Reach for the Sky! Some observations from a recent trip to Pixar
Last week, we had the opportunity to visit the Pixar campus in Emeryville, California. We pulled out several key learning points that we thought would be valuable to share.
Introduction
When I meet with other VCs, and we discuss our portfolio, eyebrows sometimes raise, and a scoff emerges when we explain that VFX and animation play a large part in our investment thesis. Comments of “How do you exit” or “monetise in this space” are frequent.
Pixar is a good reminder of its origin and how it was funded. Starting as a sub-division of the Lucasfilm computer division in 1979, it was spun out as a corporation in 1986, and Steve Jobs got involved. Jobs talked Lucas down from an initial offer of $15 million for his Pixar stock and a guarantee of another $15 million in funding for the company. Ultimately, Jobs paid just $5 million and guaranteed $5 million in funding for 70% of Pixar. He would eventually invest over $50m into the company. Jobs’ startup capital investment led to an acquisition by Disney for US$7.4 billion in January 2006 - quite the return! Like all investments we make, our decision is based on a deep-rooted passion and knowledge base in the sector and a clear line of sight to generate at least a 10x return to our investors.
With Animal Logic being acquired by Netflix last year for an undisclosed amount (rumoured to be in the high hundreds of millions) and Unity’s US$1.6 billion purchase of another certain successful VFX and animation studio in Wellington, New Zealand, we remain bullish on our prospects for a fund returner many times over from this sector.
When we had the chance to visit the Pixar headquarters last week, we grasped it with both hands. Pixar's success has several roots that lead back to a number of factors, and we thought we would share them below.
Welcoming failure
They create a welcoming environment for people to grow without without fear of being chastised for failure. Animators and artists get the chance to voice a character in their movies (the Director of the recent hit Elemental started out in the Pixar art and story departments), suggest edits and changes without fear of offending someone more senior, and try again if something doesn’t work out. I am sure that Pixar isn’t a place for wallflowers or those who don’t have ambition, but it rewards people for “having a go”.
Encouraging individuality and ownership
They promote individuality and empower people to go to extraordinary lengths to build their own space within the company. The effort and extraordinary lengths their teams go when decorating and building their office spaces are out of this world. From fully rendered and decorated submarines and Chinatown buildings to ancient Mayan temples and witches' huts, the pride and creativity (and freedom/flexibility from the Pixar facilities team!) their people put into the workspace is next level.
A flattened hierarchy
They are one of the tightest communities I have ever seen in a business. Their campus and recreation areas encourage collaboration and flatten hierarchy, allowing the most junior employee to have lunch beside an academy-award-winning producer. This breaking down of barriers to senior leaders promotes creative problem-solving and the accelerated development of existing team members. No more exec canteens!
Their brand engenders a sense of pride
Everything in their facilities, from the splash plate on the soda machine to the gift shop, exudes their brand and obvious love for it. Engendering a sense of pride in a corporate identity goes beyond creating branded hoodies and mugs. I follow a similar sense of fanaticism over our brand and how it is portrayed and received. We certainly don’t have the budget of Pixar, but every piece of branded equipment or merchandise is the very best we can afford, and I think those who receive something Hillfarrance-branded get a taste of how much we love our identity.
Their talent is not dialled down when demand is lower
They do not follow the scale-up and scale-down staffing model some animation studios put into place. Granted, their properties have generated over US$15 billion, providing a lot of runway and freedom to retain your talent, but it isn’t a typical feature or a requirement. This allows their people to feel job security, and this, in turn, promotes greater creative thinking and a healthy appetite to take risks.
Employee families do not get the short end of the stick.
Pixar walks the fine balance between creating a place where love to work but without compromising work-life balance and drawing their people away from their families. I saw dozens upon dozens of children and prams on site and learnt that Pixar actively encourages employee’s families and children to enjoy and use the campus facilities.
Walking and talking
This is a common activity within corporate campuses and the wider Silicon Valley business community, and I saw this in force at Pixar. I aim to do one meeting per day while walking in Devonport, but I will try dialling that up from here on in. Ask us if you have a meeting booked, and we aren’t walking and talking!
Summary
Like billions of others, I am a huge Pixar appreciator, and I am sure there is a bit of fan service being done to this company in this piece. If you pull out anything from this blog, I hope it is the importance Pixar places on people and culture and their commitment to not restricting the potential within their talent. That creates legacy, longing and, ultimately, truly epic performance. From an investor’s perspective, Pixar has provided a tantalising road map for our portfolio companies, like Floating Rock, to build open and innovate even further. Regardless of what they achieve, they stand on the shoulders of titans, and that is an honour which is not an opportunity that is on offer to every startup.
I am going to sign-off with a quote from my favourite Pixar film, Ratatouille:
“Your only limit is your soul. What I say is true—anyone can cook ... but only the fearless can be great.”
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