Dan Teran, one of the founders of the New York City-based venture firm Gutter Capital, is no stranger to shaking things up. Back in 2016, as CEO of the office management service Managed by Q, Teran instituted profit sharing within the startup, even giving ownership to its the company’s handymen and cleaners—something that earned him praise from then-U.S. Labor Secretary Tom Perez.
Teran sold Managed by Q to WeWork in 2019, after which he founded Gutter Capital with James Gettinger. Now the two are launching a new fund with a similar grounding in the concept of “shared prosperity,” and even taking a cue from 16th-century sailors to help model it, according to a letter to Gutter Capital’s limited partners.
In the letter, sent Tuesday, Teran and Gettinger write that the new Gutter Infinity Fund will fundamentally change the relationship between VCs and founders, which they describe as “broken.”
“We are proud to announce the Gutter Infinity Fund, sharing 5% of our profit interest in the fund with our founders,” the letter reads. “We believe that a model of shared prosperity will enhance performance for all stakeholders across a lifetime of building companies of consequence together.”
The new model “derives from 16th century maritime commerce,” the letter says.
“Sailing crude vessels on treacherous routes from Europe to Asia and the Americas, early navigators risked death or capture on the high seas to deliver their cargo. As compensation, ship captains would take 20% of the profit from goods carried. Carried interest was born. Today, carried interest refers to how venture capitalists are compensated, taking 20% of the profits from the investments they make. Where sea captains risked life and limb to earn their keep, today’s venture capitalists enjoy the spoils of conquest while remaining safe on shore.”
It further describes founders as “modern day navigators” and, as such, the Gutter Infinity Fund will attempt to share the wealth by spreading both risks and rewards across the fund’s stakeholders.
“Our view is that founders are getting a raw deal,” Teran tells Fast Company, “so we’re putting our money where our mouth is and doing something about it.”
How are the founders taking it so far? “People were over the moon,” he says, adding that he “wouldn’t be surprised if other people (VCs) do it” as well in the years ahead. “No one’s challenged the VC model in a long time, and if we’re successful, there’s no reason anyone wouldn’t do it—by sharing prosperity, everybody wins.”
JT White, the founder and CEO of Forerunner, is one of the founders in the fund, and someone who has a history with Teran; he previously served as Managed by Q’s director of design starting in 2015, prior to founding Forerunner. The “shared prosperity” model is something that White says he’s in favor of, and that he thinks it’ll prove successful.
The model is “aligned with the way that I view the world, in that everybody does hard work and everybody should have some ownership or stake in the company,” he says. “A couple of months back, Dan and James shared the idea—I think they were trying to pressure-test it and make sure there were no negative consequences or if [the founders] were worried about it. But it seems like a win-win. Why wouldn’t I want ownership?” he says.
White says that among the founders in the fund, he hasn’t heard any overt concerns about whether it will fail. In fact, they’re “thrilled,” he says, and it’s already paying off in that founders are feeling more invested in helping each other find success. “I’m not banking on this program to make me wealthy, but it is a little bit of a safety net for the founders. I really appreciate that, and I feel like Gutter has our backs,” he says.
“This isn’t out of left field for Dan; this is generally how he approaches things,” White adds. “It’d be great for founders if this model caught on.”
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