Most venture capitalists hold their cards close to their chest. Not so with Bloomberg Beta, the media giant’s investment arm, which focuses on early-stage startups. The firm put its entire operating manual online–and not on some glossy website either, but on GitHub, the utilitarian platform for open-source software code.
In those files, you can find everything from the sizes of the checks Beta writes (it has $150 million to invest), to the criteria it uses to assess startups, to how it supports founders once a deal is done. And now, just this week, it’s taken the extraordinary step of publishing the exact documents it uses when closing a deal.
All of this is practically unheard of in an industry that jealously guards its privacy. At first, Beta, which launched in 2013 and is entirely backed by the Bloomberg parent company, was just looking for a way to stand out in a crowded field dominated by rockstar players. But the firm found that going open kimono has had material benefits.
For one, it’s cut down on the noise–the firm gets fewer pitches from startups that aren’t a fit, since the documents specify exactly what it invests in (companies focused on the future of work). Surprisingly, many VCs don’t even make that information public. The frankness has also attracted some founders specifically because of the values expressed in the documents. Among the nearly 100 companies now in Beta’s portfolio are big names like Codecademy, Homebrew, and Scout.fm.
Opacity in venture capital stems partly from the hush-hush attitudes of the financial industry. “These are private investment vehicles,” said Roy Bahat, the head of Bloomberg Beta and one of Fast Company’s Most Creative People. “They’re part of a class of investment that don’t talk about themselves that much.”
But the world is changing, and many businesses are shifting toward more transparency. “You can’t manufacture a brand anymore,” Bahat said. “If your brand is going to reveal who you really are, the fastest shortcut to that is to be as transparent as possible.”
For Beta, that means laying out shortcomings as well as aspirations. The firm values diversity and inclusion, but it hasn’t yet invested in as many underrepresented founders as it’d hoped. Its manual shares both its numbers (only 17% of its portfolio companies include a female founder), as well as its strategies for improving that performance (such as office hours solely for underrepresented founders and data-driven strategies to identify people likely to start a company).
Bahat is a natural innovator–Fast Company previously profiled his unorthodox hiring strategy at IGN. And he’s one of the most candid people you’ll ever meet (check out his LinkedIn profile). But the decision to put everything out in the open wasn’t initially comfortable for everyone at Beta. There are some distinct downsides. “The more transparent you are, the harder it is to use negotiating leverage,” Bahat said.
But Bahat said Beta is trading that for something more valuable: trust with founders, which comes from the fact, Bahat said, that “you’re willing to tell somebody the things that are supposed to be the secrets.”
Plus, just as going open source improves software, Bahat said that making Beta’s manual public–and putting it on GitHub where people can, and do, post comments–is making Beta better. “Starting a company is a trade,” Bahat said. “Tradecraft is all about getting a lot of little decisions right.”
Over time, though, going open kimono has simply become second nature. “It’s like any other muscle,” Bahat said. “It’s really hard at first, and unnatural. And then, the more you do it, the easier it gets.”