I caught up with a single family office over the holidays. Let’s call him Mark. Mark told me that he had caught up with a Fund I GP that I had passed on. Let’s call her Susan. In that conversation with that GP, he told Susan that I introed him to another GP “Charlie” whom she knew and whom I invested in, which he eventually passed on. And Susan asked Mark why I invested. That it made no sense. That Susan herself would have never invested in Charlie. As such, she didn’t know why I would invest in Charlie and not her. After sharing that last line, with no explicit question that plead for an answer, Mark looked at me, waiting to see how I’d respond.
I stared back at him. And he to I. And I to him.
As he felt seemingly unsatisfied with my reaction, I asked him, “If I put both of these GPs on a report card, how would you score each?”
He followed up, “Susan is more experienced. She’s done X and Y. And she came from Z.”
“You’re right. Susan is all of that. In fact, on a report card, it’s fair to say that her GPA is a solid B+, maybe an A-.”
He concurred.
I went on. “And Charlie would probably score a B, maybe B-, if we were really critical. But to you, did anything about Susan jump out at you?”
“Not exactly.”
“What about Charlie?”
“Well, there’s that…”
“I agree. For me, and you don’t have to agree with my assessment, Charlie is on paper a lower GPA than Susan, but Charlie spikes in very particular areas. Areas I personally believe puts him in a position to do really well. That he will have a good chance to outperform. Susan is factually better in almost every area than Charlie is, but she doesn’t spike in any area. At least it’s not obvious to me. I like her thesis. I think she has a great GP-thesis fit. And I do believe that her thesis has a really good chance of being right, but I’m not sure she’s the only person in the world who can do that, much less the best person in the world to do it. In fact, I can think of two other GPs who spike in that thesis area where she doesn’t.”
It’s harsh criticism. And it’s not my place to give non-constructive criticism. So what I said when I passed was that we had other deals in the pipeline that were a lot more interesting to us. Which is true. But it’s not my place to say “I don’t think you’re good enough.” And she probably felt my pass was unsatisfying. Because in her shoes, I’d probably feel the same.
I don’t invest in all-rounders. There’s a time and place and industry for those. But I don’t believe it’s venture. Even less early stage emerging managers. There’s a line I’ve long liked in the F1 world. “In Formula 1 it’s nearly impossible to go from 13th to 1st on a sunny day, but it’s possible on a rainy day.” In the uncharted territory of true early, early stage investing, it’s always a rainy day. And to go from 13th to 1st, you need to make bold decisions. Measured, well-timed, but risky decisions. You need to make certain sacrifices to do so.
To me, that meant comparatively lower grade-point averages, but much, much higher select individual subject grades. In fact, only an A++ would suffice. A spike must be at least three standard deviations from the mean. As an emerging manager LP, who plans to be an active participant in the journey, naturally with the GP’s permission, it falls on me and my peers to help our GPs raise their overall GPAs, but we can’t help them spike. But in that, we must know and recognize their flaws.
One of the most interesting spectacles I’ve always marveled at is how lumberjacks fell trees. The first cut is the notch cut that indicates the direction the tree will fall. The second is the felling cut that catalyzes the tree to fall, acting as the hinge.
In many ways, the GP spikes (and flaws) makes the first cut. Whether you count it as nature or nurture. The GP’s job is to figure out which direction they’d like to fall. Or to borrow a line from Mark Manson’s most important question of your life: “What pain do you want in your life? What are you willing to struggle for? How do you choose to suffer?” To further borrow, “What determines your success isn’t ‘What do you want to enjoy?’ The question is, ‘What pain do you want to sustain?’ The quality of your life is not determined by the quality of your positive experiences, but the quality of your negative experiences. And to get good at dealing with negative experiences is to get good at dealing with life.” All in all, it’s a GP’s job to make that choice. An LP cannot make that choice for the GP. And it is a function of the flaws they’re willing to overcome, and how they want to double down on their spikes.
The second cut is for investors, board and advisory members to nudge our investees towards the direction they so chose. As the great Tom Landry once said, “A coach is someone who tells you what you don’t want to hear, who has you see what you don’t want to see, so you can be who you have always known you could be.” But the prerequisite for the second cut is the first. The first requires intentional and special people.
Along a similar vein, my buddy Henry wrote a post recently I really liked.
“Is this founder special?” That’s probably the only question that has to be asked in every non-obvious investment decision. Maybe every investment decision. But especially true under imperfect information conditions. And special isn’t just about getting a high GPA.
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.
“‘I remember’ is more meaningful than ‘I love you.'”
I was catching up with an college friend over the holidays who’s now in a wonderfully happy relationship now, when once upon a time, she once doubted her ability to fall in love again. And as we were talking about what makes this guy special compared to all the other ones, she said: “Because he remembers the small things.”
“I love you”, while great for Hallmark movies, often feels empty if not paired with action. And more often than not, actions speak louder than words. Remembering that whenever they order they pick the carrots out of the salad, so you order salad without the carrots. Remembering their bucket list and making it a quarterly goal to check something off that bucket list.
Separately, I caught up with a friend who runs investors relations (IR) for a large multi-stage firm. Someone I’ve heard from many—colleagues, LPs, founders, even her friends—that she is one of the most thoughtful people in the world, which seems to be “easy” for her because she has a great memory and they “don’t”. For a blogpost that will come out next year, we were talking about IR best practices and what her CRM looks like. And I can say it’s accident that she comes off with great memory. There are details she tracks in there that no sane capital formation professional would actively track. One’s go-to coffee order. Their children’s birthdays. Their anniversary. Their first day on the job. And so on. What is that James Clear line again? “You do not rise to the level of your goals. You fall to the level of your systems.”
This past year was a year where I found myself remembering. How I got here. Did I even want to be here? Why did I want to be here? Who helped me get here? What they did? What might’ve seemed like an accident, but was a subconscious habit or intention? Even to the point I’ve asked several guests on the podcast, if they always knew they wanted to be where they are today. How did they know? When did they realize it? Given how personal some of the answers got, we had to leave quite a few on the editing floor. (Sorry.)
I left Alchemist close to the beginning of this past year. 2025 was also the first year since I started where I didn’t share my birthday resolutions on this blog. Largely because I didn’t know if I needed to add more to my list of things to do, but rather subtract things.
And now I’m writing this on the last day of the year, as it felt right to recap on the year only after the year was done. (Almost done.)
2025’s Most Popular
Most of my writing this year centralized around LP/GP dynamics. More so than any previous year.
Which is funny. I started this humble blog as a public FAQ. I used to—still do—get quite a few messages often asking for the same advice. I’ve always disliked giving general advice. A piece of advice is only as great as the situation in which you use it in. But most people ask generic questions. And generic questions often get generic advice. Nevertheless, I’ve always erred on the side of sharing the circumstance in which the advice is given when I do share generic advice, except when the advice, in my experience, applies to most people I talk to. And it’s funny that of this year’s most popular blogposts, four definitely include generic advice. Two arguably more circumstantial. But proportionally, even looking back at my most popular blogposts, the furthest reaching ones often house FAQs that most people can relate to. Or know someone that can relate to it.
Without further ado, my most popular pieces of writing this year:
Hustle as a Differentiator — I don’t know how ‘hustle’ went up in search volume this year, but it did. At least in terms of how people found this essay. But I also think people like stories and tactical examples of when and how hustle beat everything else. And this is the blogpost for that. Also, the only one of the top six not written this year.
If 198 Pieces of Unsolicited, (Possibly) Ungooglable Advice for Founders Were Not Enough — The third installation of my 99 pieces of tactical founder advice series. Admittedly, not surprised this went far. Sometimes great content is hard to find. And every time I publish a collection, like this, I hope it becomes the Dewey Decimal Classification for good, tactical content in the innovation ecosystem.
Dear LP — I wrote the sister blogpost of this first. But an emerging manager asked me to write that calls LPs out on their bad behavior. Not a good reason to write a piece in my opinion, until the subsequent weeks’ worth of LP conversations left me frustrated at LP behavior myself. This is also the blogpost where I had more than a handful of friends reach out to ask if I was okay. Which I was and am. This essay was the therapy I needed.
Good Misses and Bad Hits — Most outcomes in venture aren’t clear until a decade later. And when they are, so much of our past memory atrophies that for many of us, we can’t pattern match to why we made the decisions we did. Inspired by our Golden State celebrity, we decided to write a piece on what it means to measure inputs before the outputs and how we can course correct before it’s too late.
Dear Emerging Manager — Born out of frustration with emerging managers who seem to be living under a rock. But also a realization that not every GP has the vantage point that LPs do. In fact, most don’t. So this letter was hopefully helpful to debunk some of the myths GPs have.
Goldilocks and the 3 Secondaries — One of my favorite pieces I co-wrote this year with Dave, as it is one of the most tactical and intellectually rigorous pieces this year, but also a great mathematical exercise of how much of your private stake in a company to sell, when, and to whom.
All-Time Most Popular
2025 was the year I took a step back from promoting any of this blog’s content online. I also took down any vestigial pages that asked for a subscription within the first 10 seconds of browsing a page on this blog. I simply wanted this blog to be my safe harbor, my personal diary on my journey week by week. I realized that every time I actively promoted my blog on social media, I felt a part of me die.
Unlike Superclusters, this blog isn’t meant for one particular audience. While this blog has grown over time and I’m thankful to each and every one of you who has joined me in this journey, and while I had many an opportunity to do a sponsored blogpost, selling any piece of this virtual real estate felt disingenuous. It felt that I was selling a part of my soul. Because every week when I write, I write about whatever I want to write about. I don’t have an agenda. I merely write to write.
And the way I felt most true to myself was to no longer pursue any marketing of this blog. The only reason any of the afore-mentioned blogposts in the last section made its way to new audiences is that I’m lucky to have readers like you share things with the world, while I’ve hermitized.
As such, any growth of this blog this year is because of you, not me. For that and more, I am deeply thankful. Nevertheless, the all-time most popular blogposts haven’t varied much compared to last year, except for our lucky number five. Interestingly enough, I didn’t even write that one this year.
The Science of Selling – Early DPI Benchmarks — Honestly, it still surprises me that this is my most popular one to date. Not because I think it’s a bad topic—in fact, I truly believe it’s a much needed discussion as venture funds face liquidity crunches and the asset class institutionalizes—but because, I think it’s still a niche topic that is not widely searched for. But I’m glad that people are searching for answers here. This one also led me to write its sister piece here, which ranked 6th for this year’s most popular.
The Non-Obvious Emerging LP Playbook — My first piece that felt like it went viral. And the one that taught me how much dialogue is needed in this world around investing in venture funds.
10 Letters of Thanks to 10 People who Changed my Life — Another surprise that this topic of gratitude is as enduring as it is. Hopefully, this will play a small part in helping create a more grateful world. We stand on the shoulders of giants. It’s always important to never forget that fact.
Hustle as a Differentiator — Only a matter of time that this one beat out the one I wrote about how to host fireside chats. 🙂
2025’s Most Memorable
It’s always deeply interesting to me that sometimes the blogposts I spend the most time writing and/or are the ones that resonate with me the most personally don’t always go the furthest. A constant reminder that what the world might like, what you might like, may vary from what I like. From time to time, I get small notes from you that an esoteric, but deeply personal blogpost peaks your interest. And it really makes my day. For a very brief 24 hours, if only to relish in the small joys in life, I save those notes for when I feel imposter syndrome. Trust me, it happens. Not because the readership is highest, but because it’s nice to know I’m not alone in my peculiar, sometimes really nerdy interests.
The below I will list, in no particular order, as each meant something to me at the time of writing each, as well as moving forward:
Goldilocks and the 3 Secondaries — Same rationale as above. And if you want the actual model we used to model when and how much to sell on the secondary market, it’s in there.
Flaws, Restrictions, and Limitations — Inspired by Brandon Sanderson’s framework for character development, I’ve found this framework quite useful when assessing how risky an investment is into an emerging manager.
Dear Emerging Manager — Same as the above. Free therapy for myself. Hopefully helpful to the world.
The Question Off — One of my favorite drills I did this year to be a more thoughtful conversationalist, with none other than the best sparring partner out there, Kevin Kelly.
On Re-Ups — I’m an emerging LP. I haven’t been allocating to venture funds for over a decade, and so I’m still learning. This year, for the first time, I had managers I invested in, in previous vintages, come back and ask for me to re-up. Rather than do so haphazardly, I had to build a system for when it makes sense for me to re-up. This is it.
Gratitude and Deal Flow — One of my favorite re-framings on who I choose to invest in. And I couldn’t spell out why I liked certain managers over other great ones until a friend spelled it out for me.
Intro Policy — Another piece for personal therapy. Since writing this, it’s been much easier for myself to decide when to make intros.
300 WhatsApp Messages Later: Our Risk Framework for Backing Emerging VCs — One of the beauties of collaborating with someone brilliant—I’m looking at you, Ben—is that I learn something new as I am writing this alongside my co-author. Iron sharpens iron. And it was through this piece, that I built a more robust risk framework to evaluate emerging managers.
Scientists, Celebrities and Magicians — Kudos to my friend, Michael, for teaching me his framework for how a professional can be a triple threat, which I’ve since applied to the world of venture. And how different investors and leaders spike.
Referencing Excellence — The more I invest as an LP, the more important I realize how important reference calls are. The more important I realize they are, the more I realize I need to refine the way I get to the truth. Unfortunately, there’s no silver bullet, but this blogpost led me down my first real personal exploration for how to do references my way.
There is but one personally memorable blogpost I will intentionally leave out of the above list. It is the only one I’ve gone back to edit not once, not twice, but four times this year. Let’s call it an easter egg. If you do find it somehow, just know that I plan to continue updating that piece next year as well.
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.
Warning: This is a brief-ish, but hopefully entertaining intermission from the usual Superclusters programming. When we passed the 50th episode mark more than a few episodes ago, Tyler (my editor) and I thought it’d be interesting to record an episode where I change seats. Instead of me asking the questions, someone else would ask me questions. And I couldn’t imagine any better person to do so than my good friend, Allie, who in my humble opinion, is one of the best interviewers alive today.
Allie Garfinkle is a senior finance reporter for Fortune, covering venture capital and startups. She authors Fortune’s weekday dealmaking newsletter Term Sheet, hosts the Term Sheet Podcast, and co-chairs Fortune Brainstorm, a community and event series featuring an annual retreat in Deer Valley, Utah. A regular contributor to BBC’s Business Matters podcast, Allie is also a frequent moderator at major conferences such as SXSW. Before joining Fortune, she covered Amazon and Meta at Yahoo Finance and helped produce Emmy-nominated PBS Frontline business documentaries, including Elon Musk’s Twitter Takeover and The Power of the Fed. A graduate of The University of Chicago and New York University, Allie currently resides in Los Angeles.
[00:00] Intro [02:01] Art [09:39] Competition [17:49] Paleontology [18:14] Allie’s Tiki mugs [22:49] How has VC evolved? [29:41] Evaluating risk [43:04] Why is it important for VCs to stay in touch? [47:10] Are there reliably good investors? [53:09] Young GPs in market [54:58] How useful is education that come via public talks? [57:50] Does your niche fund size make sense for the market? [1:01:16] Is there too much venture capital? [01:05:24] How much of VC is art vs science? [1:07:18] What’s going on in Allie’s world? [1:09:45] Post-credit scene: Receipts
I’m intentionally keeping this section void of the things that I said since I hate the idea of quoting myself.
“Part of the point of this [investing job] is that you want to be anonymously, asymmetrically correct. And you can’t necessarily be that by saying or doing the same thing as everyone else. That being said, the worst nightmare for a VC is that no one wants to back a company they’ve backed.” — Allie Garfinkle
“If it eventually doesn’t become consensus, you were wrong.” — Allie Garfinkle
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.
Five years ago, I wrote a piece about the third leg of the race. From my time as a competitive swimmer, the lesson our coach always had for us was if you’re swimming anything more than two laps, the most important part of every race is the third leg. Everyone’s tired. Everyone’s gasping for air. Yet everyone wants to win. The question is who wants it more. And by the time you get to a decently high level, everyone’s athleticism is about the same. All that matters is the mentality you have on that third segment of four of each race.
We often say, that starting a company or a fund is a marathon, not a sprint. True in a lot of ways. But also, it’s a series of sprints within a marathon.
We put out an episode last week with the amazing Ben Choi, which I really can’t stop recommending. Just because I learn something new every time I talk with Ben, and this time especially so. But that’s my own bias, and I get it. But more interestingly, he said something that I couldn’t get out of my mind since we recorded. “The first three funds—not just the first two, the first three—are that ‘working-out’ process. Most pragmatically, there’s very little performance to be seen by Fund III. So it’s actually Fund IV for us to hold up the manager as no longer emerging and now needs to earn its own place in the portfolio.” The timestamp is at 16:21 if you’re curious.
And it got me thinking… is Fund III that third leg of the race?
When most GPs raise Fund III, they’re usually four, maybe five years, out from their Fund I. And that’s assuming they started deploying as soon as they raised their fund. And within five years, not that much changes. Usually, that’s two funding rounds after your first investments. But lemons ripen early, so only a small, small subset move to Series A or B. Most have raised one or less subsequent round since the GP committed capital.
Even accounting for two funding rounds later, that’s usually too early to consider selling into the next round. And if one does (unless it’s a heavily diversified portfolio and the GP has no information rights, and somehow is so far removed from the company that no one at the company talks to the GP anymore), then there’s signaling risk. Because:
No matter what portfolio strategy you run, not staying in touch with your best performing companies is a cardinal sin. Not only can you not use those companies as references (which LPs do look for), you also can’t say your deal flow increased meaningfully over time. No senior executive or early employee knows who you are. So if they leave the company and start their own, they wouldn’t pitch you. Your network doesn’t get better over time. See my gratitude essay for more depth here.
Not having any information rights and/or visibility is another problem. Do the founders not trust you? Do you have major investor’s rights? How are you managing follow-on investment decision making—whether that’s through reserves or SPVs? Are the blind leading the blind?
And if you do run a diversified portfolio, where optically selling early may not be as reputationally harmful to the company, you are losing out on the power law. And for a diversified portfolio, say a 50-company portfolio. You need a 50X on an individual investment to return the fund. 150X if you want to 3X the fund. As opposed to a concentrated 20-company portfolio, where you only need 20X to return the fund and 60X to 3X. As such, selling too early meaningfully caps your upside for an asset class that is one of the few power law-driven ones. As Jamie Rhode once said, “If you’re compounding at 25% for 12 years, that turns into a 14.9X. If you’re compounding at 14%, that’s a 5. And the public market which is 11% gets you a 3.5X. […] If the asset is compounding at a venture-like CAGR, don’t sell out early because you’re missing out on a huge part of that ultimate multiple. For us, we’re taxable investors. I have to go pay taxes on that asset you sold out of early and go find another asset compounding at 25%.” Taking it a step further, assuming 12-year fund cycles, and 25% IRR, “the last 20% of time produces 46% of that return.” And that’s just the last three years of a fund, much less sooner.
Finally, any early DPI you do get up to Fund I t+5 years is negligible. Anything under 0.5X, and for some LPs, anything sub-1X, isn’t any more inspiring to invest in than if you had absolutely no DPI.
Yet despite all of the above, the only thing you can prove to LPs are the inputs. Not the outputs. You can prove that you invested in the same number of companies as you promised. You can prove that you’re pacing in the same manner as you promised. And you can prove that founders take the same check size and offer the same ownership to you as you promised. And that is always good. As you raise from friends and family and early believers in Fund I, Fund III’s raise usually inches towards smaller institutions, but larger checks than you likely had in Fund I.
Fund-of-funds care about legibility. Logos. Outliers. Realistically, if you didn’t have any before Fund I, the likelihood of you having any while raising Fund III is slim. They need to tell a story to their LPs. A story of access and getting in on gems that no one else has heard of, but if everyone knew, they’d fight to get in.
Any person you pitch to who has any string of three to four letters (or is hired to be a professional manager) attached to their name (i.e. MBA, CAIA, CFA, CPA, etc.) has a job. For many, their incentive unless their track record speaks for itself (likely not, given how long venture funds take to fully return capital) is to “not get fired for buying IBM.” Some of their year-end bonuses are attached to that. Some lack the bandwidth and the team members to fully immerse themselves in the true craft of emerging manager investing. Many times, the incentive structure is outside of their immediate hands. For every bet they make that isn’t obvious, they risk career suicide. At least within that institution.
I’m obviously generalizing. While this may be true for 90%+ of LPs who fit in these categories, there are obviously outliers. Never judge a book by its cover. But it’s often helpful to set your expectations realistically.
As such, despite not much changing from your investment side, from the eyes of most LPs, you are graduating to larger and larger LP checks. Usually because of the need to provide more proof points towards the ultimate fund strategy you would like to deploy when you’re ‘established.’ But to each new set of LPs, prior to an institutional 8-year track record, you’re still new. On top of that, as your fund size likely grows a bit in size from Fund I, to some LPs, you are drifting from your initial strategy by no longer being participatory and now leading and co-leading. You also might have added a new partner, like Ben talks about in the afore-mentioned episode. And a new strategy and a new team requires new proof points related to on-thesis investments. So, Fund III is where you begin to need to whether the storm. For some, that may start from Fund II. Altos Ventures took four years to raise their Fund II. Many others I know struggled to do the same. But if you really want to be in VC long term, this is the third leg of the race.
And this is when a lot of GPs start tapping out. Will you?
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.
The holiday season has always been a great time to celebrate the movers and shakers in our world. This season we’re celebrating my personal favorites in the LP world. To start this mini-holiday series off, Earnest Sweat and Alexa Binns runs one of the most popular podcasts on venture capital limited partners, Swimming with Allocators. I was also fortunate enough to be on their podcast as well as a bonus crossover episode.
[00:00] Intro [02:09] Alexa’s earliest relationship with money [03:28] Earnest’s earliest relationship with money [04:45] Earnest’s first major purchase [06:41] Alexa’s first major purchase [08:25] The difference between public speaking and interviewing [12:19] Memorable guests on the SwA podcast [14:46] To do or not to do in-person interviews [18:05] Evolution of YouTube titles [20:04] Why err towards evergreen content? [22:30] Was SwA designed for LPs or GPs? [24:12] How did Earnest and Alexa meet? [24:56] How did Swimming with Allocators start? [27:21] The Pandora’s Box of intros [28:02] Alexa’s 3 buckets for LP investing [30:12] What is ‘coming soon’ for Earnest and Alexa? [36:58] Post-credit scene: Spider-Man & Investors as Avengers
“Having done my investment philosophy, I’ve got three buckets. There is the ‘Let it ride, you can’t beat the market’ bucket. That’s the majority of what I’m working with. That’s 90[%] plus. There is a bucket where I’ve worked as a VC, I’ve managed a bunch of LP investments, I am better suited to vet deals than the average person. I believe in my ability to pick winners in this very thin layer of finance. Just in angel investing and GP selection where I’ve got lived experience and then my network. And then there’s a bucket for other ways capital can make your life richer.” — Alexa Binns
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.
Ben Choi from Next Legacy joins David on El Pack to answer your questions on how to build a venture capital fund. We bring on 3 GPs at VC funds to ask 3 different questions.
Gilgamesh Ventures’ Miguel Armaza, also host of the incredible Fintech Leaders podcast, asks Ben what is the timing of when a GP should consider raising a Fund III.
Similarly, but not the same, Strange Ventures’ Tara Tan asks when an LP backs a Fund I, how do they know that this Fund I GP will last till Fund III.
Arkane Capital’s Arkady Kulik asks how one should think about building an LP community, especially as he brings in new and different LP archetypes into Arkane’s ecosystem.
Ben manages over $3.5B investments with premier venture capital firms as well as directly in early stage startups. He brings to Next Legacy a distinguished track record spanning three decades in the technology ecosystem.
Ben’s love for technology products formed the basis for his successful venture track record, including pre-PMF investments in Marketo (acquired for $4.75B) and CourseHero (last valued at $3.6B). He previously ran product for Adobe’s Creative Cloud offerings and founded CoffeeTable, where he raised venture capital financing, built a team, and ultimately sold the company.
Ben is an alum and Board Member of the Society of Kauffman Fellows (venture capital leadership) and has also served his community on the Board of Directors for the San Francisco Chinese Culture Center, Children’s Health Council, Church of the Pioneers Foundation, and IVCF.
Ben studied Computer Science at Harvard University before Mark Zuckerberg made it cool and received his MBA from Columbia Business School. Born in Peoria, raised in San Francisco, and educated in Cambridge, Ben now lives in Los Altos with his wife, Lydia, three very active sons, and a ball python.
[00:00] Intro [05:05] Ben’s 2025 Halloween costume [06:44] Jensen Huang’s leather jackets [07:24] Jensen Huang’s answer to Ben’s one question [10:05] Enter Miguel, Gilgamesh Ventures, Fintech Leaders [14:43] What are good signals an LP looks for before a GP raises a Fund III? [22:35] Why does Ben say ‘established’ starts at Fund IV? [25:08] Who’s the audience for Miguel’s podcast? [27:52] In case you want more like this… [28:32] Enter Tara and Strange Ventures [32:46] How does Ben know a Fund I will become a Fund III? [36:53] How does Ben know if a GP will want to build an enduring career? [40:58] How does Tara share a future GP she’d like to work with to Ben? [42:43] Marriage and divorce rates in America [43:34] What should a Fund I do to institutionalize? [46:28] Should you share LP updates to current or prospective LPs? [48:57] Enter Arkady and Arkane Capital [51:09] How does one think through LP-community fit? [1:01:31] What’s Arkady’s favorite board game? [1:03:08] Ben’s last piece of advice to GPs [1:09:50] My favorite Ben moment on Superclusters
“The dance of fundraising is when you do have [your thesis], the LP has to figure out is this a rationalization of the past or is it actually what happened? Was this known at the time? Because if it was, we can have some confidence in the future going forward. But if it was just a rationalization of some randomness, then it’s hard to know if Fund IV or V or VI will benefit from the same pattern.” — Ben Choi
On solo GPs bringing in future partners by Fund III… “The future unidentified partner is the largest risk that we have to decide to accept. So there actually isn’t a moment where we decide this GP is going to be around for Fund III. It’s actually the dominating risk we look at and we get there, but it’s a preponderance of other things that we need to build our conviction so high that we’re willing to take that risk.” — Ben Choi
“It’s brutal. It’s a 30-year journey. For any GP who raises a single dollar from external LPs, it’s a 30-year journey.” — Tara Tan
“I don’t think anyone goes into this business to raise capital, but your ability to raise capital is ultimately what allows you to be in this business.” — Ben Choi
On community… “Your core question is how much diversity—in the technical term of diversity—can you tolerate before you lose the sense of community.” — Ben Choi
“Most letters from a parent contain a parent’s own lost dreams disguised as good advice.” — Kurt Vonnegut
“Fundraising is a journey of finding investors who want what you have to offer; it’s not convincing somebody to do something.” — Ben Choi
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.
This is a blogpost where I’ll risk sounding like an asshole. Probably am already one to some, although I try not to be.
My job—as well as all other investors, hiring managers, talent agents, sports scouts, just to name a few—is to make decisions relatively quickly when faced with the pure volume of inflows. Not necessarily investment decisions, but in a brief interaction, it’s my job to figure out if I want to continue spending time with someone. And if I do know, I need to set expectations clearly as soon as I can. Usually within the first interaction. Because of that, I find it useful to develop heuristics.
(max age at which the knowledge one has today would still be impressive) – (age today) = (# of F’s given)
Where… negative F’s is a lost cause. You’re too late to the game. Zero F’s means it’s to be expected. Expectation meets reality. And the larger the number of positive F’s given, the more impressive you are.
Let me contextualize this.
Today, I know that 7 x 8 = 56. Not impressive at all. I’m 29, at the time of writing this post. The max age knowing what 7 x 8 is, and still be impressive, is probably 5 years old.
The Pythagorean Theorem probably caps out on the “impressive scale” at 8 or 9-years old before it’s to be expected. Maybe 10. There are some pieces of knowledge that have an expiration date on impressiveness. If you know E=mc2 at 6-years old, you might be a genius. If you brag about it at 30-years old, people will wonder what you’ve done with your life. That’s not to discount the folks who spend their life on the actual intricacies of the equation. There is also an age where it starts being worrisome if you still don’t know how to do something. At 10, if you know how to file taxes, people will shower praises at you. At 40, if you don’t know how to file your taxes, people will scoff.
The interesting thing is it extends beyond simple math. In venture, there is a certain point in your career that you need to know what pre- and post-money SAFEs are. You need to know the responsibilities of a board member, if you want to be a lead investor. You need to know how to file your K-1’s. You need to know what qualifies for QSBS. If you’re three months into your job as a VC, I don’t expect you to know how to negotiate pro-rata rights when a downstream investor wants you to sell a piece of your equity so they can keep their ownership targets. If you’re a VC, and not a GP, I don’t expect you to know the difference between a 3(c)(1) and a 3(c)(7) entity and that if you have a 3(c)(1) structure, then any LP owning more than 10% will be subject to the look-through rule and every single underlying LP in theirs counts as a beneficial owner and counts towards your 100 investor cap.
There is also so much free content online at this point that the max age where someone will still be impressed by a certain skillset or knowledge will continue to decrease as media democratizes knowledge. Made even easier with AI. Although do take niche knowledge generated by AI with a grain of salt.
The second part, which is equally as important, is: How did you acquire that piece of knowledge? For instance, one of the common “Would you rather?” assessments when I first jumped into venture was: Would you rather invest in someone who graduated from MIT with a 4.0 GPA or someone who took every free computer science course online to learn to built a software product? The common consensus on our team was the latter. The latter shows drive and intrinsic motivation. Critical for someone who’s a founder. Aram Verdiyan and Pejman Nozadcall it “distance travelled”, a terminology I’ve since borrowed.
As such, both the insight and the insight development matters. It’s what I look for when I have an intro conversation with a GP and/or founder. It’s what I seek when I go to an investor’s annual summit. So much so, that in my notes, I keep track of who has the highest “insight per half hour.” And I have an extreme bias towards those who have something insightful to share almost every time I have a conversation with them, as well as those who accumulate insights faster than others.
Of course, this isn’t the end all, be all heuristic, but I find it helpful as a rough rule of thumb when a GP claims to have insight in a given area.
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.
I was talking to an emerging manager raising a $10M fund recently. He shared a comment, likely off-the-cuff, but something I’ve heard many other emerging managers echo. “This year, most of the dollars deployed into venture has concentrated in only a few big funds.”
Not this manager in particular, but I’ve heard so many other Fund I or Fund II GPs say that. Blaming their struggle with fundraising on the world. It’s not me, but the world is conspiring against me. Or frankly, woe is me. But there is no LP who ever wants to hear that. Building a firm is hard. Building a startup, likely harder. No one said it’ll be easy. So let’s not pretend it’ll be all sunshine and rainbows. If you thought so, you’re deeply misinformed. If you’re going to be an entrepreneur of any kind, you need to take matters into your own hands. You cannot change the world (at least not yet). But you can change how you approach it.
That said, the mega funds who are raising billions of dollars are raising from institutions whose minimum check size is in the tens, if not hundreds of millions. These same institutions would never invest in an emerging manager. Their team, their strategy, and their institution isn’t built for it. When they have to deploy hundreds of millions, if not billions, a year into “venture” with a team of four or less, you’re not their target audience. So as an emerging manager, those mega funds are not your competition at least when it comes to LP capital.
You’re competing against all the other funds (likely emerging managers) at your fund size. Who can take the same check size you can take. That’s who you’re competing with. So whether you like it or not, billions going to the mega funds has, from a fundraising perspective, nothing to do with you.
If you are looking for reasons to fail, you will find one.
As the great Henry Ford once said, “Whether you think you can, or you think you can’t, you’re right.”
#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.
“The limiting downside is actually something a lot of emerging managers don’t think about. If you can turn all of your portfolio companies that don’t hit that exit velocity, if you can find a soft landing for those companies versus that’s a writeoff and they’re dead and done, that’s extra effort, but that’s an extra turn on your fund’s performance.” — Carson Monson
Carson Monson is a seasoned allocator with nearly a decade of experience backing emerging and spinout GPs across large institutions, government entities, and family offices. After stints at Greenspring, SITFO, and building a fund of funds strategy for a large European single family office, he now runs the fund of funds at CrossRange, which focuses on supporting top-tier emerging and spinout GPs.
Carson has backed everything from micro funds to high-profile managers spinning out of tier-one firms. He is deeply committed to being a thought partner and strategic resource to the GPs he supports, helping them navigate the complexities of fund building and long-term success in the VC industry.
[00:00] Intro [02:08] Wildlife and wholesome trouble [06:03] The journey to being an LP [10:54] How did Carson join Greenspring? [13:55] Lessons across Greenspring [15:46] How many deals did Greenspring do per year? [18:46] An example of a qualitative metric worth measuring [20:16] How many off-thesis bets is a VC allowed to make? [21:25] When do GPs move from thematic bets to opportunistic bets? [25:45] How much AUM should any one GP have? [29:46] Why does Carson liked concentrated portfolios? [30:32] The case for concentrated portfolios [36:40] Relationships with GPs should stay at the LP partner level [39:49] Fund strategy at Fund (n) vs Fund (n + 1) [45:19] What the hell is ‘critical node theory?’ [49:54] Examples of great references [52:58] The halo effect of mega funds [58:48] How does Carson get to inbox zero [1:02:09] Why is CrossRange different? [1:08:17] The last time Carson had a pinch-me moment [1:10:17] Carson’s ricotta gnocchi [1:12:28] Post-credit scene: Ramen, gluten, Tokyo, and Tonkatsu Suzuki Pt 2
On if 20% of the fund is focused on opportunistic bets… “Wealthy is a nice word. I would say [20% is] egregious. […] 10%, it’s not like it’s the right number, but it’s the number most LPs won’t contest.” — Carson Monson
“In the past, there have been GPs who are truly excellent at one thing or a couple of things, whether that’s a thesis, strategy, or an approach. And that approach makes a ton of sense at the fund size that they’re operating at or maybe a little bit larger. In the 20-teens especially, people were able to raise more and more, and strategy drift became a huge issue. That is something managers have to face the music on now. It’s almost like the idea of being a professional baseball player and grinding and working your way up and becoming excellent and an all-star baseball player. Then being, ‘Well, the motion is similar in cricket, so I’ll just go play cricket now.’ Ya some of the motions are similar, but it’s a fundamentally different sport. Strategy drift, fund size drift; it can be a really easy trap to fall into. The motions are similar, but you lose that competitive edge when you start to play a different sport.” — Carson Monson
“If you’re more concentrated, there is an ability to impact outcomes more meaningfully. I like GPs that play a critical role in the ecosystem in which they operate in. If you play a critical role—whether that’s in go-to-market motions, whether that’s in commercialization, whether that’s in branding and storytelling—there are so many ways you can play that role. Those types of GPs tend to have an ability to move the needle for their founders more—both on the upside and limiting the downside.” — Carson Monson
“The limiting downside is actually something a lot of emerging managers don’t think about. If you can turn all of your portfolio companies that don’t hit that exit velocity, if you can find a soft landing for those companies versus that’s a writeoff and they’re dead and done, that’s extra effort, but that’s an extra turn on your fund’s performance. There is a skillset in identifying that there’s still good in a company, even if it’s not going to have this massive outcome.” — Carson Monson
“Venture should play more like Moneyball. If you can get your companies on base and limit strikeouts, that is actually so impactful at a fund level. More emerging managers should try to think like CIOs, and less like individual investors, like being a portfolio manager and managing outcomes. Obviously, venture is a game of minority positions. You do not have sole control. Playing that role for your founders, it impacts performance. It impacts reputation and, in fact, your ability to win in the future.” — Carson Monson
“You cannot say, ‘I’m going to be SV Angel today, so I can be USV tomorrow.’” — Carson Monson
“A multi-billion dollar mega fund has to have a portfolio of companies whose aggregate equity value outstrips the GDP of most small nations on this planet.” — Carson Monson
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.
One of the most interesting lines I heard on a podcast that Mike Maples was on was: “90% of our exit profits have come from pivots.” Which I first wrote here. Then here. It’s a line that lives rent free in my mind. Ideas, startups, roadmaps, and goals change all the time. I get it. That’s life. Very, very few folks are folks who unilaterally pursue one thing their entire lives. And of those who do, they’re not all successful.
Another friend of mine whose track record speaks for itself, having invested and involved herself in multiple boards before those companies became unicorns and even after, once told me that the idea she invests in is irrelevant. As long as it has grounds and can be adjacent to a large market. The primary thing she looks for is the founding team.
Early-stage investors obsess about people. They’re not wrong. Some are misled by these “VC-isms.” Others still have their own way of underwriting them. I don’t have a crystal ball. I’m also not the smartest person to be dishing out predictions. I have a rough idea of what will change, though I may not always be right. But I don’t know how they’ll change. Or when. So I’ve lived an investing career obsessing over things that don’t change. Or as Naval Ravikant puts it: “If you lived your life 1000 times, what would be true in 999 of them?”
I’ve written about flaws, limitations and restrictions before. But to quickly surmise:
Flaws are things you can overcome. Limited track record. Never managed a team. Never scaled a product. Limited access to capital.
Limitations are imposed by others and/or the environment. Gravity dictates that objects don’t fall upward. There are only 24 hours in a day. If you’re not based in the Bay Area, it’s harder to raise capital. Certain investors prefer co-founders and partnerships. Certain investors care about warm intros. The list goes on.
Restrictions are rules imposed on yourself by yourself. Batman can’t kill. You only invest in solo founders. You only invest in healthcare. You don’t invest in anyone outside the Ivy League schools. But some restrictions go deeper. You’ll never hire from a job portal again. You never hire or invest outside of your network. You won’t invest or hire having never met someone in person. You need to meet their spouse before you make a hiring decision. You don’t invest in single parents. You don’t hire anyone who doesn’t read at least one book per month. You micromanage. You don’t hire anyone who cannot curse. And yes, I’ve heard all of the above and more. My curiosity is always: Why do you impose such restrictions on yourself? What is the story you’re not telling me? Is out of a fear or admiration?
All that to say:
Flaws will and can change if it is a priority. But won’t change if they’re not.
Limitations might change, but it’s outside of your and my control. And I don’t get paid to pray to the weather gods.
Restrictions often don’t change.
Whether you admit it or not, certain habits are hard to change and unlearn. It’s possible. But that requires you to not only be aware of it, but also actively want to change it. Other habits are second nature. How you treat others. How you start each conversation. Why you look both ways before crossing even an empty street. Why you’ve sold yourself a particular personal narrative. Why you have to invest a certain thesis.
The world seems to always be trying to stay on top of things, but there seems to be far less dialogue around how to get to the bottom of things. To me, when it’s underwriting a person and their team, it’s about underwriting what doesn’t change rather than underwriting what could.
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.
