Mar 31, 2020
Over the last few years, a number of us at Upside have been questioning why there is not a greater focus on talent development and talent investing either by traditional businesses or venture funds.
If people are the key to everything, and talent is the leading differentiator, then why are more organisations and funds not laser focussed on spotting, recruiting and then total investment in an individual’s development over time.
We see an opportunity for looking further back in to a founders development and start investing well before the formal point of investment. This is something that we have been developing over the last couple of years at Upside. We believe the future is talent.
We are at cross-roads with regards to venture investment. There is a notable shift in focus from investing in the stereotype white male with a (perceived) strong background (covering Private School, OxBridge, Goldman’s/McKinsey) who likely has access to some launch capital, to a more diverse founder base coming from females, BAME and other underrepresented groups.
The investment structure of funds is well versed, invest in e.g 20 companies with one or a couple making all the return for the fund, a few providing moderate returns and the rest failing. It’s a model that doesn’t advocate sustainability and is also an unchanged model in most instances. Then the model of venture investment also remains relatively unchanged i.e. take a smart person with a good idea and give them a tonne of money to scale as quickly as possible on the hope it is the funds’ stand out performer covering the returns it needs to. If it isn’t, oh well at least they tried.
It is evident we have a shift occurring in who is being invested in but there are still few models that are looking at how to invest in individuals differently. Our belief is that this is where an even greater opportunity lies. Where you take the break-through in diversity investing and couple it with talent investing obtaining an output that is truly transforming businesses, that is more sustainable and likely to survive the tests of time.
Now, there is a reason why talent investing has not taken off to date, that is because it has an even longer lead time to return on investment. If a traditional fund is looking at a 10 year return on investment, then adding an extra 5+ years to that investment period by investing in an individual makes the model different and to many unattractive. Other than the increase in time there is also a need to invest capital and time in creating the right environment for that talent to develop, to nurture and to flourish. This is a model that to many is not appetising and therefore to date, the model has been focussed invest and drive growth at all costs. Bigger, faster, more now please. The question is, is there a better way?
Over the last 10 years, you have seen the green shoots of people who believe in talent investing. Entrepreneurs First and its founders Matt Clifford & Alice Bentnick are a good example, in fact you may say the pioneers of talent investing. Alice recently wrote an article called Funding individuals, before they’ve founded a company — meet the Talent Investors and focussed on those organisations that were waking up to talent investment.
More recently Founders Forum with the development of the Founders Academy and Whitehat where the founder Sophie Adelman is an open advocate that investing in talent is the future. But the question is, is it enough?
If you look at education broadly, then an individual’s journey through e.g. primary and secondary school is 5 years or more — think of that specific development journey and its impact on each individual in who they are and who they become. There are then those that follow the less traditional route or who drop-out of school, those individuals often have years of ‘alternative’ development behind their belt on their path to success. Even at a later stage in an individual’s education university (3 years+) or further qualifications (MBA being 2 years, an ACA being 3+). If you look at successful founders in the main they are not 20-something year olds. They are late 30s, 40s and above who have either attempted to launch many startups before succeeding or have the money and/or experience to make it work after decades of training. In summary, education and development takes time and even more so if you want to increase the success rate of businesses.
So, are the current pioneers of talent investing actually doing enough when programmes are mere months in length and none of them are over a year?
VC Funds are also now starting to acknowledge the importance of two key things:
- A focus on diversity and inclusion is a must; and
- A focus on truly understanding a founder and their team.
This is born out of either seeing the opportunity associated with diversity/ inclusivity, now have the social purpose to focus on it or are seeing a plethora of portfolio companies fail because of the lack of leadership credentials or team to be agile in delivery and show grit during the rough times.
In this CBI report, outside of ‘product/market fit’ at no.1 , ‘not the right team’ is no.3 with 23% of the votes. Second place is ‘ran out of cash’ which in the main is a consequence of not having product/market fit or the right team.
So there is more to do. Is it not time for more organisations to acknowledge that founder & CEO development is a 10+ year process and that starting on the journey with an individual as early as possible will reap greater rewards at the point of maturity?
Our hypothesis at Upside is that a long-term focus on talent investing will yield greater founder/leader/team diversity and drive greater inclusion. When you are focussed on the individual talent, it’s development and it’s future development you will outstrip hiring based on achievement, credentials and institutional brands.
We believe by ignoring an individual’s development path you miss out on understanding what kind of founder, or better CEO, an individual would be, how that changes over time and what is the right idea for them to invest their life in as that is what their journey is. Furthermore, what your role is in helping them to their path of success — this is key if you are going to invest in a talent without it being self-serving (i.e. unrestricted).
The first step to strong talent investing is a mindset shift in how you look at your employees. For businesses, talent is critical to your execution and success. But for talent, businesses are more often than not in this day and age the stepping-stone to something else.
Therefore, businesses should be changing their view of talent from one that is focussed on hiring someone to deliver commercial gain to hiring someone on the basis I/we are lucky enough to be able to nurture that individual’s talent for a period of time.
By acknowledging that and then taking action in the form of supporting that talent in developing into what it desires, you will only help create a greater impact on the business whilst you have the talent and then a lasting friend once that individual moves on. Which 8 times out of 10 these days is an inevitability.
For venture funds you can create a piece of due diligence that is focussed on understanding a founder’s development over time and how their team has developed together over time. A founder’s development should be a detailed inquisition and an eye opener to who they are, what kind of leader they are now and will be in the future.
You should look at your role as being that exceptional talent scout and therefore enquire:
- How have they been coached/ they coached others?
- What are the difficult experiences that have shaped their development?
- What skills have they made into their USP?
- What are their hidden talents that people do not know about?
- What are their current development points?
- What do they learn from and how do they learn?
- How do they invest in their own development?
- How do they invest in others’ development?
- How will they invest in others’ development going forward?
- What is their business talent strategy and development plan?
- What is their continued development path?
- How are they going to continue to develop from a founder into an exceptional CEO or alternative within their business?
Our model at Upside is simple. Create the experiences needed to create exceptional founders and CEOs. Create a group of people that have a fundamental impact on those around them and the value that they collectively create.
With that in mind, then it becomes about the duration of learning, which will be different for each individual that comes through our doors. We usually plan on a multi-year development path within Upside. However, this development path should be a critical cornerstone in someones life and therefore is something that they should take on once they leave our organisation.
To facilitate this process at Upside we take notice of some of the environments that encourage the most effective development through the talent journey:
1. Coaching: working alongside employees are various coaches both internal to Upside and external. These coaches are there to impart knowledge but also to obtain an in-depth understanding of an individuals specific development needs. To work with them on their development journey either on a regular basis or over a short period. Through this aiming to uncover hidden talents they may not realise they possess.
2. Experiences: We place employees in a range of experiences, each very different from the last. From technology product management to customer experience transformation, anywhere in the Private, Public, or Third sector. To this we add cycles of experience in and out of fast paced venture environments with businesses as different stages of early growth. We believe complex delivery environments are critical to honing both hard and soft capabilities for an individual. As we say often, it is the hard experiences where a lot of the learning is found. These experiences offer a balanced exposure to commercial delivery, change management and technology development. It’s this breadth and variety of experience that not only provides exposure but also spurs innovative thinking.
3. Academics and further learning: Along the development pathway, coaching and experiences then allow talent to create bespoke learning directions suited to their growth including both structured and unstructured learning.
We believe that a new focus on talent and talent investing is the future of successful, sustainable and socially aware business. However, to do that as a funder you need to ask more questions about the key talent you are looking to invest in, and, as a business to ask more questions internally on the breadth of experiences that you are offering your own talent.
Whether you are an individual looking for a new challenge, a funder looking for a talent assessment framework or a business thinking what more you can do to create new experiences or talent programmes then please get in touch.