Tag: nomo ventures

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Should VCs Scale? | El Pack w/ Screendoor | Superclusters

screendoor

The entire Screendoor team joins me on El Pack to answer your questions on how to build a venture capital fund. We bring on three GPs at VC funds to ask three different questions.

Kyber Knight Capital’s Linus Liang asked about why LPs choose to bet on new managers as opposed to investing in more established funds.

NOMO Ventures’ Kate Rohacz asked about what parts of venture do LPs think is most opaque.

Articulate’s Helen Min asked if every emerging manager should scale into a larger firm.

The Screendoor team is a powerhouse of experienced LPs, bringing together institutional investment experience that spans over a decade. Lisa Cawley, Layne Johnson, and Jamie Rhode have each built institutional venture programs within innovative family offices, financial institutions, and pensions. They have invested in venture capital across stages, sectors, and geographies, and in particular are known as a go-to for emerging managers.

Lisa Cawley is the Managing Director of Screendoor. Previously, Lisa worked with a private multi-billion-dollar global investment firm where she was involved in all aspects of managing the firm’s private market portfolio, including sourcing and manager due diligence, asset allocation and forecasting, and creating and implementing the firm’s investment data tools and analytics. Lisa started her career at Ernst & Young, where she served on private equity, venture capital, and public CPG clients. Lisa earned an MBA and an MSF from Loyola University Maryland, and she obtained a BBA in Accounting with a double minor in Information Systems and Spanish from Loyola University Maryland. She is a CFA Charterholder and holds a CPA.

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

Layne Johnson is a Partner at Screendoor. Previously, she led the Venture & Growth Equity manager selection effort at the Teacher Retirement System of Texas (“TRS”). At TRS, Layne was responsible for setting the venture capital strategy, including portfolio construction, new manager sourcing and diligence, and increasing exposure to emerging venture managers. She had previously been at Goldman Sachs, since 2012, in the External Investing Group (“XIG”), based out of the New York and San Francisco offices. At GS, Layne initially worked on the hedge fund manager selection team and then moved over to the private side of the business to focus on technology and venture manager selection and secondaries. She also helped lead the Launch with GS Program, including sourcing, investing in, and building portfolios of diverse managers. Layne holds a BA in History from Yale University and currently serves on the St. David’s Foundation Investment Committee.

You can find Layne on her socials here:
LinkedIn: https://www.linkedin.com/in/layne-johnson-4b71b571/

Jamie Rhode is a Partner at Screendoor. She previously spent 8 years at Verdis Investment Management, an institutional single family office that manages capital for generations 7 through 10. At Verdis, Jamie focused on venture capital, private equity, and hedge fund investment sourcing and diligence. Using a data-driven approach, she helped revamp the asset allocation strategy and rebuild these portfolios. Specifically, through Verdis’s first institutional venture fund program, Jamie played an integral role in shifting the portfolio’s exposure from multi-stage to emerging managers and early-stage VC. Prior to Verdis, she spent four years at Bloomberg, where she held roles in both equity research and credit analysis. There, she created, managed and leveraged an extensive library of statutory, financial and market data for buy and sell-side clients who use Bloomberg to make investment decisions. A licensed Chartered Financial Analyst, she earned her bachelor’s degree in Finance and Marketing from Drexel University’s College of Business Administration.

You can find Jamie on her socials here:
Twitter: https://x.com/lady10x
LinkedIn: https://www.linkedin.com/in/jerrcfa/

And huge thank you for Linus, Kate, and Helen for jumping on the show.

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

OUTLINE:

[00:00] Intro
[05:58] Enter Linus and Kyber Knight Capital
[10:06] Why take the risk of betting on an emerging manager?
[18:40] The types of pushback Linus got when he was fundraising
[19:47] The incentives of an LP when investing in VC
[21:49] How do GPs ask LPs how they’re compensated?
[24:47] Enter Kate and NOMO Ventures
[28:31] What part of venture is most opaque?
[38:18] The things venture LPs look at beyond the metrics
[43:47] “Bad” advice from LPs
[46:27] Enter Helen
[46:48] Helen’s new podcast, Great Chat
[49:34] What is Articulate?
[52:43] Should emerging funds scale?
[1:00:47] How often do GPs say they want to scale
[1:03:03] Layne’s advice for GPs
[1:03:39] Jamie’s advice for LPs
[1:04:55] Lisa’s advice for LPs and GPs
[1:07:35] David’s favorite moment from Jamie’s episode
[1:09:53] David’s favorite moment from Lisa’s episode

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“My original intention was never to target emerging managers. My intention was actually to target funds that were the first institutional check into a startup because I was looking for a way to compound capital at an extremely high rate. And that just led me to backing emerging managers because finding a fund that was willing to invest at the pre-seed/seed consistently over a very long term either meant by the time they had a track record that underwritable with DPI, I couldn’t get in or they were an established manager that was slowly creeping up into bigger and bigger fund size so they were closer to Series A and Series B. What I ended up realizing is to go access that part of the market, I had to do emerging managers.” – Jamie Rhode

“A lot of what we do in underwriting is backward-looking, but really in VC, you want to be forward-looking. So it’s really important to be taking in those datapoints, but if you’re making a majority of your decision on those backward-looking datapoints, I would argue that you’re probably missing the mark when it comes to emerging managers. You actually want to be asking how do I know this firm–this team–is still going to have an edge in, inevitably, what would be a new market environment. There are going to be new competitive forces. There are going to be new technologies–new innovation. New at every level.” – Lisa Cawley

“I’m a firm believer that if you are waiting to see the proof smack you in the face, you’re actually not participating in the proof. You’re not getting that performance. You’re not getting those returns. You’re sitting and you’re waiting. And by the way, everyone else is doing the same thing, so you’re competing against them. Just because someone can identify that’s a great brand at that point, it doesn’t mean just because you have capital, you can get access.” – Lisa Cawley

“Don’t get swayed by capital.” – Jamie Rhode

“You can’t be all things to all people.” – Lisa Cawley

“Scaling is not synonymous with increasing fund size. To me, scaling means you’re increasing in sophistication. You’re increasing in focus. And that’s really a sign of maturity and fund size is a byproduct of that.” – Lisa Cawley

“GP-market fit is so crucial and you want to make sure you’re setting yourself up for success by being able to shine in what you’re best at and what your background and experiences set you up for as well.” – Layne Johnson

“Speed to fundraise does not always equate to a strong investor.” – Lisa Cawley

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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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My Worry with AI

I was grabbing lunch with my buddy Rahul the other day. And we were talking about how frickin’ tough it was for us to become proficient at our respective sport. Tennis for him. Swimming for me. On one hand, both of us wish it were easier. That he could pick up the racket for the first time, and win matches without breaking a sweat. That I could execute a perfect dive and a sub-20-second 50-sprint with just six months of practice. But the truth is neither of us could. We had select teammates who could though.

I remember one teammate who was two years older than I was. 14 to be exact. He swam with us for two months with no formal training prior, then went to his first competition. Broke 30 seconds for 50-yard freestyle in that very first race. A few months later, broke 25-seconds. In his first year, he never lost a sprint. It got to a point that while the rest of us were swimming six days a week. 2-4 hours a day. He swam with us twice, at best thrice a week. And he still won.

Was I envious? Hell ya. No doubt about it.

It wasn’t till later that year, where he was competing in meets a step above Junior Olympics — Far Western to be specific — that he lost his first race. Then at the next one again. Then again. And the guy broke. He took his anger out on the rest of us. Beat some folks up as well. Just, give or take, 18 months after he had started, he quit. I never saw him again.

Had he stuck with the sport, I’m confident he would have been one of the best. Some people do have the genetic disposition to do well in a certain craft. They won the genetic lottery. And I’m really happy for them. If you do have it, you should definitely lean into it. Why waste the free bingo tile you’ve been given?

Circling back from earlier… on the other hand, Rahul and I are both glad it took a shitload of effort to actually win for the first time. And even more the second time. Then the third. Which by the way, really fucking sucked. I once beat the shit out of a wall in my parents’ home with my bare knuckles ’cause I was so frustrated at plateauing. Much to my parents’ horror.

But it made us better people. We are the sum of all our mistakes. The sum of all our blood, sweat and tears.

The last few months I’ve been lucky to be a part of conversations about the intersection of AI and investing. So many funds we see have built out AI screening tools, automated email management, and memo creation. Some LPs too. The latter is few and far in between. And there were multiple discussions from senior LPs and GPs that they became the investor they were today because they did the work of putting together the memos and hunting down references and details. That they made mistakes, but learned quickly why certain mistakes were worse than others. Some miscalculations were more egregious than others. That they were scolded. Some fired. The younger generation may not have the same scrutiny. And with AI, they might not fully understand why they need to do certain things other than tell AI to put together a memo.

Similarly, so many companies are building things incredibly quickly. Vibe coded overnight. They’re getting to distribution faster than any other era of innovation. It’s not uncommon we’re seeing solid 7-figure revenues in year one of the company. Annual curiosity revenue from corporates is real. Likely temporary, but real. And it’s created a generation of puffed chests. Founders and investors, not prepared for the soon-to-come rude awakening.

As first-check investors, we bet on the human being. We bet on not only the individual’s vision, but all the baggage and wherewithal that comes with it. We bet on the individual’s ability to endure. Because unless we see a mass market of overnight acqui-hires for companies younger than three years, our returns are generated in years 9-15. The long term. And shit will hit the fan.

AI is amazing in so many ways. But it has made it harder to underwrite willpower.

I’m not a religious person. But a line I really like from my friends who are Christian in faith is, “Don’t pray for an easy life. Pray for the strength and courage to overcome a hard life.”

It’s why I have a bias to folks who have scar tissue. Or what Aram Verdiyan calls “distance travelled.” What others call “people who have seen shit.”

Years ago, a friend of mine told me that famous people live one of two lives. A life to envy. Or a life to respect. A life to envy is one where that individual gets things handed to them on a silver platter. They got everything in life they asked for. Rich kids with rich parents oftentimes. A lot of people would love to have lived that person’s life. A life to respect is one where the individual goes through trials by fire and eventually came out on top. They’re riddled with scars. And while many people would want to be in that person’s shoes today, they wouldn’t want to have lived the life that individual lived.

As investors, we bias towards people who have gone through the latter or is capable of going through the latter.

Photo by Yogendra Singh 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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