Kirenaga: A Cutting-Edge Venture Investor Uses PWI to Stay Sharp

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Kirenaga is a four-year old venture fund led by Dave Scalzo and Terry Berland, two former finance industry executives with a rare combination of investment expertise, operations/engineering degrees, and hands-on operations acumen. 

They initially founded Kirenaga as a family office-type holding company – one focused on acquiring and making incremental operational improvement to mature, cash-flow generating businesses.  But rather quickly, they came see a larger opportunity in early-stage ventures which today represent the majority of their 14 investments.  This pivot, combined with a new fundraising initiative, necessitated a messaging update and the creation of a clear and differentiating purpose for positioning with possible fund investors.

Kirenaga chose BrandFoundation’s Purpose-Way-Impact DIY workshop kit to aid this new messaging/positioning effort. The following interview with Dave Scalzo shows the simplicity of PWI’s framework in action and the kinds of powerful statements that can emerge from it.

 Dave Scalzo, Kirenaga Ventures

Dave Scalzo, Kirenaga Ventures


JP: Tell me about the name Kirenaga, the idea behind it, and the role it has played in the pivot you guys have made.

Dave: Kirenaga is a Japanese word that roughly translates into “duration of sharpness” or “amount of edge retention.” It emerged from Japan’s legendary sword makers who found ways to balance the metallic properties of hardness and toughness, creating blades that were not only incredibly sharp and able to cut thru something on the first strike, but could do so repeatedly without dulling.  We liked the name because it speaks to the combination of art and science – the craftsmanship and technical proficiency –  that we bring to investing and developing companies.  It also reflected the idea of having an investing or operating “edge” over the competition, and a willingness to continuously evolve to stay ahead, and that’s what we’re doing with our portfolio holdings…and with ourselves in this pivot. 


How did this pivot to early-stage ventures come about, and why do you like that focus for Kirenaga today?


Shortly after we launched and had made our first few investments in mature, cash flow businesses, we started to be approached by earlier-stage entrepreneurs. They were passionate founders with absolutely fantastic ideas.  They needed help. They were asking for our help. And we were intrigued by the notion of turning these ideas into viable businesses. Many of these entrepreneurs were solid technical founders, but they often lacked the broader knowledge of how to build-out operations. Terry and I have deep operations backgrounds and we love to be hands-on. With later-stage businesses, there is only so much we can be hands-on with. But with early-stage ventures, we could have a huge impact.  Today, we’re about 1/3 later-stage businesses and 2/3 early stage ventures across technology, advanced materials, and advanced manufacturing.  We look to invest around $2M on average – that gives us an ability to have more impact and influence on operations than say the typical $500K investment an entrepreneur might otherwise get at this stage. It enables the entrepreneur to stay focused on their business much longer, and it allows us to be very present and hands-on.


Tell me how you used the PWI framework to rethink your purpose.

One of the things that both Terry and I have seen over and over again – and we can’t stand it – is the failure of great ideas to make the leap to great businesses. We knew from experience that not every great idea makes a great business, and not every great business is necessarily a great investment, but we wanted to close that gap for more of those ideas. We also saw that many of these founder/entrepreneurs look to their investors for their advice and help… but they rarely get it. Or when they do, it’s bad advice and that’s part of why they fail. Many early stage investors will put $50-250K into lots of opportunities. They’re spread really thin and how much time can they realistically devote to any one founder?  So, these entrepreneurs aren’t getting enough capital to make a real impact and they aren’t getting the advice and attention they need either. And the idea fails. Neither of us could tolerate that. The PWI exercises around figuring out “what drives you crazy” really helped us see that and led directly to our Purpose Statement: “To Transform Great Ideas Into Revolutionary Businesses”

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What did you arrive at in terms of your Way statement?

The exercises around clarifying our Way really led us to a few statements in different areas. It allowed us to separate out the functional approaches in our model, which we structured as actual “way” statements, from the more cultural values which we expressed are “core principles.”  For instance, one of our functional way statements is to “Invest with Sufficient Size” but a more cultural or philosophical core principal is “We Believe Fortune Favors the Bold.” We ended up with four of each and we think they play really nicely off each other. 

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And finally, the Impact statement. Where did the framework lead you there?

This was probably the hardest one for us. Primarily, because as investors and operators, we serve two audiences: the limited partners who invest in our fund, and the founder/entrepreneurs we are helping to turn great ideas into great businesses. We ended up developing a statement for each. For investors, it’s about creating high-alpha returns (25% annualized net returns) and for founders it’s to bring great ideas to life in ways that benefit all stakeholders – employees, customers, partners communities and investors.  


How did the PWI framework and workshop make this an easier exercise for you?

We chose to distribute the questions in advance to all three of the managing partners. That way we could each see where the discussion was going and think ahead to the points we wanted to make. We could quickly zero in on those points and also know when we didn’t need to waste time making unimportant points. It kept everyone on track and ensured we had none of those unresolved “table it for now” issues.  That made the conversation really efficient, something I’ve never seen in these kinds of big picture strategic discussions.  PWI also gave us a common language for these concepts and allows us to facilitate ongoing conversation that will ensure we stay in alignment as well. In about two hours of workshop time, we were able to get near-final statements together. 

 Kirenaga's PWI whiteboard 

Kirenaga's PWI whiteboard 


How do you think these statements and expressions, and the PWI framework in general, will benefit Kirenaga going forward?

Most immediately, it will help us in our own positioning with investors as we raise our fund.  Our pivot from more mature, cash-flow businesses to early-stage ventures has made it hard for investors to classify us and for us to differentiate ourselves.  Now, we have positioning and purpose that transcends classifications and connects on a deeper level.

For any business, but especially those with investors, clarifying your purpose and impact is the most important thing. Investors need to see a big impact story to justify an investment.  If the impact is big, that means the market is big and the opportunity for returns is big. Otherwise, why bother investing? 

We also see a great opportunity to apply this framework to our portfolio companies themselves. Getting clear on your purpose, the way in which you’ll pursue it and the impact you’ll make is the most important thing to do. Simplicity is the strength of the PWI framework. It’s fast and easy to execute. Start-up leaders always say they don’t have the time but they need to make the time.  And with PWI there really isn’t any excuse not to.

 

For more information on Kirenaga visit www.kirenaga.com

For more information on PWI download our infographic or visit www.PurposeWayImpact.com