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Alignment Holdings

One of the primary reasons for creating Collaborative Fund was to try and help solve a systemic problem for entrepreneurs. The problem was identifying investors whose values and structure aligned with the mission of the company.

It was based off of a simple question – If I were starting a business today who would I want to raise money from? The immediate answer was filled with familiar names of people and firms who have a great reputation for backing successful companies.

But when I took it one step further and thought specifically about the type of business I’d want to build, it became a much more complex equation. Here are some of the things that I envisioned:

And connected to all of these–

This is where it got complicated.

Even if I could identify investors whose values aligned with these bullet points, most of them are hamstrung structurally. For example, most venture capital funds have a 10 year “life” – meaning after 10 years, the partnership winds down and anything that has not exited gets distributed to the individual limited partners. This is frowned upon as limited partners typically do not have the resources or time to manage so many investments on their own and their expectation and hope is that everything in the portfolio has exited prior to the ten year window. In some cases, a fund life will be extended by a year or two – but only if absolutely necessary.

For an entrepreneur this means as soon as you accept their investment, the clock starts ticking. And even if the partner who lead the investment genuinely feels the same way you do, they have a responsibility to their investors that eventually may diverge from the mission and goals of the company – especially if your wishlist is similar to the bullet points listed above.

And thus Collaborative Fund was born.

We assembled a group of investors who believed in this philosophy and opportunity – to structure a capital source fully aligned with the type of business we’d want to build. And while we utilized a fairly standard fund structure, we were explicit with our limited partners that we would need the flexibility and agility to adapt as the world changed.

To be clear, we were not the only choice in town. There are other capital sources that have flexibility and a longer term orientation. Folks like Omidyar Network, Knight Foundation, Case Foundation, Kapor Capital – all of which have provided for-profit investment to startups with a lot of the same values and expectations. We were excited to join this group and add our flavor into the mix.

Fast forward four years and we find some of the companies we’ve invested in asking a similar question to our original one, but focused more around how to find capital at a more mature point in their business versus the very beginning. Specifically, how to find partners in year five or six or ten who have the ability to provide significantly larger amounts of capital to help them scale the business while remaining independent and true to their original aspirations. And once again, we see an opportunity.

Meet Alignment Holdings.

We have created a new investment vehicle which is focused exclusively on providing capital to more mature businesses (ie. doing $10MM+ in revenue). In this case, we did not utilize a typical fund structure. We’ve setup a special purpose entity which allows us a lot of flexibility as to how to structure our investments and treat each case uniquely. The initial capital for Alignment Holdings comes from some of the same investors as Collaborative Fund.

Think of it as a macro investment thesis (same as Collaborative Fund) but applied at a different stage/asset class.

Initially leading this effort is Doug Smith. Doug is an integral part of Collaborative Fund. He has been an investor from the beginning and a part of the investment committee. As background, Doug is a Vice President and principal of Wesray Capital, LLC and Van Beuren Management, Inc. (family office organization for Raymond Chambers) and has worked for Wesray and affiliates since 1986. His primary responsibility at Van Beuren Management relates to the oversight of private equity and other privately held illiquid investment holdings, including venture and real estate funds, direct investments, co-investments and other alternative strategies, including many “double bottom line” initiatives.

For those who are not familiar, Wesray Capital was an early pioneer in private equity and leveraged buyout investments and produced fantastic returns to their investors.

In other words, we think we have just the right person to help us navigate this new endeavor and help ensure that we are financially rigorous while creative and flexible.

To that end, we are busy working on our first investment and plan to share more exciting news in the near future. If interested, please follow along @collabfund.