Ever since I became an LP, albeit small, but a dedicated one, when people ask me what kinds of funds I invest in, I, of course, share the usual:
- Funds I and II
- Pre-seed and seed managers (ideally first checks)
- Both emerging investors (limited track record) and emerging managers (extensive track records, but first-time managers)
- Industry-agnostic, but little overlap with my existing portfolio
- Geographically-agnostic
- Bias towards concentrated portfolios
- Bias towards sub $50M funds
These are all boilerplate demographics. And I’m happy to qualify each one, but they’re all traits that, more or less, I seek alongside a lot of other emerging manager-focused institutions share. But one additional thing I share with others is that I look for GPs who believe venture is the last job they’re ever going to have.
The world’s best founders bet their entire lives on the success of an idea. The literal definition of all eggs in one basket. Along that journey they’ll raise capital from a variety of people, some of whom will take board seats and be their trusted partners. The last thing a founder would want is someone who “retires” 3-4 years into the job because they didn’t have the intestinal fortitude to stick with the business. They leave a vacant hole in the board. They leave their founders by the wayside. These founders need someone who has their back no matter what.
And even if not, these GPs are the folks founders can call at 3AM in the morning, and these GPs have jumped out of bed before they’ve even picked up the number. They’re primed even on the weekends. Even on vacation. It’s borderline not healthy, but the GPs love this craft as much as the founders love theirs. To them, this job and the all shit that comes with it is the utopia.
The truth is things can change. Will change. But at the time of our investment, I need to believe that every GP I back has no Plan B, that they’re going to figure it out no matter what. And more importantly, they need to believe that. That they’ve been put on this planet to do so. That they will help their portfolio companies figure it out no matter what. And the more concentrated their portfolio, the more they must help. Incentives align.
It’s hard to describe what that exactly looks like because different people exhibit that differently. It’s also one of those things you can’t just say, but comes out in the small things you do, over time. It’s like glitter. Deep and enduring intentions have a way of sticking with you. They’re hard to shake off. And in their darkest, character-building moments, they shine.
And by function of that, we will too. Giving up should not, cannot exist in their vocabulary. I err towards GPs who run through walls. And if they can’t, they need to believe with every fiber of their body they can and will it into existence. Even if they don’t know the answer, they will figure it out quickly. Naturally, they have an extremely high rate of iteration. Their decks, weekly updates, and even their memos will go through sweeping evolutions over the course of a few short months. And that pace will only get faster.
I like investing in people who want long careers in venture. And that will lead us towards two kinds of people:
- The kind of person who wants to get rich on fees
- And the person who would do this even if they didn’t get rich because they love this craft.
The first cohort will likely have all right answers. They know the jargon. The modelling. The narratives LPs want to. They know exactly how big their Fund III and IV and V looks. How big, their check size. And everything will be explained as a function of today’s dollars, today’s terms, today’s environment. A few deep references will unveil how they treat others. Why they change jobs. What did they say at the job interview every time.
The latter cohort will have a world view. The way the world will look 30-40 years from now. Not in terms of technology, but people. They don’t try to get on top of things though it’s part of their job. They get to the bottom of things. They’re laser focused during conversation. They’re not looking at the notifications on their phone. They’re looking at the small details of the conversation and their mind turns in ways that you haven’t seen others turn. And they often look at things that don’t change. They can go really deep in areas any rational person will have taken at face value. There’s a natural obsessive quality they have about them.
They notice things others do not. And they have a thoughtful reason to things people take for granted. They show evidence that their shower thoughts revolve around this. They wake up in the middle of the night thinking about this. They consume information from various sources and all roads somehow still lead to Rome. In this case, venture.
Photo by Sven Mieke on Unsplash
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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.