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When Helpful is an Action Verb | Aakar Vachhani | Superclusters | S2E5

Aakar Vachhani is a Managing Partner and a member of Fairview’s investment committee. He is involved in research, due diligence, investment monitoring, and business development for Fairview’s venture capital and private equity partnership and direct co-investment portfolios.

Prior to joining Fairview, Aakar was with Cambridge Associates, a leading investment advisor to foundations, endowments and corporate and government entities. He was responsible for analyzing private equity and venture capital investments in support of the firm’s clients and consultants. In addition, he led research and data analytics projects on the firm’s private equity and venture capital database. Aakar also spent time with MK Capital, a multi-stage venture capital firm with a sector focus on software and cloud services.

Aakar Vachhani holds a B.S. in Economics-Finance from Bentley University and an MBA in Finance and Entrepreneurship & Innovation from the Kellogg School of Management. He is a member of the Board of Directors of San Francisco Achievers and the New Breath Foundation. On top of that, Aakar established and leads Fairview’s San Francisco office.

You can find Aakar on his socials here:
Twitter: https://twitter.com/aakar15
LinkedIn: https://www.linkedin.com/in/aakarvachhani/

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
[04:29] Growing up in a household of 10
[09:36] Aakar’s leadership style when he was a child
[12:12] Why Aakar turned down a job in insurance back at home
[17:25] The third time Aakar applied to Cambridge Associates
[21:56] How Fairview aligns incentives with each investment they make
[26:15] How Fairview helps their GPs
[28:58] How Fairview gives pitch feedback to GPs
[32:54] Reasons Fairview passes on a GP
[34:58] How does Aakar define what a “new manager” looks like?
[37:55] How did Aakar build out Fairview’s SF Bay Area practice?
[44:26] Fairview’s onboarding process for new hires
[47:21] Why Fairview’s investment decisions need to be unanimous
[52:17] The balancing act between a narrow thesis and a big market
[56:09] Why Fairview invested in Eniac Ventures
[57:56] What does a helpful LPAC member look like?
[59:30] Typical questions GPs bring to their LPAC
[1:01:13] How do the best GPs communicate strategy drift to their LPs?
[1:03:01] Why LPs dislike strategy drift
[1:06:28] What new technologies does Aakar think LPs should pay attention to?
[1:08:30] Aakar’s core memories
[1:11:45] Thank you to Alchemist Accelerator for sponsoring!
[1:14:22] If you enjoyed the episode, it would mean a lot if you could like, comment, share, or subscribe!

SELECT LINKS FROM THIS EPISODE:

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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From Demo Day to First Meeting: My Demo Day Checklist

notebook, page, notes, checklist

Possibly the quiet thing out loud, one of the best parts about demo days is the excuse to catch up with old friends. Yes, we do go there to see deals, but realistically, many of us would have started the conversations with many of the demoing class before demo day. This is not only true for VCs at startup demo days, but equally so for LPs at emerging manager demo days.

Earlier this week, my friend invited me to go to his emerging manager demo day. I’ve always admired how intentional he’s been with picking, so it was a natural yes. The pitches came and gone. And as the networking part kicked off after, a few LP friends and I came together to catch up but also to compare notes. What did we think of Fund A? Fund D? Who was interesting? Who would we take a second conversation with? And why?

Naturally, we shared our respective decision-making frameworks. A lot of which overlapped. Others were more unique to each LP themselves. Simply because the motivations of LPs often differ from each other. Some do so for co-investment opportunities. Others invest in VC as an asset class. And there are also those that invest to pay it forward.

So while it’s not my place to share the words whispered to me in confidence, here are some general takeaways:

  • Unlike startup pitches, there is no consistency of pitch format among emerging managers.
  • Most GPs don’t seem to know what kinds of metrics/facts immediately stand out to an LP. One such GP buried an amazing angel track record TVPI as one line in his deck.
  • Humor sells.
  • Spinouts are only interesting if your track record is portable. In other words, if you were too junior on the team to have pounded the table for deals, you don’t count as a spinout in some LP’s minds.
  • Unscripted moments are memorable. At least ones that feel unscripted.
  • DPI earned within 5 years (as opposed to 5+ years) begs the question of where does it come from (i.e. secondaries, acquisition, etc. Former will lead to yellow flags.)
  • Track records that began post-2019 have an asterisk next to them.

That said, if it may be helpful to not only GPs, or other LPs out there, I’ll share my own calculus below.

I want to preface that the goal of the below “checklist” is for me to quickly decide which GPs I should follow up with, given limited information in the format of a 5-minute pitch. As such, this isn’t all-inclusive, but simply answers the question: Is this fund/manager interesting enough for me to spend another hour with them?

I will also say that this works best for me particularly for Funds I and II.

And one more thing, I’m still a WIP. In other words, this is the checklist that suits my current needs the best, but your mileage may vary.

The Demo Day checklist

At a high level, below are the five categories that are the most interesting to me.

  • Sourcing — Are they fishing in differentiated pools? Do they have proprietary access to deals? Where are they finding diamonds in the rough?
  • Picking — This can be interesting in two ways: (a) track record (which only starts to become interesting after 5+ years with 20+ deals), and/or (b) decision-making framework/algorithm.
  • Winning — Why do the best founders pick you? How much ownership can you get in these companies? Some examples here.
  • Likability — You’re either very likeable or contrarian. Anything else just isn’t memorable. And if not memorable for me, likely not memorable for founders. In many ways, I’m looking for ways you stay rent free in a founder’s mind when they know nothing else other than the fact that you invest in early stage companies. ‘Cause let’s be honest; most firm’s websites say just that and nothing more. Some might call this GP-founder fit. Others call it vibes.
  • Uniqueness — A bit amorphous here, but really, it’s just: Is there something I’ve never heard of before?
    • As a caveat, I only started including this “pillar” after I saw about 200 decks and pitches. Before that, I simply didn’t know what counted as unique and what didn’t.

And for each category, I give 4 different kinds of scores.

✔️There’s something special here. Worth digging deeper. If I continue on to diligence, this is usually the first thing I reference check.
〰️No strong opinion here and/or there’s no edge here.
❌I use this extremely sparingly. This is a sign of a red flag. In fact, there are very few red flags that can even come out in a 5-minute pitch. So really, I only use an X when I feel the fund manager is sharing something dishonest.
Yes, that’s a blank space. Meaning the pitch itself failed to offer any reference point or evidence on this variable.

And for the five categories above, having a check mark in at least two of them is enough for me to say yes to another conversation. No single A+ trait standing in pure isolation. But only one X is enough for me to pass.

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.

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How a Pension Fund thinks about Venture Capital | Peter Teneriello | Superclusters | S2E4

Peter Teneriello has been a career-long investor in the private markets. He has experience as an allocator across a range of institutional types, from wealth management firms to pensions and endowments, and helped launch the venture capital program for the Texas Municipal Retirement System. Other past experiences of his have included leading finance/operations for a venture-backed startup, in addition to vetting investments for a family office and working with their portfolio companies. Over the years he has also written about his investing experience on Medium and Substack.

He is a graduate of the University of Notre Dame as well as the Kauffman Fellows Program, an executive education program focused on venture capital and innovation leadership. He wears many hats.

You can find Peter on his socials here:
Twitter: https://twitter.com/_PeterT_
LinkedIn: https://www.linkedin.com/in/peterteneriello/

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
[03:57] The origin of Peter’s nickname
[05:16] How was boxing formative to who Peter is today?
[07:25] The art of the first conversation with a GP
[11:46] How did TMRS deploy $1B into VC and PE annually?
[19:45] Looking at the underlying portfolio of companies
[24:06] How overlap in venture portfolios affect re-up decisions
[26:55] Marks from an LP perspective
[30:52] Qualitative vs quantitative information
[34:45] Signal vs noise in the private markets
[40:46] When Peter shaved his head in front of an entire lecture hall
[45:09] The most recent update to the Peter OS
[51:17] Thank you to Alchemist Accelerator for sponsoring!
[53:53] If you enjoyed the episode, consider dropping a like, comment or share as it really helps me create content that is interesting to you

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“Don’t overweight the quantitative over the qualitative.” – Peter Teneriello

“It’s not to be in the consensus out of a misguided sense of self-preservation; it’s approaching your life’s work with creativity and conviction and treating it like the art that it is.” – Peter Teneriello

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

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The Complexity of the Simple Question (DGQ 20)

Last week, Youngrok and I finally launched our episode together on Superclusters. In the midst of it all, we wrestle with the balance between the complexity and simplicity of questions to get our desired answer. Of course, we made many an allusion to the DGQ series. One of which, you’ll find below.

In many ways, I started the DGQ series as a promise to myself to uncover the questions that yield the most fascinating answers. Questions that unearth answers “hidden in plain sight”. Those that help us read between the lines.

Superclusters, in many ways, is my conduit to not only interview some of my favorite people in the LP landscape, but also the opportunity to ask the perfect question to each guest. Which you’ll see in some of the below examples.

  1. Asking Abe Finkelstein about being a Pitfall Explorer and how it relates to patience (1:04:56 in S2E1)
  2. What Ben Choi’s childhood was like (2:44 in S1E6) and how proposing to his wife affects how he thinks about pitching (1:05:47 in S1E6)
  3. How selling baseball cards as a kid helped Samir Kaji get better at sales (45:05 in S1E8)

In doing so, I sometimes lose myself in the nuance. And in those times, which happen more often than I’d like to admit, the questions that yield the best answers are the simplest ones. No added flare. No research-flexing moments. Where I don’t lead the witness. And I just ask the question. In its simplest form.

For the purpose of this essay, to make this more concrete, let’s focus on a question LPs often ask GPs.

“Tell me about this investment you made.“

In my mind, ridiculously simple question. Younger me would call that a lazy question. In all fairness, it would be if one was not intentionally aware about the kind of answer they were looking to hear OR not hear.

The laziness comes from regressing to the template, the model, the ‘what.’ But not the ‘why’ the question is being asked, and ‘how’ it should be interpreted. For those who struggle to understand the first principles of actions and questions, I’d highly recommend reading Simon Sinek’s Start with Why, but I digress.

Circling back, every GP talks about their portfolio founders differently. If two independent thinkers have both invested Company A, they might have different answers. Won’t always be true, but if you look at two portfolios that are relatively correlated in their underlying assets AND they arrive at those answers in the same way, one does wonder if it’s worth diversifying to other managers with different theses and/or approaches.

But that’s exactly what makes this simple question (but if you want to debate semantics, statement) special. When all else is equal, VCs are left to their own devices unbounded from artificial parameters.

Then take that answer and compare and contrast it to how other GPs you know well or have invested in already. How do they answer the same question for the exact same investment? How much are those answers correlated?

It matters less that the facts are the same. Albeit, useful to know how each investor does their own homework pre- and post-investment. But more so, it’s a question on thoughtfulness. How well does each investor really know their investments? How does it compare to the answer of a GP I admire for their thoughtfulness and intentionality?

(Part of the big reason I don’t like investing in syndicates because most outsource their decision-making to larger logos in VCs. On top of that, most syndicate memos are rather paltry when it comes to information.)

The question itself is also a test of observation and self-awareness. How well do you really know the founder? Were you intentional with how you built that relationship with the founder? How does it compare to the founder’s own self-reflection? It’s also the same reason I love Doug Leone’s question, which highlights how aware one is of the people around them. What three adjectives would you use to describe your sibling?

Warren Buffett once described Charlie Munger as “the best thirty-second mind in the world. He goes from A to Z in one go. He sees the essence of everything even before you finish the sentence.” Moreover in his 2023 Berkshire annual letter, he wrote one of the most thoughtful homages ever written.

An excerpt from Berkshire’s 2023 annual letter

As early-stage investors, as belief checks, as people who bet on the nonobvious before it becomes obvious, we invest in extraordinary companies. I really like the way Chris Paik describes what we do. “Invest in companies that can’t be described in a single sentence.”

And just like there are certain companies that can’t be described in a single sentence — not the Uber for X, or the Google for Y — their founders who are even more complex than a business idea cannot be described by a single sentence either. Many GPs I come across often reduce a founder’s brilliance to the logos on their resume or the diplomas hanging on their walls. But if we bet right, the founders are a lot more than just that.

Of course, the same applies to LPs who describe the GPs they invest in.

In hopes this would be helpful to you, personally some areas I find fascinating in founders and emerging GPs and, hell just in, people in general include:

  • Their selfish motivations (the less glamorous ones) — Why do this when they can be literally doing anything else? Many of which can help them get rich faster.
  • What part of their past are they running towards and what are they running away from?
  • All the product pivots (thesis pivots) to date and why. I love inflection points.
  • If they were to do a TED talk on a subject that’s not what they’re currently building, what would it be?
  • Who do they admire? Who are their mentor figures?
  • What kind of content do they consume? How do they think about their information diet?
  • What promises have they made to themselves? No matter how small or big. Which have they kept? Which have they not?
  • How do they think about mentoring/training/upskilling the next generation of talent at their company/firm?

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.

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The Questions that Form an LP Investment Thesis | Winter Mead | Superclusters | S2E3

Winter Mead is the Founder and Managing Member of the investment firm Coolwater Capital, which exclusively focuses on emerging managers and technology investments. Coolwater is an academy for training, building and scaling emerging managers, a curated community of VC investors and early-stage investment specialists, and an investment firm. Coolwater has helped launch over 175 emerging managers, establishing strong ties and trust with these managers, who form the foundation of the Coolwater community. Winter is also the author of “How To Raise A Venture Capital Fund”.

Prior to Coolwater, he played a key role in an evergreen investment fund at SAP, co-founded the LP transparency movement called #OpenLP, and served on the committee for the Institutional Limited Partners Association (ILPA), which sets the standards for the private equity industry. Winter’s extensive experience includes private equity and venture capital roles in San Francisco, institutional fund investments, direct technology investments, and angel investing.

He also served as junior faculty at Stanford Graduate School of Business, holding degrees from the University of Oxford and Harvard University, and now resides in Utah with his family, passionately solving business challenges.

You can find Winter on his socials here:
Twitter: https://twitter.com/wintmead
LinkedIn: https://www.linkedin.com/in/wintermead/

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
[03:14] Why Winter biked across Spain with a flask of maple syrup in his back pocket
[05:55] How did Amy Lichorat change Winter’s career?
[07:15] How did Winter get into Hall Capital Partners?
[10:34] What makes Hall Capital Partners special?
[13:49] How office design affects the team’s ability to learn
[23:49] The value of living in the Bay Area
[27:17] Where to meet founders and VCs in the Bay Area
[33:35] Institutional checks vs angel checks
[38:58] Two of Winter’s decision-making frameworks for angel investments
[41:58] How to build an LP investment thesis
[52:53] The interplay of fear and diligence
[59:44] Two rookie mistakes that emerging LPs make
[1:05:34] The chip on Winter’s shoulder
[1:09:03] Thank you to Alchemist Accelerator for sponsoring!
[1:11:39] If you enjoyed this episode, consider subscribing and/or sharing!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“Diversification is potentially the only free lunch in investing.” – Winter Mead

“Investing should be thought of as a probability exercise.” – Winter Mead

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

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DGQ 19: Does the overall level of the team make me question if I’d be a good enough to play in this industry?

“I won’t forget the first time I saw Jason Peters do a one-on-one pass set with Trent Cole, and being amazed at the speed, balance, and power I just witnessed. It reminded me, or looked like, a grizzly bear wrestling a panther. It was so impressive, it made me question if I was good enough to play in this league.”

Much of this DGQ was inspired by Jason Kelce’s retirement speech, delivered with the prose and candor befitting of a legend. Which for those who have yet to read/listen to it, it’s 24 minutes that will be well-spent, whether you’re a sports, football, or Eagles fan or not.

There’s something really special about being the underdog. Whether you feel it or others say it. That slight chip on the shoulder, that measured level of imposter syndrome, is fuel to the fire. There is a distinct advantage for being the dumbest person in the room, knowing that there are mentor figures on the team you can learn voraciously from, even if by osmosis. And if you do have naysayers, you have the greatest privilege to prove them wrong. It means that you have space to grow. That journey ahead, at least for me, is quite exciting.

After all, in Jason’s 2018 Super Bowl Parade speech, he quoted another line from Jeff Stoutland. “Hungry dogs run faster.”

Although not framed nearly as eloquently as Jason Kelce put it, it’s something I think about a lot. Does the overall level of the team make me question if I’d be a good enough to play in this industry?

Challenge is as scary as it is thrilling.

Similarly in VC, we often say it’s an apprenticeship business. And it’s true. Almost every great investor I know had someone who took them under their wing and showed them the ropes. Sometimes a set of people. And it’s incredibly hard to learn and check your blindside without someone who plans to dedicate a good portion of their time to do so. That said, the next best you can get is to learn by osmosis.

You are the average of the five people you hang out with most. So if you have the chance to live and breathe alongside people who intimidate you with their skill, intellect and the way they execute in a good way, take it.

Photo by Vicky Sim 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.

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Diligence Questions: As Simple As They Are Complex | Youngrok Kim | Superclusters | S2E2

Youngrok Kim is a Partner at GREE LP Fund, a Fund of Funds operating in the US and Japan. Previously, he held the position of SVP at Recruit Strategic Partner, the strategic investment arm of Recruit Holdings, a major internet company in Japan. Youngrok began his career as an engineer at Goldman Sachs before transitioning to a VC career at ARCH Venture Partners in Chicago. He earned an MBA from the University of Chicago and received his degrees in Information Technology from Aoyama Gakuin University in Tokyo.

You can find Youngrok on his socials here:
Twitter: https://twitter.com/youngrock46
LinkedIn: https://www.linkedin.com/in/youngrok-kim/

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
[04:10] How did Youngrok find himself in Japan?
[09:29] Picking up the Japanese language
[20:29] How did Youngrok go from Japanese guitarist to being an LP?
[26:50] From pitching LPs on a fund-of-funds to getting a job offer from a prospective LP
[33:21] GREE LP Fund’s hiring process
[37:40] The three sources of data that helped Youngrok’s fund-of-funds thesis come together
[44:17] Superpowers and where to reference check them
[48:57] Simple versus nuanced questions for fund managers or reference checks
[56:12] One thing that many GPs think is special but actually isn’t for an LP
[58:52] What makes a good LPAC member?
[1:00:26] What are typical questions GPs have for their LPACs?
[1:05:28] Why GP friendships with other emerging managers might be becoming less important?
[1:11:55] A fun fact about Youngrok’s name
[1:12:55] Playing a number game with Youngrok
[1:16:05] Thank you to Alchemist Accelerator for sponsoring!
[1:18:41] Like, comment, or subscribe if you enjoyed this episode!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“Reference calls have a lot of nuance. No one wants to say bad things about their investors. And no one wants to say something bad about their co-investors. So my job is to find out the subtle nuances.”

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

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The Proliferation of LP Podcasts

I am under no illusion that there is a hell of a lot of interest in the LP landscape today. Not only from GPs who are realizing the difficulties of the fundraising climate, but also from aspiring and emerging LPs who are allocating to venture for the first time. The latter of which also have a growing set of interests in backing emerging GPs. And in the center console in this Venn diagram of interests lies the education of how to think like an LP.

I still remember back in 2022 and prior, we had Beezer’s #OpenLP initiative, Ted Seides’ Capital Allocators podcast, Notation Capital’s Origins, and Chris Douvos’ SuperLP.com. Last of which, by the way, can we start a petition to have Chris Douvos write more again? But I digress. All four of which trendsetters in their own right. But the world had yet to catch storm. Or maybe, the people around me and I had yet to feel the acceleration of interest.

Today, in 2024, we have:

There is no shortage of content. LPs are also starting to make their rounds. You’ll often see the same LP on multiple podcasts. And that’s not a bad thing. In fact, that’s very much of a good thing that we’re starting to see a lot more visibility here and that LPs are willing to share.

But we’re at the beginning of a crossroads.

A few years back, the world was starved of LP content. And content creators and aggregators like Beezer, Ted, Nick, and Chris, were oases in the desert for those searching. Today, we have a buffet of options. Many of which share listenership and viewership. In fact, a burgeoning cohort of LPs are also doing their rounds. And that’s a good thing. It’s more surface area for people to learn.

But at some point, the wealth of information leads to the poverty of attention. The question goes from “Where do I tune into LP content?” to “If I were to listen to the same LP, which platform would I choose to tune into?“

After all, we only have 24 hours in a day. A third for sleep. A third for work. And the last competes against every possible option that gives us joy — friends, hangouts, Netflix, YouTube, hobbies, exercise, passion projects and more.

In the same way, Robert Downey Jr. or Emma Stone or Timothée Chamalet (yes, I just watched Dune 2 and I loved it) is going to do multiple interviews. With 20, 30, even 50 different hosts. But as a fan (excluding die-hard ones), you’re likely not going to watch all of them. But you’ll select a small handful — two or three — to watch. And that choice will largely be influenced by which interviewer and their respective style you like.

While my goal is to always surface new content instead of remixes of old, there will always be the inevitability of cross-pollination of lessons between content creators. And so, if nothing else, my goal is to keep my identity — and as such, my style — as I continue recording LP content. To me, that’s the human behind the money behind the VC money. And each person — their life story, the way they think, why they think the way they think — is absolutely fascinating.

In closing

There’s this great Amos Tversky line I recently stumbled upon. “You waste years by not being able to waste hours.” And in many ways, this blog, Superclusters, writing at large, and my smaller experiments are the proving grounds I need to find my interest-expertise fit. Some prove to be fleeting passions. Others, like building for emerging LPs, prove to be much more.

Photo by Jukka Aalho 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.

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How One of VC’s Biggest LPs Builds Relationships | Abe Finkelstein | Superclusters | S2E1

Abe Finkelstein, Managing Partner at Vintage, has been leading fund, secondary, and growth stage investments focused on fintech, gaming, and SMB software, among others, leading growth stage and secondary investments for Vintage in companies like Monday.com, Minute Media, Payoneer, MoonActive and Honeybook.

Prior to joining Vintage in 2003, Abe was an equity analyst with Goldman Sachs, covering Israel-based technology companies in a wide variety of sectors, including software, telecom equipment, networking, semiconductors, and satellite communications. While at Goldman Sachs, Abe, and the Israel team were highly ranked by both Thomson Extel and Institutional Investor.

Prior to Goldman Sachs, Abe was Vice-President at U.S. Bancorp Piper Jaffray, where he helped launch and led the firm’s Israel technology shares institutional sales effort. Before joining Piper, he was an Associate at Brown Brothers Harriman, covering the enterprise software and internet sectors. Abe began his career at Josephthal, Lyon, and Ross, joining one of the first research teams focused exclusively on Israel-based companies.

Abe graduated Magna Cum Laude from the Wharton School at the University of Pennsylvania with a BS in Economics and a concentration in Finance.

Vintage Investment Partners is a global venture platform managing ~$4 billion across venture Fund of Funds, Secondary Funds, and Growth-Stage Funds focused on venture in the U.S., Europe, Israel, and Canada. Vintage is invested in many of the world’;s leading venture funds and growth-stage tech startups striving to make a lasting impact on the world and has exposure directly and indirectly to over 6,000 technology companies.

You can find Abe on his socials here:
LinkedIn: https://www.linkedin.com/in/abe-finkelstein/

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
[03:22] How did Abe get his first job?
[15:30] The currency of trust
[17:12] How does Vintage view mistakes and weaknesses?
[20:03] How Vintage organizes team offsites
[28:42] The lessons Abe gained on people and long-term potential
[33:47] Type 1 and Type 2 errors when evaluating GPs
[36:00] How does Vintage work with their GPs and the GPs’ portfolio companies?
[45:06] What Abe likes to see in a cold email
[49:33] Funds that Abe says no to
[51:18] When does fund size as a function of stage not make sense for Vintage?
[54:51] Carry splits within a fund
[1:02:08] What kinds of funds does Vintage not re-up in?
[1:05:23] How did Abe become a Pitfall Explorer?
[1:07:38] What Abe has learned over the years about patience?
[1:11:05] One of Abe’s biggest blows in his career
[1:16:23] Thank you to Alchemist Accelerator for sponsoring!
[1:18:58] Like, comment and share if you enjoyed this episode!

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What You Can and Cannot Control as a GP

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Not too long ago, I was catching up with the amazing Owen Willis, someone I’ve been lucky to see in action during our time at On Deck together, who now runs Opal Ventures. And there was one thing he mentioned that I cannot stop thinking about.

As a fund manager, there are things you can control. And things you cannot.

So often, many a fund manager focus on things they cannot. The market. In many ways, marks. And not enough on things, they can. Chief of which, communication. What. How. When.

Are your LPs hearing about news on you or your portfolio — good and bad — from you or from another source?

What are you seeing in the market? What is your insight into it? Why? After all, LPs pay you for your opinion.

And how frequently do you maintain an open line of communication with your LPs? Do you share everything? Or only the good? Do you miss regular updates because of how busy you get?

To nosedive a level deeper, as a GP, what are your most powerful tools of communication with LPs? Not to lead the witness, but you’ve probably figured it out. LP updates. Many GPs I meet tend to only have one type. At best one and a half.

There’s the update GPs send your existing LPs. But they also understand the value of prospective LPs, so they end up sending the exact same to prospects. Maybe with some numbers redacted (if it includes sensitive information on the portfolio). Most of the time, that’s it. But really, it’s helpful to think about existing and prospects as two different audiences. The former will naturally be disposed to support. The latter is still deciding if they want to support. They have yet to be converted.

As such, instead of one, there should be two types of LP updates. To make it simpler, one is for “customer success.” The other is for “sales and BD.”

The “customer success” update

There’s a lot of content on this front already, so I’ll spare you the extra verbiage here. But if you want a place to start, I’d recommend the below first:

But to provide a brief summary (plus, a snazzle dazzle of the Cup of Zhou perspective), typical LP updates I see have:

  1. The Abstract / TL;DR / What to know if you only had 2 minutes
  2. Performance (TVPI, DPI, IRR, new investments, % deployed, % left, % capital called, and (if so) did you preemptively mark down portcos and why)
  3. Net New Investments — 2-3 lines about each company + what’s promising + why’d you invest + website link + key highlights (you’ll need sign off from your founders for this last one)
  4. Asks — for your portfolio and for your fund
  5. Team updates — if your team changed (i.e. new hires)
  6. General portfolio updates — the good, the bad, the ugly
  7. Capital call schedules / Legal stuff if any
  8. Insights into the market (if any)

In general, you want to tell your LPs if there are any updates before they find out about them themselves. Better to hear from you than from other channels.

Lastly, I like personal flare and highlights as well. But hell, that’s up to each GP’s preference.

The “sales” update

So, there will be some overlap of information with the earlier type of update. With some redactions, particularly the specific numbers on the portfolio side. That said, rather than what goes in it, what might be more helpful is how to think about it.

Sales, like in any other industry, requires you to know your customer.

Some general framing questions:

  1. Are they the solution to your problem or are you the solution to their problem?
    • For instance, are they actively looking to deploy? Why? What motivates them? If not, you might be pushing a rock uphill. If yes, are you actually what they’re looking for, or can you better triage them to a friend who is investing in what they’re looking for. Relationships are long.
  2. Do they see VC as an access class or an asset class?
    • Generally, not always, individuals and family offices see VC as an access class. So they care more about co-investment opportunities, deal flow for them to directly invest, and/or opportunities to learn from you. In other words, these LPs want to see what you’re investing in, who else is validating your investments, and what are you seeing and learning. If you’re a Fund I, you’re probably spending more time with these LPs.
    • Institutions, like foundations, endowments, pensions, and fund of funds, see VC as an asset class. As such, returns and performance matter a lot more. So the best ways to convince them is to let the numbers do the talking AND how close you stick with your initial strategy and if you deviate, why. Promise fulfillment, or in LP lingo, consistency of strategy, matters just as much as returns, if not more, once return profiles measure up to 3-5X across several years. Or when and how quickly DPI hits 1X. If you’re a Fund II+, you’re probably spending more time prospecting these.
  3. Are you looking to institutionalize your fund? To go from a fund to a firm?
    • If so, how do you set yourself up to grow in team? How are you knocking out key risks one by one?
    • And in a loose way, not for an LP update, what happens once you get hit by a bus?
  4. What kind of cadence makes sense for you and is enough to keep you top of mind for these LPs?
    • Including events you’re hosting or when you’re visiting certain geographies are always a nice added bonus.

And lastly, getting feedback is always important. As you might suspect. So that your communication between both your existing and prospective LPs only improves over time.

Photo by ANDY ZHANG 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.

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