Why Trust is Built from the Small Things | Ben Ehrlich | Superclusters | S3E8

Ben Ehrlich is the founder and General Partner of First Momentum Capital, where he helps seed a new generation of venture capital firms. He is also the Director of Strategy at the Long Term Stock Exhange. Previously Ben worked across the venture ecosystem supporting companies in the Canadian Technology Accelerator, OutCast Communications and Cribspot (YC 15). In his free time Ben takes his Irish setter doodle hiking and enjoys watching the University of Michigan football team (mostly) win.

You can find Ben on his socials here:
Twitter: https://x.com/benjaminehrlich
LinkedIn: https://www.linkedin.com/in/benjamin-ehrlich-43b75498/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[03:43] The origins of the Out of the Crisis podcast
[06:54] Ben’s advice for rookie podcasters
[08:35] How did Ben first meet Eric Ries?
[11:46] The play-by-play for Ben’s interview with LTSE
[13:36] What do decisions and conversations look like at LTSE?
[16:23] Building trust among team members
[18:29] How does Ben build trust with GPs?
[25:14] How did First Momentum Capital start?
[30:42] What was the pitch to close First Momentum’s first fund?
[33:54] How does Ben underwrite Fund I managers?
[36:42] How does Ben measure a GP’s future deal flow (as opposed to today’s)?
[45:40] What does a “No” from Ben look like?
[57:50] Thoughts on fund governance
[1:05:57] What is the role of serendipity in Ben’s life?
[1:08:17] Commisso Bakery in Toronto
[1:10:35] Thank you to Alchemist Accelerator for sponsoring!
[1:11:35] If you enjoyed the episode, I’d appreciate it if you could share it with one friend!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“Make sure to pay the government, doctors, and podcast producers on time.” – Ben Ehrlich

“If you want to build trust with someone [on your team], if they screw up, you have to be okay with them screwing up because you put them in the situation.” – Ben Ehrlich

“We’re looking for concentrated, non-correlated bets.” – Ben Ehrlich


Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
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What Limited Capital Does to Founders and Investors

pitch, presentation

My friend invited me to a demo day earlier this week. Albeit, it was a bunch of summer interns presenting their project they’d been working on for the last two months. The few investors and I who sat on the judging panel were all admittedly quite surprised by the quality of pitches and products from students and hell, even within two months. In fact, these 10-11 interns have gotten much further in product development and customer discovery than most founders I’ve seen across the span of a year. Whether sampling bias or not, the latter is probably about 50%+ of what I see these days. And you’d think that AI would have sped up the product development cycle.

But I digress.

Simply put, I was impressed. So, in efforts to simulate actual pitches at demo days, I asked a team who had presented five features they’d been working on and gotten each to a working prototype. “If you had to kill three of the five features, which three would you kill?”

To which, the “CEO” replied: “To be honest, all five are quite important. But if we had to kill a feature, it’d be the AI chatbot, but the rest of the four go hand-in-hand.”

I pushed for a more discerning answer, but was met with a paraphrased version of the last answer. And of course, it left a little more to be desired. What I was looking for was something of more prescriptive specificity. For instance, “we’d focus on usage metrics, particularly with respect to retention cohorts and actions per session across all the features. And depending on what features seem to perform better than others, our plan is to focus 70% of engineering resources on the top feature, 20% on the second most popular feature, and 10% focused on either a permutation of the other three or spending time with our customers to see where they’re the most frustrated.” It may not need to be the “right” answer, but having a thought-out answer is helpful.

After all, the original question boils down to the fact that most founders fail from indigestion not from starvation. Charles Hudson wrote this great piece last month, aptly named “The Last $250K.” In short, one of the most common behavioral changes he’s observed is when founders are down to their last $250K. And, three things stand out in particular:

  1. “The most important things to work on become incredibly clear.”
  2. “The data needed to validate the company’s hypothesis becomes much clearer.”
  3. “There are things that the company was doing that they stop doing because those things don’t really matter given the gravity of the situation.”

It’s a quick read. And I highly recommend it. Much of which I personally agree with. Not sure if that’s usually the $250K mark, but my personal sample size is far smaller than Charles’. Constraints are the breeding grounds of creativity.

What’s really interesting is that my first reaction to that blogpost was just like how the last 4-6 months of runway leads to deep focus, how do the last 4-6 months affect fund managers? And it’s not too far off.

  • Deployment speed slows. The simple reason is that they no longer feel the fire under their belly to deploy. Either because they’re close to their target portfolio size or they need to elongate the time horizon while they’re actively raising their next fund.
  • The quality bar for what gets funded goes up. Since your deal flow pipeline is likely not contracting, there’s a flight to quality. And quality more often than not, translates to traction, logos/brands, and founder’s prior experiences. While there are always outliers, I see many GPs take less risky bets that they would’ve otherwise.
  • GPs are actively planning for the next fund’s strategy. And actively synthesizing lessons learned. Or at least, with respect with how they pitch LPs. And if they’re an emerging manager, or a fund without clear wins in their last fund, the most important things also become painfully clear. They often focus on the 20% that drove 80% of fund returns.
  • GPs are spending a lot more time on portfolio support. Not only because graduation rates become a lot more important (for fund returns and narratives for prospective LPs), but also because references matter in diligence. And well, if you’re fundraising for your next fund, you can be damn well sure that a sophisticated LP is going to do anywhere between 10-50 reference checks. On-list and off-list. 20-30% of which with your portfolio companies.

Thematically, focus. While there are other constraints that help improve a founder or a fund manager’s level of focus, limited runway (or capital to deploy) is a natural forcing function. The best ones I’ve seen often impose artificial constraints early on, before things get rough. Rules and codes of conduct. Things they promise themselves and the team never do. Aligning compensation behind performance. In other words, operational discipline.

Naturally, it should be to no surprise that investors of any kind spend a lot of time on organizational discipline before they choose to invest.

Photo by National Cancer Institute on Unsplash


Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!


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.

An Inside Peek into the Mind of an Individual LP | Susan Kimberlin | Superclusters | S3E7

Susan Kimberlin builds and invests in things that are Good & Useful. She is an angel investor, limited partner and product leader with a career that is equal parts building SaaS software products, and investing in companies, funds, teams, and projects that promote social equity with practical solutions for real-world problems. She is committed to bringing more diverse people into investing and the innovation economy. With a background in building search and natural language products for companies like PayPal and Salesforce, she leverages her experience to help her portfolio companies with product and fundraising strategies. Susan believes that bringing diverse perspectives to creative and practical challenges is the best way to create durable and impactful change.

In addition to her tech roles, Susan co-owns and manages Tammberlin Vineyards, growing Rhône wine varietals in Bennett Valley, Sonoma County. She works on documentary and narrative film projects as an executive producer, supporting creative projects that raise awareness, start conversations, and bring joy. She is a lifelong singer, and has been singing with pop a cappella group The Loose Interpretations for nearly 20 years.

You can find Susan on her socials here:
Twitter: https://x.com/susansearchpro
LinkedIn: https://www.linkedin.com/in/susankimberlin/
Substack: https://goodanduseful.substack.com/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[02:51] What are madrigals?
[10:10] How to balance high expectations for your team and the trust that they will get there
[14:53] How does Susan recognize drive and excellence in others?
[21:49] What made Susan’s founding LP check in Backstage Capital so unique?
[26:01] Difference between LP stakes and GP stakes
[38:51] The smokes and mirrors behind the first pitch
[43:54] Susan’s investment strategy as an individual LP?
[50:21] What topic would Susan give a TED talk in that’s not startups or venture?
[59:24] Thank you to Alchemist Accelerator for sponsoring!
[1:00:25] If you enjoyed this episode, could you share this with one other friend?

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“Communication between us is the definition of our experience in the world.” – Susan Kimberlin


Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

Anecdotal Telltale Signs of Exceptionalism

dune, sand, great

I’ve been lucky enough to meet a number of founders and fund managers over the years. Many of which I probably have no business of meeting and getting to know. And I count myself fortunate every day to have the opportunities to do so.

Nevertheless, and as an FYI, all of this is completely anecdotal. Maybe at some point I’ll find data to support this. Hell, maybe there’s already data on this. But as is the perk of this blog, I get to write about just things on my mind.

Per some recent conversations with friends, having already shared with them, thought I’d share the below. Some telltale signs I’ve noticed in founders and fund managers that are world-class before the rest of the world knows it:

  • Highly responsive. It’s insane to think about this given their busy lives. But the folks I’ve been lucky to invest in and (gosh darn it) passed on who’ve gone on to create hundreds if not thousands of jobs respond remarkably fast. Sometimes within minutes of me sending them a message/email. But on average before half the day is over. I will say I’m personally slipping here a bit as of late. But I guess, that just means I’m not world-class by my own definition. Many seem to be night owls, at least when they’re still hustling. I’m not personally sure if they’re working deep into the night, but at least, they’re responding to me at 2AM, and I’m trying to figure out what they’re doing then.
  • They exercise in the morning, or have a morning routine that they do every day without fail, even when on vacation. It could be writing, journaling, making that morning cup of espresso just right, or making breakfast for their kids EVERY morning. It’s ritualistic, so that they perform just as well on the first meeting of their day as they do their last.
  • Operationally disciplined. They’re really good at saying no. They set clear boundaries. Often times, boundaries that most people have not heard of. And many, even after hearing them, may find bizarre or strange. But in an odd way, they make a lot of sense if you give them the time of day. I was calling a friend recently on this, and he was sharing that he’s not the kind of friend that most people want. He doesn’t show up at birthday parties or celebrations. He also doesn’t post to socials regularly to congratulate friends on promotions or otherwise. But he aimed to be, and ends up being the first call friends make when shit hits the fan. And because of that practice, he can be laser focused on his priorities every day.
  • They’re really good at using analogies. In many ways, it’s the classic 7-year old test or the grandma test. They’re extremely high context individuals in a lot of different disciplines. And if I were to define it (not original, but I forget the attribution, might be Tim Urban), high context individuals are those that are well-versed on a given subject. Low context folks are those are out of the loop. For example, a PhD in neuroscience is high context on how different reward systems affect dopamine, but possibly low context on Marvel Cinematic Universe lore. And when someone is high context in not just one area but in a lot of areas — in other words, people might call them polymaths, or at the very least, well-read — it’s easy for them to pull analogies in ways that best help relay what they want to say to the other person’s ears. Like a crypto founder (probably one might be able to guess who) who once described to me one-way hash functions as putting fruits in a blender. Or Josh Wolfe who describes the battle of ethics in a company a battle between intentions and incentives. Or that society is a constant battle between deception and detection.
  • They ask really good questions. Questions you’ve likely never heard asked before. And many can get to proficiency on any subject quite quickly. Largely, probably because of how they think and how they eventually arrive at an answer.
  • Words are used intentionally and with specificity, and rarely, if ever, use amorphous terms and superlative adjectives. Like success, community, unique, compelling, unfair advantage, best, better, and so on. And if they do, they are quick to define what they personally mean when they use those words.

Photo by Linhao Zhang on Unsplash


Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!


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.

The Art and Science of Reference Checks | Raida Daouk | Superclusters | S3E6

raida daouk

Raida Daouk started her career in banking before moving to the investment team of BY Venture Partner, a venture fund with offices in Beirut and Abu Dhabi. She quickly climbed the ranks within the company and ultimately became a Venture Partner.

Recognizing a void in the market for personalized venture consulting services, Raida established Amkan Advisory, a boutique consultancy firm specializing in assisting family offices and high-net-worth individuals in identifying venture funds that align with their specific strategies. Given that first-time fund managers often possess the most aligned incentives with their investors, she understood the significant value they bring to the venture capital landscape. However, Raida also understood the reluctance of family offices to commit capital to relatively unproven managers. By curating a portfolio of carefully selected funds, she aims to mitigate the perceived risk associated with investing in first-time managers while still accessing the high-growth potential of emerging ventures.

Amkan Ventures emerged to offer LPs access to emerging managers beyond their direct reach. Focusing on small Funds I and II led by ambitious managers with a conviction-driven approach, the firm prioritizes delivering returns and nurturing opportunities in the venture arena.

Amkan Ventures’ first close occurred in April 2024, with one investment already made in a $30M fund I out of NY and one more about to be announced.

Raida currently serves on the Selection Committees of RAISE Global and The Bridge Platform.

You can find Raida on her socials here:
LinkedIn: https://www.linkedin.com/in/raidadaouk/
Amkan Ventures: https://www.amkanventures.com/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[02:45] The impact of biology on Raida’s career
[06:24] If Raida were to teach a founder psychology course
[08:42] Raida’s definition of “running through walls”
[10:16] Similarities and differences between founders and fund managers
[11:36] What does GP-thesis fit look like?
[14:38] How Raida got to a yes on Nebular Ventures?
[20:35] The personas of different kinds of references
[26:05] The one question that Raida always asks during reference calls
[28:31] Is there such a thing as too many references?
[31:57] What if you don’t have a network of references as an LP?
[35:26] How does one set up the venture arm of a family office?
[40:28] What is the GCC?
[43:58] The best way to build relationships in the GCC
[47:54] The origin story of Amkan Ventures
[52:19] How did Raida build a strong understanding of the foodtech space?
[53:58] Where did Amkan’s name come from?
[58:26] What fund is in Raida’s anti-portfolio?
[1:00:30] What’s Raida’s take on solo GPs?
[1:03:10] How does your mindset change as an LP if you had evergreen capital?
[1:06:58] Thank you to Alchemist Accelerator for sponsoring!
[1:07:59] If you enjoyed this episode, it would mean a lot if you could share this with one other friend!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“It’s always best to start the relationship when there is no ask.” – Raida Daouk

“The average length of a VC fund is double that of a typical American marriage. So VC splits – divorce – is much more likely than getting hit by a bus.” – Raida Daouk

“The more constraints you have, the more conviction you will have in each manager.” – Raida Daouk


Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
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The Strength of Battle-Tested Friendships

These days I’ve been spending a lot of time thinking about succession and key person risks. Definitely influenced by a number of conversations I’ve had with a partnership I invested in who broke up and LPs who take the long-term perspective on investing in funds.

When I say long-term, I mean when those LPs invest in a firm, it’s not just a single check into one fund. They plan to budget out $XX million dollars over the next three funds or so. Or across 9-10 years primarily to invest in this fund manager. We’ve talked about how underwriting a solo GP is actually much easier than underwriting a partnership, at least on the key person risk side of things.

If a solo GP dies, they die, and the firm naturally cannot go on. And any capital reserved for them automatically goes towards net new investments. If a partnership loses a key partner, then it’s this awkward dance to figure out if the remaining partners are worth re-upping on. And a re-underwriting needs to occur.

Before I go any further, let me first define key person risk for the uninitiated. Key person risk is the risk created when a single person leaves or dies that creates meaningful knowledge, brand, or performance loss at the institution. Simply put, when shit hits the fan in a partnership, how volatile will the transition be?

As such, my recent conversations informs much of what I write below. For the purpose of this blogpost, I’ll focus on partnerships as opposed to solo GPs and founders.

All great relationships are battle tested. Battle-hardened. In fact, when I ask a set of co-founders how they resolve disagreements, and they say, they never disagree, I run in the opposite direction fast. So fast that I could be cast as Barry Allen. Maybe. If my acting were better. If two people never disagree, they’re either the same person (which is hard, ’cause even biological twins disagree) or they’ve never truly worked on something together that they would call their life’s purpose.

To me, the formula for battle-hardened relationships has two key variables.

  1. Depth – High stakes
  2. Breadth – Time for the stakes to manifest

Even if artificially high stakes. Even if in the moment, all parties involved must truly believe that this is the be all, end all. That there is no Plan B. There’s no going back. That everyone has to see it through. In Hollywood, I believe it’s called the inciting incident. A clear market in time that after a set of events that there is no way one can go back to their old life. Whether it’s the state championships for a sport among high school students, or fighting for survival in the middle of nowhere. For artificially high stakes, one must distort the reality, so that at the minimum they must convince themselves of the gravity of the situation.

Why do high stakes matter? Because only then does one put their all into something. And when you truly care, you hold nothing back. High stakes reveals the character you are. If people can accept and embrace you at your worst, everything else is a cherry on top.

This varies for different people. Sometimes it takes time to care. Other times, it takes time to fully realize what’s at stake. And others still, may never get to that point of realization. For example, in a ball game with four quarters, sometimes it isn’t until the score is neck and neck in the fourth quarter do you give it your all.

So in practice, I love spending time with folks to talk about their past. Their origin story. And get into the weeds on key inflection points not only in their own lives, but also in the time they’ve gotten to know each other. When did they first work together? When did they realize they were more than just colleagues? At what point did they introduce their families to each other? What was the point of realization?

Most investors focus primarily on length of a relationship, which is definitely valuable information, but without depth, it’s easy to know someone for decades and care very little for their growth and success.

Photo by Kimson Doan on Unsplash


Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!


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.

Why an LP of GPs is Uniquely Valuable | Lisa Cawley | Superclusters | S3E5

Lisa Cawley is the Managing Director of Screendoor, a highly respected LP of GPs, investing in firm-builders by firm-builders, with a unique model for partnering with allocators to access the emerging manager ecosystem. She’s been covering venture capital for more than a dozen years, since 2010 at Ernst and Young, a private investment firm, and now to Screendoor.

Lisa is a proud graduate of Loyola University Maryland where she’s earned her MBA and MS in Finance, as well as her BBA in Accounting, with a double minor in Information Systems and Spanish. Lisa is a CFA Charterholder and holds a CPA from the State of Maryland. In addition, she’s also a member of Class 29 of the Kauffman Fellows.

You can find Lisa on her socials here:
LinkedIn: https://www.linkedin.com/in/31mml/
Screendoor: https://www.screendoor.co/contact

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[03:43] How swimming has influenced Lisa’s life to date
[11:16] How does Lisa evaluate competitive spirit in others?
[14:36] The importance of understanding LP side letter terms
[21:33] Investing as a team AND individual sport
[23:45] Screendoor as the LP of GPs
[28:43] How does Screendoor align incentives with their GP advisors?
[31:05] How do GP advisors get assigned to portfolio managers?
[35:09] LP-GP fit
[37:46] Generation 1 vs Generation 5 of a family office
[43:19] How does firm-building differ from fund-building?
[49:09] Reference checking a fund manager’s “unique” value-add
[55:24] Which two life lessons would Lisa canonize in a time capsule?
[57:36] What was in Lisa’s last OS update?
[1:01:23] The different facets of education in Lisa’s life
[1:09:09] Final words on being thoughtful as an LP
[1:14:05] Post-credit scene
[1:25:27] Thank you to Alchemist Accelerator for sponsoring!
[1:26:29] If you enjoyed the episode, I’d great appreciate it if you shared it with 1 other person!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“[Swimming, like venture] is both a team and individual sport.” – Lisa Cawley

“If you are governing things from a point of a legal document, whatever that may be and having to refer to that in order to trigger a behavior, that often to me feels emblematic of a transaction, not a relationship.” – Lisa Cawley

“Performance is everybody’s right to continue to do their business in venture.” – Lisa Cawley

“You can be a critic while still helping somebody, and you can be a critic while still giving empathy and doing so with respect.” – Lisa Cawley


Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

DGQ 22: If you were hiring someone underneath this person, what skills would they have?

hire

I’ve had Harry’s episode with Peter Lacaillade under my saved episode list on Spotify for a long minute. And Benedikt Langer‘s semi-recent piece on Embracing Emergence finally got me over the activation energy to listen to it. (Sorry, Harry)

But I’m so glad I did. In it, Harry shared a question he likes asking “If we were hiring someone underneath me to support him, what skills would they have?” In many ways, it’s the same as another question Doug Leone shared on his podcast as well. What three adjectives would you use to describe your sibling?

It comes down to simple purpose of trying to ask about someone’s weakness without asking them “what’s your weakness?” Why does it matter? When you’re too forward with your question, say the weakness one, recipients always end up finding ways to explain their “weakness” as a byproduct of their strength, or not really sharing a true weakness. “I’m too honest.” “I work too hard.” And so on.

While the above set of questions may not work for everyone, and probably even less so now that Harry and Doug shared it in a public arena, I can’t help but appreciate the linguistic gymnastics to find the right combination of words that gets one the answer they want. Nevertheless, I’m sure there are many more on this planet who still have yet to be exposed to those questions.

Similarly, I find it to be a damn good question to ask when doing references on potential investments. The truth is every founder or GP one invests in will have weaknesses. And that’s okay. Everyone’s a human. But in reference calls, there are two hurdles that one most overcome in their diligence:

  1. Getting the reference to share an honest assessment of the person they know. This is especially hard when these are on-list references. In other words, references that the person being diligenced is providing themselves. Naturally, this list is full of people who are almost guaranteed to say positive things about said individual. Besides, there is absolutely no incentive to badmouth another person. Neither do most people aim to do so.
  2. How high on the priority list is this person’s weakness? Can I get conviction on this deal even if I were to accept this weakness? Does it matter as much in a Fund I? Fund II? Fund III? If they need to hire someone to fundraise for them, is that a question of ability or network? And how crucial is it not only to the firm’s survival, but also their outperformance? If they need to hire someone to manage their calendar, that may be lower on the priority list of risks for most LPs.

Nevertheless, I find Harry’s question a great one to ask former colleagues, occasionally portfolio or anti-portfolio founders.

Photo by Clem Onojeghuo on Unsplash


The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.


Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!


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.

Operational Due Diligence Like You’ve Never Seen Before | Evan Finkel | Superclusters | S3E4

Evan currently serves as Head of Venture Capital Investments and Research for Integra Global Advisors, a multi-family office. Prior to Integra, Evan served as Senior Manager of Data Science for Anheuser-Busch InBev where he oversaw data science and strategy for the US marketing organization. Prior to Anheuser-Busch, Evan spent two years as a Management Consultant at Marketing Management Analytics and held a technical role at Amazon. Evan earned an MS in Computer Science with a concentration in machine learning from Georgia Tech and studied computational and applied mathematics at the City University of New York and finance and psychology at the University of Miami.

You can find Evan on his socials here:
LinkedIn: https://www.linkedin.com/in/evanfinkel/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[03:27] What are the mechanics of a great cold email?
[07:54] Evan’s background in sports marketing
[10:54] The kinds of data to ignore as an LP
[13:01] Portability and replicability of track record
[19:57] How much thesis drift is too much?
[22:37] What happens when a partner isn’t pulling their weight?
[29:35] Why does Evan have two bachelor degrees?
[34:38] Why study quantum mechanics in applied math?
[38:25] Evan’s journey to Integra
[45:21] Buy vs Build at a fund-of-funds
[47:40] Questions to ask when choosing which vendor to work with
[51:24] How Evan thinks about operational diligence
[58:30] Setting up an information policy in your firm
[1:01:39] Valuation policy at a hedge fund vs VC fund
[1:11:12] Why doesn’t Integra have strict mandates for geographies to invest in?
[1:21:20] The fallacy with LPs overweighing DPI in 2020-2021
[1:27:15] Evan’s greatest life lesson
[1:28:14] Evan’s favorite kosher restaurants in NYC
[1:32:07] “Post-credit scene”
[1:34:24] Thank you to Alchemist Accelerator for sponsoring!
[1:35:25] If you liked this episode, it would mean a lot if you left a like and shared this episode with one friend!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“It’s important to be data-informed, not data-driven.” – Evan Finkel

“Not only does [an investment] have to be the best in that geography, it actually has to be better than the incremental dollar we could put in any other geography.” – Evan Finkel

“The way we think about VC is both on an absolute and a relative basis. On an absolute basis, we have to be able to underwrite a manager to 3X net or better, or ideally 4X net or better. Because otherwise the lockup doesn’t make sense. It doesn’t make sense to lock up your money for 10, 12, or 15 years with pretty limited distributions. In order to be able to consider a VC fund for our portfolio, we have to be able to underwrite it to at least 3X, but ideally 4X or better.

“But then there’s also a relative component. We’re not looking for the best relative managers. Understanding whether this is a really good year or weak year… You might be the best manager of a given vintage, but in absolute terms, you actually might not be quite as impressive. […] It helps us contextualize the performance of a given manager.” – Evan Finkel

“DPI generated in a chaotic environment is sort of similar to TVPI generated in a chaotic environment. It’s great it happened, but let’s contextualize it properly and don’t overweight DPI when you’re evaluating managers.” – Evan Finkel

“In venture, we don’t look at IRR at all because manipulating IRR is far too easy with the timing of capital calls, credit lines, and various other levers that can be pulled by the GP.” – Evan Finkel


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#unfiltered #90 If A Song Took a Lifetime to Play

music, song

Just the other day, I was listening to one of 99% Invisible’s episodes, interestingly titled as “As Slow As Possible,” named after the organization ASLSP, which stands for the same. My knee-jerk reaction was that the abbreviation and the first letters of each word just didn’t match up. Luckily, Roman Mars and Gabe Bullard explained. Although it still left something more to be desired.

“The title is also a reference to a line in James Joyce’s novel Finnegans Wake. The line is: ‘Soft morning, city! Lsp!’ Where lisp is just spelled L S P.”

Nevertheless, the episode itself circles around the concept of taking one song and using the entire lifespan of a pipe organ (639 years) to play that song just once. That even a single note would take two years to play. A fascinating concept! And which led me down a rabbit hole of thought experiments.

What if we took our favorite song and extrapolated that to the human lifespan? Say 90 years. What note would we be on today? Have we gotten to the chorus yet?

So for the sake of this thought experiment, for a brief second, let’s walk down the lane of music theory. Take the average pop song. The average pop song plays for about three minutes. And many at 120 beats per minute. Apparently, 120 bpm is also the golden number you want to get to if you’re working a crowd as a DJ. You never start at that speed, but you work your way up throughout the night. And if you can get people’s heart rate matching the beats per minute, you’ve hit resonance. But I digress.

So, taking round numbers, the average pop song has a total of 360 beats. Most songs are in 4/4 time. In other words, four beats per bar. An average pop song takes about 2-4 bars for the intro. 16 bars for a verse. Possibly, another 4 bars as the pre-chorus. And the first chorus doesn’t really start till bar 25. And usually lasts another 4-8 bars.

Now, if we were to extrapolate a song to the average human lifespan. 90 years. 360 beats across 90 years. Assuming it takes 24 bars to get to the chorus, the chorus doesn’t start until we’re 24 years old. And the full chorus doesn’t end until we’re 32 years old. With each note lasting a full three months. And the second chorus starts around age 48.

Then again, I remember reading somewhere that most pop songs are played in multiples of four or eight. And that most of these songs only have 80 bars. If that’s the case, the first chorus doesn’t kick in till we’re just past 28 years old and ends around 36 years old.

In either case, the first chorus happens around the time when most people would define as their prime. Young enough to take risks; old enough to be dangerous. The second chorus seems to fit as the second wind people have in their careers. Hell, HBR found, the median age of a startup founder when they start is 45. And with that reference point, they’ll be 47 or 48 when they become venture-backed.

Obviously, this is just me playing around with numbers. Correlation does not mean causation, of course. But nevertheless, the parallels… curious and uncanny.

P.S. Jaclyn Hester and my episode together on Superclusters got me thinking about a lot how much music applies to our lives and how we live and think.

Cover Photo at the top by Marius Masalar on Unsplash


#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.


Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!


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.