“Neutral references are worse than negative references.” – Kelli Fontaine
From investing in great fund managers to data to investor relations, Kelli Fontaine is a partner at Cendana Capital, a fund of funds who’s solely focused on the best pre-seed and seed funds with over 2 billion under management and includes the likes of Forerunner, Founder Collective, Lerer Hippeau, Uncork, Susa Ventures and more. Kelli comes from the world of data, and has been a founder, marketing expert, and an advisor to founders since 2010.
[00:00] Intro [02:11] How Kelli became a figure skater [06:59] Kelli’s football fandom [08:47] Picking schools for critical thinking for children [10:55] The difference between likeability and founder-friendliness [13:35] Correcting biases as LPs [15:07] Examples of what makes GPs unique [19:53] What kinds of data was Cendana NOT measuring when Kelli joined? [21:58] What are datapoints that LPs should measure but aren’t? [23:45] Startup metrics that LPs should track [26:16] Can you trust the data out there? [32:05] How does one start building a GP dataset from scratch? [37:38] Why does Cendana do 40 reference checks per fund? [39:47] Neutral references are worse than negative references [42:28] The questions Kelli asks founders when diligencing GPs [43:44] How Cendana does monthly calls with all their GPs and large LPs [47:57] How often does Cendana send investor updates? [49:13] The difference between monthly calls and taking an LPAC seat [51:19] Kelli’s indelible sports moments to witness [52:37] What makes Kelli laugh? [56:14] Thank you to Alchemist Accelerator for sponsoring [57:15] If you enjoyed this episode, it would mean a lot to me if you shared it with one other friend!
“Neutral references are worse than negative references.” – Kelli Fontaine
“What is unique about their background that gives them a right to win today?” – Kelli Fontaine
“Everybody uses year benchmarking, but that’s not the appropriate way to measure. We have one fund manager that takes five years to commit the capital to do initial investments versus a manager that does it all in a year. You’re gonna look very, very different. Ten years from now, 15 years from now, then you can start benchmarking against each other from that vintage.” – Kelli Fontaine
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.
Yes, that’s the title of this blogpost. And no, that’s not in Wingdings font.
And yes, that’s also an equation.
Surprises do better than suspense, which do better than pauses, which do better than full stops.
The first is indelible. The last is forgettable.
Let me elaborate.
Notation
Meaning
Explanation
!
Surprise
(For all you coders, the exclamation point does not stand for “not.”)
You’ve shared something interesting, shocking, unexpected… something non-consensus or nonobvious. This is the easiest justification for someone to take a meeting. You not only have their attention, but their curiosity.
It’s a point of contention. It allows for debate. At face glance, it may not sound right. It may outright be shocking.
?
Suspense
Why? How? You’ve posed an interesting question that begs an answer. People will follow up. They may or may not take the meeting, which is highly dependent on their bandwidth and your luck in their schedule.
Oftentimes, the follow up will seek some level of external validation. You need to appeal to a higher authority. References. Facts/data, and starting from universal truths. Or sometimes, a higher form of logic and reasoning.
In the words of Siqi Chen, questions are “tell tale signs of objections politely withheld.” For the purpose of gauging interest, quiet objections out loud may work in your favor.
,
Pause
You’ve introduced a subclause before the clause. The subclause itself must be interesting enough for them to want to finish the sentence. It’s the difference between a feature and a product. If it is interesting enough, there may be a follow up, but things will usually stay asynchronous.
Oftentimes, this manifests in the form of taking a large leap of faith in logic. Either one starts a premise, but has no conclusion/solution. Or the other way around. You deliver the punchline, but has no build-up.
.
Stop
A quick conclusion can be drawn. No further questions or curiosities. There’s nothing special. Nothing worth noting. This neither grabs attention or begs curiosity. The same as saying the sky is blue.
While that may seem obvious, the equivalent in the startup world is “We are a B2B SaaS product leveraging AI to deliver insights.” You’ve said nothing. And unfortunately, all of which is forgettable.
All that to say, if the goal is to get a conversation going, the above is a formula I often advise the founders and GPs I work with.
Then once you have the meeting, of all the meeting requests I get, the two most common reasons are:
I need money
I need feedback
Oftentimes, not mutually exclusive.
For the purpose of this blogpost, and as I’ve written about the former in the past, I’ll focus on the latter.
Feedback
The vast majority of people also suck at asking for feedback. Take pitch decks, for example.
Most founders and GPs ask: “Can you give me some feedback on my deck?” Unfortunately, the ask is nebulous. What kind of feedback are you looking for? How honest can I be? What are my parameters?
Should I be worried about hurting your feelings? Are you looking for validation or constructive criticism?
Am I the best person to give you feedback on this? Am I supposed to give feedback from the perspective of me as [insert your name] or a different persona?
So, unless you’re best friends with the person you want feedback from AND they are the ideal archetype you’re trying to target, you need to be more direct and focused on what you’re looking for.
Love-Hate-Forget
One of my favorite set of questions of all time happens to be something that was designed to be asked in groups of strangers. Something that came from the social experiments I hosted pre-COVID. Not original, but I forget the attribution.
Who did you notice? Who, for whatever reason, rational or not, did you like?
Who, for whatever reason, did you not like or feel it may be hard to be friends with them?
And after all that, who did you, for whatever reason, not notice at all?
Similarly, in the case of deck feedback…
Love
Could you go through the whole deck, spending an average of half a second on each slide? While you do so, could you note, which slides you spend longer than one second on, for whatever reason?
FYI, leave it up to them if they want to elaborate. Sometimes you don’t need to ask. Oxygen usually rises to the top.
If you were to keep just one slide and throw everything else out, which slide would you keep?
Hate
Could you spend up to five seconds per slide? Which slides do you dislike, for whatever reason?
Why?
FYI, typical feedback is usually too messy, no punchline (I don’t get what you’re trying to say), or I don’t agree. The last of which is actually not always bad, depending if it’s a point of view of the world or you’re misrepresenting a fact.
Forget
These are not questions you ask the feedback giver. Rather, these are questions for introspection.
Which slides did the person giving feedback totally ignore?
Why might they have?
More often than not, these are table stakes slides. Delete these slides if you can.
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.
Back when I was still swimming competitively, one of the drills our swim coach always had us do was a set of hypoxic drills. The two that left the most indelible marks were:
10 sets of 100 yards, broken down by 25 yards. Lap 1, breathe every 5 strokes. Lap 2, every 3 strokes. Lap 3, every 7 strokes. And Lap 4, every 9 strokes.
20 sets of 55 yards. You start with a flip turn into the wall. First 25 yards (Lap 1), no breaths allowed. Second 25 (Lap 2), you’re allowed to only take one breath.
Naturally, those drills usually left me the most exhausted. Not only did I find myself catching my breath, we also had to swim those on specific intervals, which left less than five seconds of rest at best, while swimming at 80% our max speed.
All that to say, it was a set of exercises that trained us to hold our breath. We had less oxygenated blood. Naturally, it was harder to exert our max strength and endurance. But it tested our ability to weather exhaustion.
Just like today.
Our venture ecosystem needs oxygen. The whole industry is holding their breath. For IPOs. like Stripe’s. Which may be unlikely to happen in the near future given Sequoia’s recent share acquisition. Software acquisitions have also hit an all-time low, leaving LPs starved for liquidity from the major private market exit paths.
And of the few “acquisitions” that are happening, they’re done to circumnavigate anti-trust laws. As Tomasz points out, “they hire the core team [in other words the founding team], license the technology, but the majority company continues to operate as a separate entity.” In addition, a number of companies also need to get re-priced in the market, having raised in 2020 and 2021 on over three-year runways. Which to their credit, was the common advice given by VCs during that era.
Election season does not make this Mexican standoff any less strenuous. How will it impact the global economy? And who’s the last to hold the bag with all these hot AI deals? We all know AI has low margins and requires and immense amount of compute to deliver the results that we expect, but how much longer will this need to go on?
Who knows?
At least until we get to breathe again. The consensus seems to be Q1 2025. But until we have oxygen again, this is the hypoxic training that our world will have to endure for the foreseeable future.
In the words of my coach, “focus on distance per stroke.” In other words, executional discipline. Do more with less.
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.
In the last few months, I’ve been to a number of AGMs. For the uninitiated, annual general meetings. These annual summits VCs host once a year to their investors. Their LPs. Some of such events I go to because I’m an LP in those respective funds. The vast majority of which I am not. But I go because I’m a friend of the team, or the GPs want me to give them feedback on the event, or that I advised them on how to put together the event itself. The invite, in and of itself, especially to those I am not an LP in, is an honor and a privilege. Something I don’t take lightly.
The best ones bring in quality attendees, not just speakers. And that these A-players bring their A-game. They are willing to share their insights and experience with candor, and leave little to the imagination. They are battlegrounds of ideas and creative conflict. To take a line from Matt Ridley, a line I first heard also at a an AGM last week, “Innovation is when ideas have sex.” Quality events are simply “brothels of ideas,” to borrow a line from a speaker at that AGM, leading not only to a higher quality of conversation, but also a higher quality of eavesdropping.
In the words of someone I met at one last week, “I don’t have a membership to a country club, but this is the closest thing I have to it.”
In each, the general partners for each firm would typically share the progress of the fund. The good. The bad. The numbers. The trends. As well as the future of the fund. Then after all that, they would have 2-3 of their portfolio companies present on stage, with insight as to what innovation looks like from ground zero. My personal favorites are where the founders don’t pitch that they’re fundraising. It is purely, in its truest sense, an exchange of ideas. Occasionally, there would be an additional speaker — an influential individual in the space to highlight the GP(s)’ networks. These have ranged from published authors to established GPs to celebrities to bloggers and podcasters to Nobel Prize winners.
LPs often go to so many of these. Many more than I have to date. That at some point, every annual meeting starts looking like the next. If you knew nothing else, or if you’re ever curious of my favorite rule of thumb on whether an AGM is truly different and worth one’s time is one where less than 10% of the attendees are on their devices. And even if they are, they aren’t on it for long.
That said, one thing I couldn’t help but notice was that many of the founders who spoke on stage often reflected the personality of the GPs. A mirror of sorts. Not all the time, but enough for me to consistently notice. Which makes sense since like-minded people gravitate towards each other.
People with similar energy levels. People with similar levels of charisma. Those with similar levels of curiosity. Similar sets of hobbies.
I have no thesis here. Merely a hypothesis from a very anecdotal set of observations. How crucial is a GP’s personality in selecting and attracting founders? If there was a loose personality archetype of a great founder, does that mean LPs should pick GPs with that same personality archetype since they’re more likely to attract entrepreneurs with similar personalities?
Hell, as they sit two degrees of freedom away from actual innovation, do most LPs actually know what makes a great founder?
#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.
“When you bring people in as partners, being generous around compensating them from funds they did not build can help create alignment because they’re not sitting there getting rich off of something that started five years ago and exits in ten years. So they’re kind of on an island because everybody else is in a different economic position and that can be very isolating.” – Jaclyn Freeman Hester
We’re doing a three-part series with some of our fan favorites over the last three seasons on the LP perspective of succession-planning and VC firm-building.
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.
Ben Choi manages over $3B investments with many of the world’s premier venture capital firms as well as directly in early stage startups. He brings to Next Legacy a distinguished track record spanning over two decades founding and investing in early-stage technology businesses.
Jaclyn Freeman Hester is a Partner at Foundry. Jaclyn helped launch Foundry’s partner fund strategy, building the portfolio to nearly 50 managers. Bringing her unique GP + LP perspective, Jaclyn has become a go-to sounding board for emerging VCs.
[00:00] Intro [01:55] Lisa on documenting the how and why behind decisions [05:52] Ben on leadership transitions at VC firms [08:08] GP commits by young GPs at established firms [11:56] What makes Kauffman Fellows special [14:33] Should Kauffman sponsor Superclusters? [15:34] A rising tide raises all ships [16:41] Partnerships that choose to stay together [18:21] Jaclyn on leadership transitions at VC firms [25:48] The economics of succession planning [31:28] Lisa on succession planning vs wind-down planning [33:10] Jaclyn on pros & cons of succession planning & committee decisions [41:50] Thank you to Alchemist Accelerator for sponsoring! [42:51] If you liked this 3-part series, do let us know with a like or a comment below!
“If it’s not documented, it’s not done.” – Lisa Cawley
“If somebody is so good that they can raise their own fund, that’s exactly who you want in your partnership. You want your partnership of equals that decide to get together, not just are so grateful to have a chance to be here, but they’re not that great.” – Ben Choi
“When you bring people in as partners, being generous around compensating them from funds they did not build can help create alignment because they’re not sitting there getting rich off of something that started five years ago and exits in ten years. So they’re kind of on an island because everybody else is in a different economic position and that can be very isolating.” – Jaclyn Freeman Hester
“When you think about succession planning, you actually have to take a step back and think: Is that even going to be my approach? Do I need to think about succession planning or am I really talking about wind-down planning? And when I stop raising a subsequent fund.” – Lisa Cawley
“We overcomplicate almost nothing as LPs. And this is a criticism of myself. And I think we oversimplify almost everything. Because by definition, we’re the customer of the end product. […] LPs watch the movie, but don’t read the book.” – Ben Choi
We’re doing a three-part series with some of our fan favorites over the last three seasons on the LP perspective of succession-planning and VC firm-building.
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.
Ben Choi manages over $3B investments with many of the world’s premier venture capital firms as well as directly in early stage startups. He brings to Next Legacy a distinguished track record spanning over two decades founding and investing in early-stage technology businesses.
Jaclyn Freeman Hester is a Partner at Foundry. Jaclyn helped launch Foundry’s partner fund strategy, building the portfolio to nearly 50 managers. Bringing her unique GP + LP perspective, Jaclyn has become a go-to sounding board for emerging VCs.
[00:00] Intro [02:00] Questions Ben asks GPs to see if they’re thinking long-term [06:50] Questions Jaclyn asks GPs to assess long-term thinking [09:45] What does leverage look like for a GP? [20:13] The role of AI internally at a firm [21:06] Advice to people looking to take junior VC roles [25:33] Questions Lisa asks GPs to assess long-term thinking [29:19] When does a fund turn into a firm? [31:26] Lisa: What do LPs often oversimplify vs overcomplicate about firm-building? [35:31] Ben’s answer to oversimplification vs overcomplication [41:00] What do emerging and established GPs oversimplify and overcomplicate? [45:06] Thank you to Alchemist Accelerator for sponsoring! [46:07] If you can’t wait for Part 3 of this conversation, leave us a like or comment!
“How do you get the most out of the least amount of people? […] I don’t think getting more bodies solves it. I think getting high leverage from a smaller set of resources is better.” – Jaclyn Freeman Hester
“If I hire someone, I don’t really want to hire right out of school. I want to hire someone with a little bit of professional experience. And I want someone who’s been yelled at. […] I don’t want to have to triple check work. I want to be able to build trust. Going and getting that professional experience somewhere, even if it’s at a startup or venture firm. Having someone have oversight on you and [push] you to do excellent work and [help] you understand why it matters… High quality output can help you gain so much trust.” – Jaclyn Freeman Hester
“What’s your right to win? Why are you going to be a founder and talent magnet? Why does the world need you as a firm? Why does the world need you as a VC? And how do you define success?” – Lisa Cawley
“We overcomplicate almost nothing as LPs [about the firm building process]. And this is a criticism of myself. And I think we oversimplify almost everything. Because by definition, we’re the customer of the end product.” – Ben Choi
“LPs watch the movie, but don’t read the book.” – Ben Choi
“Ultimately, Job #1 as an emerging GP is to be a great investor. We want you to be a great investor that lasts the test of time. But if you’re a mediocre investor that lasts the test of time or a great investor that doesn’t last the test of time, we prefer the second.” – Ben Choi
I went shoe shopping with my partner the past two weekends, and I’ll be the first to plead ignorance to the difference between the B and D suffix for shoe sizes. And even after two weekends, I’m still learning.
I’ve never looked much into shoes. Having spent much of my early life bathed in chlorine (so much that at one point, my hair was brown with blond tips. FYI, for those I’ve never met in person before, I sport naturally black hair.), I’ve spent more time choosing the right $300-400 swimsuit than what I’d wear on my two lower appendages the other eight hours of the day. All that to say, I’m ill-equipped to speak the language of sneakerheads and running shoe geeks.
But just as I’m still learning how shoe geeks around the world understand the finer nuances of heel to toe drop impacting ankle versus knee strain, most founders who haven’t spent the time understanding the nuances of VCs think all money is green. In fact, just last month, I spoke with a founder I randomly met at an event who said, “Money is money.”
And he’s not completely wrong. There is some truth to it. At the end of the day, as investors, we sell money. Moreover, most investors who promise to be helpful are not. As well-intentioned as they are at the time of investment, most fall short of being truly helpful. There are multiple studies that show that founders believe a huge majority of their investors are not helpful.
That said, one of my investor buddies said something quite interesting to me earlier this week. Many founders see investors as saviors not partners. A source of capital to save them when they’re near the gates of hell, but not while they’re building their stairway to heaven. All that to say, as someone who’s been an operator, now a “VC”, but also someone who invests in other VCs, here are some of the nuances I’ve really come to appreciate over the years that I overlooked when I first stepped into the world of entrepreneurship.
Consensus and conviction-driven decision making
Some firms are consensus-driven. Others are conviction-driven. The former requires majority or unanimous buy-in. The latter doesn’t. Neither is universally better than the other, but knowing how decisions are made is extremely helpful. Not only to know who else you need to convince on the team, but also to know how the firm will help you post-investment.
The former is usually a firm where carry is split equally among all partners, so all partners are theoretically incented to see every portfolio company succeed. So as a founder, if you want to rely on the expertise and network of the collective partnership, these are the firms you should pursue. The latter, the conviction-driven ones, are most helpful if you really want one specific partner’s experience. They’ll be the person who takes the board seat. Opportunistically, they may ask for 1-2 junior team members to also have board observer seats. The downside is when and if this partner leaves the firm, there may be a gaping hole in governance as well as interest in the continued success of your company. But otherwise, this will be the partner you will have on speed dial.
I shared a presentation I made recently on LinkedIn. Of which, I share that three kinds of friends in the world. When shit hits the fan at 3AM in the morning…
There’s the friend you call. They see the call. And they go back to sleep.
There’s the friend you call. They see the call. And begrudgingly pick up.
And there’s the friend you call. And as they’re picking up the phone, they’ve got their pants on already and are running out the door with their keys.
Conviction-driven firms, where the partner that pounds the table for you will likely be on you board, or even if not, they’re going to be the third friend. At consensus-driven firms, and I’m clearly being reductive here, you’re more likely — not always — to have the reluctant one or sleepers.
Then it comes down to how the team is compensated. Not something most founders can find out or ask out, but how carry is distributed for each fund matters.
Disagreeableness
I’ve realized a lot of the best investors are quite disagreeable. They have their opinions and are quite vocal about them.
A lot of them quite often score incredibly low on investor review sites. Of course, some just score low on NPS purely because their assholes. But I want to caveat. Assholes are often disagreeable, but not all disagreeable people are assholes.
But it takes a lot of courage to have a contrarian viewpoint that one can back up. You don’t have to agree with it. But it matters. More often than not, these folks will also have negative references. For an LP evaluating VCs, that’s ok. Negative is always better than neutral references. The latter means you’re easily forgettable.
Regardless of whether you agree with these investors or not (equally, if not more true, in great founders), they make you stop and think. And that pause to think makes you a more well-rounded professional, and makes your own opinions more robust when you choose to adopt or not adopt said piece of advice.
There’s a great Steve Jobs line, which I think is quite applicable here. “Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.”
Great investors are troublemakers. In a good way.
P.S. To the three verified troublemakers I know who are reading this blogpost, can’t wait for your debut.
Small talk
Small talk was definitely one of those things I was rather dismissive of earlier in my career. Who da hell cares about the weather? Or what you did over the weekend?
But over the years, I realize some of the best investors are remarkably good at this. Not in the sense that they know how to ask great weather questions, but they learn how to build rapport early and quickly. And even better, they get a founder comfortable, honest, and candid about where they are at.
No one’s perfect. Every investor gets that. Most founders often pretend that they are. But a great investor is great at helping a founder realize they don’t have to be, and also get to understand a founder from a personal level. Not jumping straight into the pitch. Or give me your metrics. Or how much are you raising at how high of a valuation?
Radical candor
Borrowing this phrase from the amazing Kim Scott, the best investors are upfront with expectations. They don’t waste your time. Some even go as far as to share what their incentives are. And the harsh reality that they may be wrong many times before they’re right. They don’t beat around the bush. They don’t delay the inevitable. They’re great at ripping bandages off quickly, so they can prioritize their focus on other matters that require more attention. They have tough conversations early and synchronously. The last thing one can ever say about them is that they aren’t thoughtful. It seems remarkably simple, but most cannot do just that.
To be fair, it’s sometimes easier said than done. Even for myself, and I would not even dare to put myself in the category of great, I’ve been berated, gaslit, and shamed (haha!) for giving and attempting to give honest feedback to founders and investors. In fact, I was introed to a fund manager recently for the purpose of giving feedback. When I realized a couple red flags about her fund (namely her raising a $100M fund with no track record), I asked if she wanted feedback. To which, she replied with something to the effect that she only takes feedback from people who invest and that I didn’t deserve to give her feedback.
So I can see why some managers are averse to giving any.
Raising junior talent
I was reminded of this in my recent episode with Rick Zullo. And I noticed Rick is really good at giving credit and lifting up his team. In a soon-to-be-released episode, Eric Bahn from Hustle Fund does the same. I’ve asked him to speak at events before and he’s often referred one of his junior team members to the event. Not as a “I don’t want to do this, so someone else should”, but as a “I believe XX person will be a great future leader of this firm, and I believe others need to hear her insights.” And he’s been right every time.
Building an institutional firm takes more than one person. It takes a village. To build a legacy also requires more than one generation. I often see great investors taking less credit and giving a lot more to their team. Those often hidden from the limelight.
Discipline
Every great investor I know does something consistently every day. They set ground rules and while it’s less so for others, they hold themselves accountable to do so. Whether it’s a cup of coffee brewed from home every morning, or going to the gym on a daily basis or quality time with family or calling their significant other at a set time every day, I have yet to meet an investor who can’t keep to a promise they made to themselves consistently.
Venture capital is a long game, and it’s very possible for these multi-decade games, to be lucky at least once. Good investors, at some point, hit a unicorn. Great investors can discover many before others do. But any more than twice requires extreme discipline and the ability to say no to things that are good to make room for the great. And it’s so much harder than one might think.
And the simplest proxy to an investor’s ability to do so is their ability to fulfill promises to themselves when no one else is looking.
In closing
At the end of the day, not all shoes are the same. Just like not all VCs are. But if all you need is to get from Point A to Point B, and you don’t care for what kind of support you get along the way, VCs, like shoes, may all be the same.
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.
Rick Zullo is the Co-Founder and Managing Partner at Equal Ventures. which invests into the future of four verticals: climate, insurance, retail, and supply chain, and boasts a portfolio including the likes of Threeflow, Leap, Smarthop, Ghost, Starday, David Energy, Leap, Odyssey, Vquip or Texture, just to name a few — many of which Rick serves on the board of.
Prior to co-founding Equal Ventures, Rick was an investor at Lightbank, an early-stage venture fund based in Chicago, where he led investments in companies like Riskmatch (acquired by Vertafore), Vettery (acquired by Adecco), Neumob (acquired by CloudFlare), Expel and Catalytic amongst others. Prior to Lightbank, Rick worked with investment firms Foundation Capital, Bowery Capital, and Lightview Capital, investing in technology companies across the capital spectrum from seed-stage to buy-out and began his career as a strategy consultant at Deloitte Consulting.
Rick received an MBA with Honors from Columbia Business School and graduated from the University of Richmond where he studied Economics and Leadership Studies.
[00:00] Intro [00:42] Rick’s book and how Rick thinks about his habit of writing [05:45] How Rick became a VC [11:36] The speed Rick listens to audiobooks [12:38] How Sendbird closed their first customer [14:20] Is networking a feature or a bug in VC? [17:59] Rick’s three hat framework [26:07] Growing up with a stutter and weak knees [35:58] Going from getting a job in VC to starting a firm [46:42] What motivated Rick despite how hard it was to raise Fund I [57:16] What makes EMC different from other emerging manager communities? [1:04:03] How does Rick help people become vulnerable at EMC? [1:15:25] What’s broken with venture [1:18:50] Rick’s hot take on funds of funds [1:22:04] “Seed stage is the worst stage to be investing into” [1:27:54] Asymmetric insight and asymmetric value add [1:33:00] How to pick board members as a founder when VC currently has high turnover [1:39:54] What should people know about Rick that he isn’t already known for? [1:42:55] Thank you to Alchemist Accelerator for sponsoring! [1:43:55] If you enjoyed this GP episode, do let me know in the comments or in DMs!
“Everyone in venture is networking and not working.” – Rick Zullo
“When I played football once upon a time, our coach [was] screaming at us, ‘Three hats on the ball! Three hats on the ball!’ The runner wasn’t down until we had three helmets tackling them.” – Rick Zullo, on staffing at a VC firm
“Historically, if you look at the last 10 years of data, it would suggest that multiple [of the premium of a late stage valuation to seed stage valuation] should cover around 20-25 times. […] In 2021, that number hit 42 times. […] Last year, that number was around eight.” – Rick Zullo (circa 2024)
One of my favorite Pat Grady lessons is the one he shares about his wife, Sarah Guo. The short of it is that while Pat was just enjoying his weekend down the wine country, Sarah had used that same car ride over to make several phone calls and several messages over the weekend. A time that most VCs take off for themselves, their family, or their hobbies. But Sarah took to get to know the founders, the team, key executives and everyone who was at the company.
For a deal that Sequoia, a16z, and Benchmark were also fighting over, the firm that won the deal was Greylock. And it was because of Sarah. She had spent so much time with said founders that they couldn’t imagine working with any other partner except for her.
Similarly, rumor has it that Mark Zuckerberg was able to buy Instagram also because of a flurry of conversations over Easter weekend in 2012, when no one else was expecting to be working. And while one can argue the ethics behind how the deal went down (i.e. the intensity of communication, threats or that Zuck was driven by paranoia), the fact stands that Facebook acquired that 13-person company with no revenue at a time when Twitter had offered supposedly $500M to acquire the photo-sharing company, and that Sequoia had also offered to mark the company at half a billion. But when literally anyone else could have won the deal, Facebook did.
I wrote about responsiveness being a telltale sign of excellence earlier this month. So this one is more or less an expansion of that.
I’ve always appreciated the ability in others who are able to make things happen. The hustle. Time doesn’t wait for you to wake up. From my buddy Andrew flying across the nation to close a candidate to Blake Robbins who cold emailed Nadeshot three times per week and bought him tickets to the Cavs NBA Finals game to win the chance to fund 100 Thieves. I hear about these stories every so often, from simple things, like flying to meet a founder and not expecting the founder to fly to the Bay, to more wilder stories to a lawyer cold emailing his way to Elon to get an exec position at SpaceX or sending fan mail to a music artist to put a song into outer space. And I can’t help but feel an immense amount of respect (also often inspired to take action myself).
The truth is most people don’t. Not because they physically can’t send an email on the weekend or jump on a phone call at 10PM. But because they won’t.
As an LP, one of the wavelengths I measure emerging GPs on is their ability to win deals. Too often these GPs brag about their networks and operating experiences. More often than not, not differentiated. I kid you not. Like 99% of the time. But in an age, where every GP has a podcast or a newsletter. Or a community. Hell, every GP knows someone who knows an Elon or a Bill Gates or a Jensen Huang (or they know them themselves).
Admittedly, they all start looking the same. But every so often, I meet a GP or a founder who can’t boast a crazy network or crazy set of prior exits. And the only thing they can boast is their hustle. And they are able to show for it. Those are the folks who I think will change the world.
I will admit, hustle is hard as hell to share in a pitch deck. In many ways, I advise GPs and founders to not include it because there is almost no way that a deck is the best platter to share one’s hustle. Then again, the people who are the greatest hustlers don’t need me to tell them that.
They know. And as the Nike slogan goes, they “just do it.”
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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.
Felipe Valencia is one of the co-founders of Veronorte, a venture capital investment firm based out of Colombia. In the first decade, Veronorte focused on managing Corporate Venture Programs for some of the largest Corporations in Latam.
These days, they’re diving into a Fund of Funds investment strategy in the Venture Capital space. For the last 12 years, Veronorte has invested in over 25 startups across the U.S., India, Europe, Mexico, and Colombia, and in more than 12 Venture Capital funds, primarily in the U.S.
With over 20 years of experience under his belt, Felipe has dabbled in various fields like robotics, the internet, international trade, and infrastructure project management.
Felipe graduated summa cum laude with a Mechanical Engineering degree from EAFIT University. He also holds a Master’s in Web Communication from the European Institute of Design in Rome and an MBA from the University of Chicago, where he focused on entrepreneurship and finance.
Felipe’s journey has taken him all over the world: He worked for AVG – Robotics in Los Angeles, did research and development in Mechatronics at Siemens in Germany, and was the Commercial and Strategic Director of Indexcol in Colombia. He also served as the Commercial Attaché at the Colombian Embassy in China and led the Proexport office there. Most recently, he was involved in business development at Pierson Capital in Beijing and managed infrastructure projects in Mexico.
[00:00] Intro [02:54] Felipe’s teenage years under a life of terror [10:01] How Medellin has changed over the years [13:12] Tales from Felipe’s travels across 10 cities in 4 continents [17:53] How did Felipe made his foray into VC? [22:46] How did Felipe meet his co-founding partner Camilo? [26:31] How Felipe pitched a VC fund without a track record [39:16] How did Felipe and Camilo think about compensation in Fund I? [47:40] How did Veronorte transition from a VC fund to a fund of funds? [55:14] The Monte Carlo simulation of fund of funds strategies [1:03:04] How much better does a venture fund need to do than public markets? [1:05:46] How did Veronorte get into top tier established funds? [1:12:00] What coffee brand did Felipe bring on his visits to the US? [1:13:38] How did Veronorte close Latam family offices in their fund of funds? [1:17:04] How does Veronorte communicate with their LPs? [1:23:58] The difference between an emerging firm and a frontier firm [1:28:55] Portfolio construction at Veronorte [1:34:50] What podcasts does Felipe listen to? [1:38:19] Felipe’s advice for the wanderlust [1:43:39] Thank you to Alchemist Accelerator for sponsoring! [1:44:39] If you enjoyed this episode, albeit longer, please do leave a like and share it with one friend who’d enjoy this episode!
“Diversification is a good way to control dispersion of returns.” – Felipe Valencia
“Every time they go to a meeting, they go with a present.” – Felipe Valencia, on building relationships
“This is an access class, not an asset class. And to show access, you need to bring these established firms. It’s not that we will invest in any shiny name, and we have passed on amazing firms that have an amazing brand because they don’t fit in our strategy.” – Felipe Valencia
