Founders' Co-op

We all need a kick in the ass once in a while. I got one Wednesday when I read the New York Times article on Patagonia founder Yvon Chouinard’s decision to put his family’s entire $3B ownership stake into a perpetual trust, with 100% of future company profits dedicated to protecting the environment.

I worked for Yvon and Malinda in the mid-’90s, first heading up the “technical” products group (all the sport-specific products requiring specialized fabrics and construction), and then leading the effort to build the company’s first online store. I was just 26 when I started there, in way over my head professionally, and still trying to figure out how to reconcile my interest in business with my desire to make the world a better place. For me, at that moment in my life, Patagonia was the perfect place to try to understand how those two often-conflicting value systems could be brought into (uneasy) balance.

Eventually my passion for the Internet pulled me away from Patagonia’s cozy home in Ventura up to the Bay Area, and then on to Seattle. But the path that Yvon showed me – brought freshly into focus with yesterday’s news – is the same one I’m still trying to walk today.

But wait, you’re saying to yourself, you’re a venture capitalist; isn’t that among the darkest of the dark arts? How does the growth-at-any-cost world of VC have anything to do with making the world a better place?

Nearly 30 years ago these were the same kinds of questions I found myself asking Yvon and Malinda about their business. At the time, each senior leader was required to write a monthly letter to the two of them, outlining their activities but also raising issues or posing questions about the business that only the founders could address. Malinda in particular was known for reading each letter carefully, often sending it back with red-ink notes in the margin, responding on behalf of them both. Many of my letters to them found me struggling with the tension at the heart of their business: how does a company that sells affluent people more stuff they don’t need reconcile that with its stated goal of serving the environment?

Yvon’s answer to this question came in the form of a Zen parable: the “goal” of business isn’t profit, it’s to pursue your craft with a total focus on right action at each step. The process itself is the work, and if practiced with diligence over many years it will produce positive financial results, but only as “exhaust”, a side effect of having done the work correctly along the way.

The Chouinards never accepted the traditional rules of business, always finding a way to do the work that allowed them to be their authentic selves while also building a for-profit business that survived and thrived in an industry known for cyclical churn. Their decision to put the business in trust is just the latest twist in a lifetime journey of succeeding by doing things differently.

Patagonia is a global brand with $1B in annual revenue, Founder’s Co-op is a regional VC fund nobody’s ever heard of, with barely $100M under management. But when I read about Yvon and Malinda’s recent decision I felt a welcome jolt of recognition.

Every day, Aviel and I wrestle with the same questions I struggled to answer almost 30 years ago: how do we build a business that both works and does right? How do we take care of our founders, our LPs, our families and our communities, all at the same time? Where are we getting it wrong, and how can we do better?

We already know we’re outliers in the blue-shirts-and-khakis world of venture capital. We’re self-taught VCs, having never worked at any investment firm but our own. For 14 years we’ve practiced our craft in a city that’s barely acknowledged as mattering to the global software business (despite decades of outperformance by firms large and small). In an industry that relies on Asset Under Management as the ultimate marker of both power and wealth, we’ve deliberately kept our partnership and fund sizes small. Over time, we’ve learned that certain types of founders and business models run counter to our values and we don’t choose to work with them, no matter how much money we think we might make by doing so.

None of this makes us better than any other VC firm out there. It just means we get to bring our whole selves to work every day. That’s the gift that every founder earns the right to by sticking their neck out to build something new.

When you bring your authentic self into the world it inspires others, even if it takes a while. That’s what Yvon and Malinda taught me, and that’s our goal for the founders we back: to have the courage and strength to be 100% yourself, in life and in work, whatever that means to you. Founders are the most powerful force for good the world has ever known. If we pick the right people, and support them in the right way, everything else will come.