into a company, and to contribute a meaningful amount of capital. This is the core of what we do, and it reflects roughly 90% of the dollars we invest. We want to be able to add capital, sometimes even increasing our ownership stake, as the company evolves. While we lack a specific ownership percentage target, we try to get meaningful ownership given the stage of the company -- in practice, this can be 5-15% depending on how far the company’s progressed. (It’s difficult to generalize because, in startups, exceptions are the rule. We also find that hard ownership targets can make it more difficult to form a syndicate with other investors who can be helpful.) For these investments, for the sake of transparency and simplicity, we typically recommend an equity investment (as opposed to convertible shares, such a note or SAFE), although we’re happy to use whichever investment type the founders prefer.

"Opportunity Fund"

We want to find extraordinary founders who are defining the future of work -- and we’re privileged that we already have many of these founders in our portfolio. We’ve learned that to best serve these founders and extend our working relationships with them, we sometimes want to invest more in later-stage rounds than we can afford to do from our core seed fund. Opportunity fund investments will be several millions of dollars in size, and often be several rounds after our initial investment, once companies have deeply proven themselves and the primary risk remaining is the size of the ultimate opportunity.

“Funds”

While funds are a different business than startups, they're surprisingly similar: both have founders trying to find product-market fit and seek an outlier result. So we invest in founders of funds for the same reason we invest in founders of startups -- and since we always invest as early as possible, we prefer first-time funds, buying as much risk as we can afford. To align incentives for the long term (beyond the first fund’s companies) we look to invest in the firm itself (technically, either in the GP or the management company). We back fund founders as we would any founder, as our customer. We're in this for the duration and we want to help portfolio funds win.

"Open Angels"

We created the Open Angels program to deepen relationships with a handful of angels we trust. We back every deal our Open Angels do at a fixed ratio with their personal investment. We are not direct investors in their portfolio companies and each Angel manages their relationship with companies. Our intent is to support people we trust, and extend our fund to support many more companies, not to create direct deal flow for us. (In fact, sometimes our Open Angels might invest in companies competitive to ones in our portfolio -- since we have no visibility into details about those companies, and we're obligated to back them if our Open Angels do, we can continue to serve our portfolio companies effectively. We treat this situation the same way as if we'd invested in a venture fund that backed a startup competitive to one of ours.)

Our Open Angels include Adrienne Harris, Ivan Kirigin, Max Simkoff, Jim Greer, Michael Wellman, Dennis Pilarinos, Edith Harbaugh, Travis Deyle, Amjad Masad, Harry Campbell, Raphael Parker, and Nick Arner.

“Flag”

In some cases, we only seek to put a small amount of money to work (for example, in rounds where the founder is fortunate to have many investors who want to support the company, or it is a later-stage company), and it is unlikely we will invest more. In these cases, our support is as much symbolic as it is financial -- we want to be part of something, even though we know it is unlikely to be an investment that is meaningful to our fund financially. A typical check for these investments might be $50K. While these investments have access to all the services we offer our portfolio, given our lower ownership stake we’re less able to pay proactive attention to these companies and we want to set clear expectations up front about what kinds of startups the founder will likely consider competitive.

How we support founders

The founders we back are our customers. We aspire to be the most useful investors per minute spent with us, and per dollar on the cap table. We want founders to want to work with us even if we weren't investors offering them money. (Though, for us to be willing to advise, we'd need the same level of conviction that we have when we're willing to invest.)

We want to work with startups the way they work, not the way that big companies or traditional investors work. We prefer to take the formality out of the investor-founder relationship. Instead of requesting board seats and scheduling formulaic calls, we share with founders and encourage them to reach out to us when we can help. We've supported founders with everything from customer introductions to helping hire a critical new team member to sharing product feedback to thinking strategically about press. Consider us “on speed dial.” We try to cut waste out of the process; starting a company is hard enough. If you want regular check-ins, sure.

Often founders want to know how "hands on" we are -- and it's a difficult question because we're willing to be as "hands on" as a founder may want (we've line edited documents, spent full days with teams, etc.) though we avoid meddling in details unless a founder explicitly invites us. In practice, this means that our collaboration often gets intense at certain times and more "hands off" at other times. There are a wide range of ways we work with startups, adapted to the needs of each.

Our team works closely together -- we speak often and love helping each other, and we each know the full portfolio -- so every portfolio company has access to every member of our team. We think this is different to some other venture firms we’ve met -- we try to be a “no dysfunction” partner to you.

Areas where we tend to be most useful

While we’re happy to help companies across the full range of early-stage company questions -- recruiting (how to seal the deal for a critical early hire?), fundraising (should I take more money or call it a day?), services (who do I use for HR?) -- we concentrate on the range of skills loosely called “going to market.” Our focus on the future of work means that we may know your market well, or your business model.

To us, going to market includes finding product-market fit, segmenting your market, sequencing your approaches to potential users or customers, pricing, understanding when to review and when to ignore the competition, using the various organic marketing tools, paid marketing, press, partnerships, planning to raise more capital, and just the overall understanding of the importance of communicating who you are and why you are. We have many views here that startups find surprising.

We bridge multiple professional worlds -- technical, financial, corporate, philanthropic, political, social, and otherwise. We try to bring founders across those bridges early and often, with introductions to leaders in any of those fields and group discussions to share ideas and lessons learned that are applicable to startups.

We have presence in both San Francisco and New York. We've found that SF-based founders appreciate introductions to customers in New York -- we can open that door. We make a concerted effort to help the transition from “west to east” and “east to west.”

We don’t care about face time -- you won’t get a “hey let’s have coffee just to catch up” every two weeks. We do spring into action when we see the Bat Signal. We take feedback from companies on what they want. Some of our companies have asked us to do monthly, or even weekly, meetings with them, others “go into hiding” while working on their product -- we’re good either way.

Because we sometimes create our own products, we stay current on tactical trends and may know them firsthand. If you're building something that we can use on our team, we'll share product feedback and be your biggest advocate. We believe founders have as much wisdom as investors (or more) -- we’re all just trying to spark something great in this big wide world.

One thing many founders don’t realize is how little direct control their investors ultimately have -- we can’t demand certain information from you unless it’s specifically written into our agreements (where we often ask only for general financial information), we won’t be able to make you hire or fire anyone -- we work with you based on mutual trust.

How we like to communicate with you

It varies. In some cases most of our communication is by email and chat, others where we do a regularly-scheduled call, others where we meet in person from time to time -- it just depends on what the founder wants. And for transparency, you can look at our internal (personal) Manual of Me, where each member of our team explains how we like to operate with each other. At minimum in our communications with you, we generally like to know the number one thing we can help a company with at a given time so we can focus on that.

We appreciate getting regular investment updates (e.g., a monthly email) from companies we back, since it creates a background of good understanding that helps us help you. In practice, about two-thirds of companies we back are in this habit.

What makes a good written update for investors?

Here is a template for a monthly investor update.

Even better than an update intended for investors is a passive way to keep us updated (i.e., something that requires no incremental work). If you send a weekly internal update, copying us is great; if you use a team collaboration tool (Slack, Discord, Notion, a WhatsApp or Signal chat, etc.) we’d love to be included and take it as a great sign of trust; we even subscribe to private Github repos.

How to make the most of us

What gets us going is helping companies realize their potential. We are happiest when we are “in it” with you: describing what makes you special, introducing you to customers, helping close candidates, whiteboarding a set of features, pushing back on your plan to announce your fancy new product release, or getting that late night call that you think things aren’t working out with the person you just spent six months to recruit. We feed off your enthusiasm, and hope to help you build even more of it.

We intend to earn the trust of Bloomberg Beta founders. We commit to being available to you whenever you want to talk. We try to notice when it’s "a moment," and especially important to lead with empathy. We recognize that issues around the personal finances of founders are particularly important and often go undiscussed -- something we would like to change, so we can better serve founders. We commit to treating founders' personal financial information, when they share it with us, with confidentiality and respect. We intend to use our knowledge to help you and your companies.

We also know startups are not all roses and sunshine, even for the best of companies. We aspire to be most helpful to you when times are tough. That’s why we’re committed to the mental wellbeing of all our founders, and why we'll always urge you to prioritize your mental health. We support founders treating the direct costs of caring for their mental well-being – including out-of-pocket expenses for therapy, coaching, group support, and software-based solutions – as a legitimate, worthwhile, and encouraged business expense. And for those needing the additional support, we can share a list of providers who provide coaching, therapy, and other services (like Pilea) with you.

Investing, to us, is really nothing more than the mechanism we use to find a way to work with you. We are more comfortable talking about new product launches than about how to optimize our allocation of capital across our portfolio.

Events we host

We invite founders to many events. We believe one way we can help companies is just by getting them out of the building. We get our founders together every so often with an extended group of our friends, and with each other. Once founders start to see familiar faces, they understand that we're building a community of mutual support. These events are completely optional, and sometimes have no direct usefulness at all (like our monthly game of Werewolf in San Francisco).

To bring worlds together, often we'll bring in an author, or a senior government official or business leader, or even an artist, to expose founders to ideas and people from outside the technology startup world. We invite portfolio company founders to every event, and some are only for them. When possible, we try to include the broader community in events we convene.

Each other

Now that we have a critical mass of companies in our portfolio, the companies can be helpful to each other should they want to be -- vendor referrals, emotional support, product tips, etc.

We were one of the first (if not the first) fund to set up a portfolio community channel on Slack, even before Slack supported this functionality natively. Our founders congratulate each other, promote one another's successes, support each other through tough spots, offer tactical recommendations ("who should I use as an accountant?") in ways much more immediate, varied, and specific than our fund could do for any of them directly.

We noticed the conversations in that channel were surprisingly specific -- less about the big picture and more about what kind of paintbrush to use. We were inspired by the Picasso quote that only art critics talk about the Big Ideas, real artists help each other find cheap turpentine. So we created an event series, "Turpentine Talks," where one of our founders who has expertise in a certain area (e.g., growth, building open source communities, hacking personal use of time) leads a roundtable discussion with other founders learning and offering their own experiences.

We admire and want to continue to support these kinds of communities, that openly share a craft to hone the trade of companybuilding, with a particular set of companies that share a similar way of working and similar values. This kind of community is itself part of the future (and the past) of work done well.

Learning

We recognize that founders don’t have the time to plan for their own professional growth and learning, so we offer them some of that. We might do a training on how to create useful communication with technical teams, or invite founders to a panel on a subject we think they might care about. Founders can request Turpentine Talks on topics of particular interest to them, of course.

How our fund works with Bloomberg L.P.

We look for opportunities to connect startups (including our portfolio companies and others) with Bloomberg L.P. -- we invest significant time in understanding what Bloomberg may be interested in seeing. In practice, we refer more companies to Bloomberg that are not our portfolio companies, than are portfolio companies. And at the moment only one-fourth of our portfolio companies have business contact with Bloomberg. Bloomberg Beta would never be a party to a business relationship between a startup and Bloomberg L.P.; those relationships are all at arms’ length.

There are areas where access to Bloomberg may be enormously helpful to a startup. For example, some areas where Bloomberg has some of the best expertise in the world: the creation of a data-driven subscription business, selected technical specialties, high-touch customer service.

That said, we are set up as a separate legal entity to protect the confidentiality of startups with whom we work.

While Bloomberg will only work with your startup if it makes sense for Bloomberg (no, you can’t have a discount on a Bloomberg terminal), we understand how to facilitate the right conversation quickly.

We have an Advisory Committee at Bloomberg L.P. that hears from us about common themes we see, gives us input and feedback, and approves unusually big checks -- just like the LP Advisory Committee for any venture fund.

After the exit...

We are disciplined about learning from every company. We will write up a retrospective report where we evaluate our value added to the team -- vs. what we wish we could have added. We assess whether we were right on the risks the company faced, and what lessons we learned. Most important, we ask whether the founder would have asked for our money again.

Capital that we earn will go back to Bloomberg L.P., and therefore to Bloomberg Philanthropies where they focus on five key areas for creating lasting change: the arts, education, the environment, government innovation, and public health.

Company feedback on us

Once a year we ask all our founders to do a short anonymous survey to give us feedback on what we can do better. We calculate a Net Promoter Score as part of this. We use that NPS as the most important metric to drive our fund's choices.

We would share our Net Promoter Score here, but we don’t want our founders to feel we are using their feedback to market ourselves. (Though we’d be happy to tell you in person.)

Always be learning from your customers -- ours are founders.

Finding us

If you don’t know how to find us, figure it out. Great founders overcome much more than that. If you can't, you don’t know how to use the internet and you should probably rethink whether being a founder is the right career for you.

How to reach out

Should you send us a cold email? Probably not. If we were a customer of yours, or a deeply-valued long-term partner, would you email us cold? (That might depend on whether you're planning an enterprise-sold service, product-led growth, or something else. We believe in matching the fundraising process, as much as things allow, to the nature of the startup those founders are building.)

Wouldn’t you rather try to find someone in common? If you have to resort to a cold email, which great people sometimes do, at least show us that you took the time to exhaust the available sources of information first. Write an interesting headline. Tell us you read this… sentence… right… here.

Caveats founders should know

Things that won't work:

On competitive conflicts between startups

We will turn down investing in a startup that is a known competitor today to one of our portfolio companies. If you pitch us, and we think one of our founders might find it competitive, or you might find one of our investments (especially an un-announced one) competitive, we'll tell you that we think there is a risk and (in as much as we can share) why. Then, if you want to continue talking, we'll agree with you on what we can share with the other founder (and then, vice versa) to assess the risk of a competitive issue as openly as possible.

We recognize that competition issues can be complicated. Our intent is to respect the interests of our portfolio companies, and the confidentiality of every startup with which we communicate.

Why you should take our money

We wrote this manual so you could understand how we work, and see if you want our money. We hope this manual achieved that, and that we can avoid repeating it all right here.

Thank you

We all move fast, and prefer to spend our time on things that matter. So if you read this, and if you spend time with us, we hope that -- whether or not we work together -- you find it worth it.