Ahoy Capital’s founder, Chris Douvos, joins David 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.
Pachamama Ventures’ Karen Sheffield asked about how GPs should think about when and how to sell secondaries.
Mangusta Capital’s Kevin Jiang asked about how GPs should think about staying top of mind with LPs between fundraises.
Stellar Ventures’ David Anderman asked Chris about GPs who start to specialize in different stages of investment compared to their previous funds.
Chris Douvos founded Ahoy Capital in 2018 to build an intentionally right-sized firm that could pursue investment excellence while prizing a spirit of partnership with all of its constituencies. A pioneering investor in the micro-VC movement, Chris has been a fixture in venture capital for nearly two decades. Prior to Ahoy Capital, Chris spearheaded investment efforts at Venture Investment Associates, and The Investment Fund for Foundations. He learned the craft of illiquid investing at Princeton University’s endowment. Chris earned his B.A. with Distinction from Yale College in 1994 and an M.B.A. from Yale School of Management in 2001.
You can find Chris on his socials here:
Twitter: https://twitter.com/cdouvos
LinkedIn: https://www.linkedin.com/in/chrisdouvos/
And huge thank you for Karen, Kevin, and David 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
[01:03] The facade of tough times
[05:03] The last time Chris hugged someone
[06:53] The art (and science?) of a good hug
[08:32] How does Chris start his quarterly letters?
[10:35] Quotes, writing, and AI
[15:13] Venture is dead. Why?
[17:33] But… why is venture still exciting?
[21:13] Enter Karen Sheffield
[21:48] The never-to-be-aired episode with Chris and Beezer
[22:55] Karen and Pachamama Ventures
[24:19] The third iteration of climate tech vocabulary
[26:55] How should GPs think about secondaries?
[33:53] Where can GPs go to learn more about when to sell?
[36:53] Are secondary transactions actually happening or is it bluff?
[38:44] “Entrepreneurship is like a gas, hottest when compressed”
[42:26] Enter Kevin Jiang and Mangusta Capital
[44:21] The significance of the mongoose
[46:36] How do LPs like to stay updated on a GP’s progress?
[59:35] How does a GP show an LP they’re in it for the long run?
[1:03:57] David’s Anderman part of the Superclusters story
[1:05:41] David Anderman’s gripe about the name Boom
[1:06:31] Enter David Anderman and Stellar Ventures
[1:10:21] What do LPs think of GPs expanding their thesis for later-stage rounds?
[1:21:43] Why not invest all of your private portfolio in buyout funds
[1:25:48] Good answers to why didn’t things work out
[1:28:13] Chris’ one last piece of advice
[1:35:18] My favorite clip from Chris’ first episode on Superclusters
SELECT LINKS FROM THIS EPISODE:
- Ahoy Capital
- Why You Should Be Wrong and Alone with Chris Douvos
- The LP Game Show with Beezer Clarkson and Chris Douvos
- Bretton Woods system
- Ted Williams
- Joe & the Juice
- Walt Whitman
- The Great Gatsby by F. Scott Fitzgerald
- Dan Primack
- Delphi
- Tim Berners-Lee
- Chris Dixon
- iPhone
- Tim O’Reilly
- Sunil Nagaraj
- Karen Sheffield
- Pachamama Ventures
- Earnest Sweat
- Swimming with Allocators
- Chris Douvos on Swimming with Allocators
- Beezer Clarkson
- Palo Alto Creamery
- OpenLP
- EarthX’s E-Capital Summit
- Texas Christian University
- Al Gore
- TIFF Investment Management
- Uber
- Golden Gate Capital
- Qualified Small Business Stock (QSBS)
- Section 1202
- PRINCO
- Josh Kopelman
- Rob Hayes
- Geoff Yang
- Redpoint Ventures
- Amanda “Robby” Robson
- Modern Technical Fund
- Kevin Jiang
- Mangusta Capital
- Softbank
- Softbank Vision Fund
- Masayoshi Son
- Flexport
- Wiz
- Google acquiring Wiz
- Rikki-Tikki-Tavi (1975 short film)
- Figma
- Andy Weissman
- Union Square Ventures
- Ross Fubini
- Palantir
- Joe Lonsdale
- First Round Capital
- AngelList
- AngelList Rolling Funds
- Stewart Alsop
- Laniakea Supercluster
- Boom Supersonic
- David Anderman
- Stellar Ventures
- SpaceX
- Starlink
- Lucasfilm
- Disney
- Elon Musk
- SpaceX’s Starship
- Charles Hudson
- Precursor Ventures
- Floodgate
- Iris Choi
- Ann Miura-Ko
- Adam the first human (Bible)
- Sistine Chapel
- Leonardo Da Vinci
- Michael Porter
- Ad astra (definition)
- Don Draper (fictional character)
- Mad Men scene: “He either lives in your heart or he doesn’t.”
- Jeremy Grantham
- Massachusetts Institute of Technology (MIT)
- Samir Kaji
- First Republic Bank
- Sequoia Capital
- Michael Moritz
- Kleiner Perkins
- SuperLP.com
- Peter Dolan
- Jack Meyer
- Harvard Management Company
SELECT QUOTES FROM THIS EPISODE:
“Every letter seems to say portfolios have ‘limited exposure to tariffs.’ The reality is we’re seeing potentially the breakdown of the entire post-war Bretton Woods system. And that’s going to have radical impacts on everything across the entire economy. So to say ‘we have limited exposure to tariffs’ is one thing, but what they really are saying is ‘we don’t understand the exposure we have to the broader economy as a whole.’” – Chris Douvos
“Everybody is always trying to put the best spin on quarterly results. I love how every single letter I get starts: ‘We are pleased to share our quarterly letter.’ I write my own quarterly letters. Sometimes I’m not pleased to share them. All of my funds – I love them like my children – equally but differently. There’s one that’s keeping me up a lot at night. Man, I’m not pleased to share anything about that fund, but I have to.” – Chris Douvos
“There’s ups and downs. We live in a business of failure. Ted Williams once said, ‘Baseball is the only human endeavor where being successful three times out of ten can get you to the Hall of Fame.’ If you think about venture, it’s such a power law business that if you were successful three times out of ten, you’d be a radical hero.” – Chris Douvos
“Tim Berners-Lee’s outset of the internet talked about the change from the static web to the social web to the semantic web. Each iteration of the web has three layers: the compute layer, an interaction layer, and a data layer.” – Chris Douvos
“Venture doesn’t know the train that’s headed down the tracks to hit it. Every investor I talk to—and I talk mostly to endowments and foundations—is thinking about how to shorten the duration of their portfolio. People have too many long-dated way-out-of-the-money options, and quite frankly, they haven’t, at least in recent memory, been appropriately compensated for taking those long-term bets.” – Chris Douvos
“Entrepreneurship is like a gas. It’s the hottest when it’s compressed.” – Chris Douvos
On communication with LPs, “come with curiosity, not sales.” – Chris Douvos
“Process drives repeatability.” – Andy Weissman
“The worst time to figure out who you’re going to marry is when you’re buying flowers and setting the menu. Most funds that are raising now, especially if it’s to institutional investors—we’re getting to know you for Fund n plus one.” – Chris Douvos
On frequent GP/LP checkins… “Too many calls I get on, it’s a re-hash of what the strategy is. Assume if I’m taking the call, I actually spent five minutes reminding myself of who you are and what you do.” – Chris Douvos
“One thing I hate is when I meet with someone, they tell me about A, B, and C. And then the next time I meet with them, it’s companies D, E, and F. ‘What happened to A, B, and C?’ So I’ve told people, ‘Hey, we’re having serious conversations. Help me understand the arc.’ As LPs, we get snapshots in time, but what I want is enough snapshots of the whole scene to create a movie of you, like one of those picturebooks that you can flip. I want to see the evolution. I want to know about the hypotheses that didn’t work.” – Chris Douvos
“We invest in funds as LPs that last twice as long as the average American marriage.” – Chris Douvos
“The typical vest in Silicon Valley is four years. He says, ‘Think about how long you want to work. Think about how old you are now and divide that period by four. That’s the number of shots on goal you’re going to have to create intergenerational wealth.’ When you actually do that, it’s actually not very many shots. ‘So I want to know, is this the opportunity that you want to spend the next four years on building that option value?’” – Chris Douvos, quoting Stewart Alsop
When underwriting passion… “So you start with the null hypothesis that this person is a dilettante or tourist. What you try to do when you try to understand their behavioral footprint is you try to understand their passion. Some people are builders for the sake of building and get their psychic income from the communities they build while building.” – Chris Douvos
“There’s pre-spreadsheet and post-spreadsheet investing. For me, it’s a very different risk-adjusted return footprint because once you are post-spreadsheet—you talk about B and C rounds, companies have product-market fit, they’re moving to traction—that’s very different and analyzable. In my personal opinion, that’s ‘super beta venture.’ Like it’s just public market super beta. Whereas pre-spreadsheet is Adam and God on the ceiling of the Sistine Chapel with their fingers almost touching. You can feel the electricity. […] That’s pure alpha. I think the purest alpha left in the investing markets. But alpha can have a negative sign in front of it. That’s the game we play.” – Chris Douvos
“Strategy is an integrated set of choices that inform timely action.” – Michael Porter
“I’m not here to tell you about Jesus. You already know about Jesus. He either lives in your heart or he doesn’t.” – Don Draper in Mad Men
“If there are 4000 people investing and people are generally on a 2-year cycle, that means in any given year, there are 2000 funds. And the top quartile fund is 500th. I don’t want to invest in the 50th best fund, much less the 500th. But that’s tyranny of the relativists. Why do we care if our portfolio is top quartile if we’re not keeping up with the opportunity cost of equity capital of the public markets?” – Chris Douvos
“In venture, the top three funds matter. Probably the top three funds will be Sequoia, Kleiner, and whoever gets lucky or whoever is in the right industry when that industry gets hot.” – Michael Moritz in 2002