“GPs over-index on how that value-add ties into a portfolio strategy.” — Stacey Kline
Stacey Kline and Ben Gallacher are co-founders of February Capital, a fund-of-funds dedicated to providing access to the best in venture. Prior to starting February, they’ve each held roles as professional athletes, corporate lawyers, startup founders, emerging managers themselves, family office allocators, just to name a few.
We spend much of this episode talking about their backgrounds that led them to where they are today, but also on why Stacey and Ben spend so much time underwriting emerging managers’ value-adds, as well as their controversial take on it.
You can find Stacey on her socials here:
LinkedIn: https://www.linkedin.com/in/staceykline/
You can find Ben on his socials here:
LinkedIn: https://www.linkedin.com/in/benjamingallacher/
Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.
OUTLINE:
(00:00) Intro
(04:03) Why did it take 22 months to set up fund of funds in Canada?
(07:22) Toughest moments when building February Capital
(10:12) How did Ben know he wanted to be an LP?
(12:58) How did Stacey know she wanted to be an LP?
(16:53) The doctor’s advice no one expected
(18:32) Ben’s first NO from Stacey
(23:06) Why is it called February Capital?
(23:58) What is the role of the LP today?
(27:59) What Ben and Stacey look for in GPs
(31:08) When does non-consensus thinking lead to portfolio divergence?
(36:28) How much portfolio overlap is fair for February?
(39:31) How large is February’s portfolio?
(43:17) Picking an ecosystem vs picking an investor
(46:24) What types of GPs did Stacey change her mind on?
(47:56) Underwriting a GP’s story
(49:44) Stacey’s controversial take on value-adds
(53:07) Why value-adds affect sourcing
(57:10) Examples of negative value-add
(59:19) Refreshing your value add
(1:03:36) An example of when GP and founder incentives are misaligned
(1:05:12) The February Capital OS you don’t see
SELECT LINKS FROM THIS EPISODE:
- February Capital
- Jason Demant
- GTMfund
- Ashby Monk
- “LPs Should Get Paid More” with Ashby Monk (Superclusters)
- 23andMe
- Voxel AI
- Otto Intelligence
- SickKids Foundation
- SickKids Breakthrough Fund
- Benchmark Capital
- Founders Fund
- Stanford University
- Harvard University
- Y Combinator
- Massachusetts Institute of Technology (MIT)
- Josh Kopelman
- Anthropic
- Claude
SELECT QUOTES FROM THIS EPISODE:
“What we’re looking for are GPs who are highly convicted in their strategy, where they’re focused on, how they articulate that, and then the proof points that tie the story together.” — Ben Gallacher
“At the end of the day, our job is to take risks.” — Ben Gallacher
“You have to refresh your network every seven years.” — Ben Gallacher citing Josh Kopelman
“It really is fundamentally our job to figure out not to uncover unobvious ecosystems, it’s to figure out who to back in the obvious ones.” — Stacey Kline
“If there’s someone in the operator seat, that’s amazing because they are boots on the ground. It’s really hard to see around corners and they’re the ones who are best positioned to see the world today super, super clearly and know what needs to be built.” — Stacey Kline
“[GPs] can potentially over-index on how that value-add ties into a portfolio strategy.” — Stacey Kline
“Do you end up spending the most time with the companies that are performing really well or with the companies that aren’t? It’s often that companies in a portfolio that are doing really well don’t actually need that much help.” — Stacey Kline
“If I were to defend the GP here on value-add and helping, at the end of the day, you’re just trying to better your sourcing because if you really help a company that’s struggling and they decide it doesn’t work and they start another business, they want to look back and be like, ‘That GP was super helpful to me and they were with me during my hardest times. I’m going to call them because I’m starting a new company and I want them to back me again.’” — Ben Gallacher
“70% of VCs are not value-add at all. They’re just capital and that’s fine. 15% are generally value-add. And 15% are actually negative value.” — Ben Gallacher
“The question is say-do ratio. An old mentor of mine used to say that to me, ‘What’s your say-do ratio? And then our job is basically to audit that. Are founders telling us what you say you’re doing? And does that matter?” — Ben Gallacher