Community-Driven Companies: What They Are and Why We’re Investing in Them
Hi all! My name is Lolita Taub. I’m General Partner at Ganas Ventures where our mission is to leverage the power of our community to invest in community-driven future unicorns. We believe that companies with community at the core will become unicorns and produce outsized returns.
What’s a community-driven company?
There are various takes on what community-driven companies are. It’s part of what makes this model so special. But we, at Ganas Ventures, all coalesce around a few key points including…
- customers identify as members
- members are able to create value for other members
- members start the marketing and sales flywheel
Side-notes: a community-driven company can have the community be its product or have a community built around its product. They can also come from any sector and can be both B2B (e.g., MongoDB, Salesforce) or Consumer (e.g., Peloton, Glossier).
Why is now the time to invest in community-driven companies?
The timing is right for community-driven companies to rise and build the companies of the future because:
- people more than ever are seeking community
- platforms to unite/create communities are abundantly available (e.g., Slack, Facebook Groups)
- traditional ways of attracting customers are expensive
Why do you believe that community will be a strong indicator of success for companies?
Community-driven companies are faster growing due to their passionate members and sticky products, they have better gross margins because engaged users support others and engage in sharing product feedback, and these businesses have lower operating and sales costs from that marketing/sales flywheel I mentioned above. All of this leads to a far superior P&L and higher multiples.
Also, we’ve noticed that when comparing companies to their competitors, valuations prove to be higher when companies leverage community. I’ll share two examples of community-driven companies and their valuations. Consider AirBnB and VRBO. AirBnB, who built a community around its hosts, is valued at $26 billion; while VRBO, a rental site that does not have a community, is valued at $3.6 billion. Community-driven Peloton is valued at $27 billion, while Life Fitness, a fitness company without community, is valued at $0.5 billion.
What are the business benefits of building a community-driven company?
We believe that community-driven businesses will produce…
- customers who are passionate and mission-aligned
- sticky community around products
- engagement and feedback loops on product development
The community members of community-driven companies will…
- spread the word about the company and that word-of-mouth will decrease customer acquisition cost
- create bonds with the community and keep coming back which will lead to higher retention and lower churn of customers
- allow for opportunities to expand revenue
How can founders build a community-driven company?
Our community-driven company playbook includes…
- Defining the purpose of the community and how the community will interact
- Setting up the community so that members both add value to each other and inform the company’s product (in the case that the community is not the product)
- Leveraging the marketing/sales flywheel that a community can generate
- Measuring community return on investment (CROI). Here’s the formula we use: (VALUE GAINED — COST) / COST = CROI
Where can I learn more about community-driven companies and Ganas Ventures?
You can learn more about the community-driven thesis in this thread. You can learn more about Ganas Ventures on our site and in our FAQ. And if you’re a community-driven company who want us to review your company for investment consideration you, let us know here!
About author: Lolita Taub is a GP at Ganas Ventures where she invests in pre-seed and seed community-driven companies in the US and Latin America. With 15 years working within the Silicon Valley ecosystem, she has accomplished $70M+ in sales and made 90+ investments as an angel investor, Scout at Lightspeed Venture Partners, and VC at Backstage Capital and The Community Fund. Lolita is also a Co-Founder of proprietary matching tools Startup-Investor Matching Tool, the GP-LP Matching Tool, and the LaaS community which brings along a community of over 4K+ founders, funders, and ecosystem friends. Forbes and Inc Magazine have featured her as a woman promoting investment in underestimated founders and funders. She has a BA from the University of Southern California and an MBA from the IE Business School. Lolita is currently in LATAM, hunting for unicorns, and most importantly, she is a dog mom to the cutest Dachshund mix, Choco.
