I’ve always admired the way Mike Maples has thought about backcasting. In summary, he proposes that true innovators are visitors from the future. Or as he puts it: “Breakthrough builders are visitors from the future, telling us what’s coming.” Such that they “pull the present from the current reality to the future of their design.” In other words, start from the future, then work your way backwards to figure out what you need to do today to get there.
And I find it equally as empowering to do the same exercise as an emerging manager. Hell, for any aspiring institutional investor. Be it from an angel to a GP. Or an individual LP to a fund of funds.
Start from your ideal fund model. Your ideal LP base. Your ideal pitch deck. Then work backwards to figure out what you need to do today. For the purpose of this blogpost, I’ll focus on reference checks.
For everyone in the investing world, especially in the early-stage private markets, we all know that reference checks is a key component of making investment decisions. Yet too often, founders and emerging managers alike think about them retroactively. Post-mortem. Testimonials that are often not indicative of one’s strengths. And especially not indicative of how a GP won that investment, as well as how they can win such investments in the future.
An exercise I often recommend investors do is write your ideal reference you would like to get from a founder. Be as specific as you can. What would your portfolio founders say about you? How have you helped them in a way that no one else can? What do founders who you didn’t fund say about you?
Another way to think about it is if you were to own a word — something that would live rent free in people’s minds — what would you own? Hustle Fund owns “hilariously early.” Spacecadet Ventures owns “the marketing VC” and they live up to it. Cowboy’s Aileen Lee created the idea of “unicorns.” “Software is eating the world” is attributed to Marc Andreessen.
On the flip side of the token, what are testimonials that should never be written about you?
Hell, at this point, if you’re an aspiring institutional investor, and have yet to spell things out, create the whole deck. Fill in the numbers and the facts later, but for now, make up your ideal deck. When leading indicators become lagging, then update it and fill it in.
Then be that kind of investor for every founder you help. As Warren Buffett once said, “You should write your obituary and then try and figure out how to live up to it.”
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.
Aakar Vachhani is a Managing Partner and a member of Fairview’s investment committee. He is involved in research, due diligence, investment monitoring, and business development for Fairview’s venture capital and private equity partnership and direct co-investment portfolios.
Prior to joining Fairview, Aakar was with Cambridge Associates, a leading investment advisor to foundations, endowments and corporate and government entities. He was responsible for analyzing private equity and venture capital investments in support of the firm’s clients and consultants. In addition, he led research and data analytics projects on the firm’s private equity and venture capital database. Aakar also spent time with MK Capital, a multi-stage venture capital firm with a sector focus on software and cloud services.
Aakar Vachhani holds a B.S. in Economics-Finance from Bentley University and an MBA in Finance and Entrepreneurship & Innovation from the Kellogg School of Management. He is a member of the Board of Directors of San Francisco Achievers and the New Breath Foundation. On top of that, Aakar established and leads Fairview’s San Francisco office.
[00:00] Intro [04:29] Growing up in a household of 10 [09:36] Aakar’s leadership style when he was a child [12:12] Why Aakar turned down a job in insurance back at home [17:25] The third time Aakar applied to Cambridge Associates [21:56] How Fairview aligns incentives with each investment they make [26:15] How Fairview helps their GPs [28:58] How Fairview gives pitch feedback to GPs [32:54] Reasons Fairview passes on a GP [34:58] How does Aakar define what a “new manager” looks like? [37:55] How did Aakar build out Fairview’s SF Bay Area practice? [44:26] Fairview’s onboarding process for new hires [47:21] Why Fairview’s investment decisions need to be unanimous [52:17] The balancing act between a narrow thesis and a big market [56:09] Why Fairview invested in Eniac Ventures [57:56] What does a helpful LPAC member look like? [59:30] Typical questions GPs bring to their LPAC [1:01:13] How do the best GPs communicate strategy drift to their LPs? [1:03:01] Why LPs dislike strategy drift [1:06:28] What new technologies does Aakar think LPs should pay attention to? [1:08:30] Aakar’s core memories [1:11:45] Thank you to Alchemist Accelerator for sponsoring! [1:14:22] If you enjoyed the episode, it would mean a lot if you could like, comment, share, or subscribe!
“I won’t forget the first time I saw Jason Peters do a one-on-one pass set with Trent Cole, and being amazed at the speed, balance, and power I just witnessed. It reminded me, or looked like, a grizzly bear wrestling a panther. It was so impressive, it made me question if I was good enough to play in this league.”
Much of this DGQ was inspired by Jason Kelce’s retirement speech, delivered with the prose and candor befitting of a legend. Which for those who have yet to read/listen to it, it’s 24 minutes that will be well-spent, whether you’re a sports, football, or Eagles fan or not.
There’s something really special about being the underdog. Whether you feel it or others say it. That slight chip on the shoulder, that measured level of imposter syndrome, is fuel to the fire. There is a distinct advantage for being the dumbest person in the room, knowing that there are mentor figures on the team you can learn voraciously from, even if by osmosis. And if you do have naysayers, you have the greatest privilege to prove them wrong. It means that you have space to grow. That journey ahead, at least for me, is quite exciting.
Although not framed nearly as eloquently as Jason Kelce put it, it’s something I think about a lot. Does the overall level of the team make me question if I’d be a good enough to play in this industry?
Challenge is as scary as it is thrilling.
Similarly in VC, we often say it’s an apprenticeship business. And it’s true. Almost every great investor I know had someone who took them under their wing and showed them the ropes. Sometimes a set of people. And it’s incredibly hard to learn and check your blindside without someone who plans to dedicate a good portion of their time to do so. That said, the next best you can get is to learn by osmosis.
You are the average of the five people you hang out with most. So if you have the chance to live and breathe alongside people who intimidate you with their skill, intellect and the way they execute in a good way, take it.
The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.
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 am under no illusion that there is a hell of a lot of interest in the LP landscape today. Not only from GPs who are realizing the difficulties of the fundraising climate, but also from aspiring and emerging LPs who are allocating to venture for the first time. The latter of which also have a growing set of interests in backing emerging GPs. And in the center console in this Venn diagram of interests lies the education of how to think like an LP.
There is no shortage of content. LPs are also starting to make their rounds. You’ll often see the same LP on multiple podcasts. And that’s not a bad thing. In fact, that’s very much of a good thing that we’re starting to see a lot more visibility here and that LPs are willing to share.
But we’re at the beginning of a crossroads.
A few years back, the world was starved of LP content. And content creators and aggregators like Beezer, Ted, Nick, and Chris, were oases in the desert for those searching. Today, we have a buffet of options. Many of which share listenership and viewership. In fact, a burgeoning cohort of LPs are also doing their rounds. And that’s a good thing. It’s more surface area for people to learn.
But at some point, the wealth of information leads to the poverty of attention. The question goes from “Where do I tune into LP content?” to “If I were to listen to the same LP, which platform would I choose to tune into?“
After all, we only have 24 hours in a day. A third for sleep. A third for work. And the last competes against every possible option that gives us joy — friends, hangouts, Netflix, YouTube, hobbies, exercise, passion projects and more.
In the same way, Robert Downey Jr. or Emma Stone or Timothée Chamalet (yes, I just watched Dune 2 and I loved it) is going to do multiple interviews. With 20, 30, even 50 different hosts. But as a fan (excluding die-hard ones), you’re likely not going to watch all of them. But you’ll select a small handful — two or three — to watch. And that choice will largely be influenced by which interviewer and their respective style you like.
While my goal is to always surface new content instead of remixes of old, there will always be the inevitability of cross-pollination of lessons between content creators. And so, if nothing else, my goal is to keep my identity — and as such, my style — as I continue recording LP content. To me, that’s the human behind the money behind the VC money. And each person — their life story, the way they think, why they think the way they think — is absolutely fascinating.
In closing
There’s this great Amos Tversky line I recently stumbled upon. “You waste years by not being able to waste hours.” And in many ways, this blog, Superclusters, writing at large, and my smaller experiments are the proving grounds I need to find my interest-expertise fit. Some prove to be fleeting passions. Others, like building for emerging LPs, prove to be much more.
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 know I just wrote a blogpost on how LPs assess if GPs can win deals. But after a few recent conversations with LPs in fund of funds, as well as emerging LPs, I thought it would be interesting to draw the parallel of not only proxies of how GPs win deals, but also proxies of how LPs win deals. And as such, coming back with a part two. Maybe a part one and a half. You get the point.
The greatest indicator for the ability to win deals as a VC is to see what the largest check (and greatest ownership target) a world-class founder will take from you. (That said, if you are only capable of winning deals based on price, you might want to consider another career. You should have other reasons a brilliant founder will pick you.) And even better if they give you a board seat.
The greatest indicator for the ability to win deals as an LP is to see what the smallest check a world-class GP will take from you. And even better if they give you a seat on the LPAC.
In the world where capital is more or less a commodity, the more capital one can provide (with some loose constraints on maximums), the better. But if someone who has no to little trouble raising is willing to open doors in a potentially over-subscribed fund for you, that’s something special.
An LP I was chatting with recently loves asking the question, “How big of a check size would you like me to write?” And to him, the answer “As much as you can.” Or “I’ll take any number.” is a bad answer. According to him, the best GPs know exactly how much they’re expecting from LPs, and sometimes as a function of how helpful they can be, especially in a Fund I or II. But always as a function of portfolio construction. Your fund size is after all your strategy, as the Mike Maples adage goes. While I don’t know if I completely agree with this approach, I did find this approach intriguing, and at least worth a double take.
I’m forgetting the attribution here. The curse of forgetting to write things down when I hear them. But I was listening to a podcast, or maybe it was a conversation, where they used the analogy that being a VC is like watching your child on the playground. You let your child do whatever they want to. Go down the slides. Climb the monkey bars. Sit on the swings. And so on. You let them chart their own narratives. But your job as the parent is once you see your kid doing something dangerous, that’s when you step in. When they’re about to jump off a 2-story slide. Or swing upside-down. But otherwise your kid knows best on how to have fun. In the founders’ case, they know how to build an amazing product for an audience who’s dying for it.
Excluding the fact that you’re a good friend or family that go way back, you likely have something of great strategic value to that GP — be it:
Network to other LPs
Operational expertise and value to portfolio companies (to a point where you being an LP will help the GP win deals with founders)
Operational expertise to the GP and the investment team
Investment expertise to help check the GP’s blindside
Access to downstream capital
Deal flow, or
Simply, mentorship
At the same time, ONSET Ventures once found that “if you had a full-time mentor who was not part of the company’s management team, and who had actually run both a start-up and a larger business, the success rate increased from less than 25% to over 80%.” (You can find the case study here. As an FYI, the afore-mentioned link leads to a download of the HBS case study.)
That’s the role of the board. The LPAC. Of the advisory board. For a founder or emerging GP, the full-time availability of said board members or LPAC members is vital.
A proxy of a mentor’s availability is pre-existing relationships between founder/emerging funder and said investor or advisor. Another is simply the responsiveness of the investor or advisor. Do they take less than 12 hours to reply? Or 3-5 business days? It’s for that latter reason Sequoia’s Pat Gradyonce lost out on an investment deal to his life partner, Sarah Guo. Being responsive goes a long way.
In sum, for LPs in fund of fund managers, small things go a long way.
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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.
The great Jim Collins has this line I really like where he says fire bullets then cannonballs. “The right big things are the things you’ve empirically validated. So, you fire bullets, you validate, then you go big — bullets, then cannonballs — it’s both.”
Too often — something I see in me as much as I see in founders — when trying something new, we bottle it up. We charge the entropy of our creativity. Waiting to release it all at one big moment. A cannonball. No one else should or needs to know know. Sometimes it’s a fear of someone else stealing your idea. Sometimes, well, speaking more for myself, I just like surprises. I love the mystique. And on the slim chance you’re right, albeit rare, then awesome. But 999 out of 1000 times, you’re likely not. At least not in the first try.
I’m forgetting and also can’t seem to find the attribution. But I read somewhere that the only difference between vision and a hallucination is that others can see it. You see… the greatest YouTubers test their ideas with test audiences several times. In fact, they even test their video titles with select audiences a number of times before launching. (Instagram even added the ability to do it at scale for creators too.) Reporters do too with their headlines. Legendary investor Mike Maples at Floodgate once said, “90% of our exit profits have come from pivots.” ONSET Ventures also found in its research1 that founded the institution back in 1984 (prescient, I know) that there is a 90% correlation between success and the company changing its original business model.
All to say, one’s first idea may not always be the best and final idea. So, test things. With small audiences. With trusted confidants.
And while I may not do this all the time, with my bigger blogposts (like this, this, and this), I always run it by co-conspirators, subject-matter experts, lawyers, writers, bloggers, and people who love reading fine print. And sometimes the final product may not look like the one I initially intended, which will be true for an upcoming bigger blogpost. For events, like one I recently worked with the team at Alchemist on — redefining what in-person Demo Days look like at accelerators, we tested the idea with 20 other investors and iterated on their feedback before launching on January 30th this year. And still is not even close to its final evolution.
As Reid Hoffman once said, “If you are not embarrassed by the first version of your product, you’ve launched too late.”
Now that it’s out there…
One of the greatest Joker lines in The Dark Knight is: “Trust no one, salt and sugar look the same.”
It’s true. Whether people like something or not, they’ll always tell you things were good. It’s the equivalent of when one goes to a restaurant, orders something that’s a bit saltier than one’s liking, but when the server comes by to ask, “How is everything?”, most people respond with “Everything’s fine.” Or “good.”
You’re not going to get the real answer out of people oftentimes. Unless people really do love or hate something you did passionately. So… you must hunt for them. You must lure out the answers. You need to force people to take sides. There can be and shouldn’t be middle ground. If there are, that means they don’t like it.
Maybe it’s in the form of the NPS question. On a scale of 1-10, how likely would you recommend this product to a friend? And you cannot pick 7.
In the event space, I’ve come to like a new question. If I invited you to this event the week of, would you cancel plans to make this event? And to add more nuance, what kinds of events would you cancel to be here? What kinds of events would you not cancel?
Sometimes it helps to seed examples on a spectrum (although I try not to lead the witness here). Would you cancel a honeymoon? Or would you cancel going to another investor/founder happy hour? What about an AGM (annual general meeting, annual conference in VC talk)? What about a vacation?
As Joker said, salt and sugar look the same. So you have to taste it. Looking from afar won’t help. And if you want to iterate and improve, you need what people really think. I’d rather have people hate or dislike something I’ve created than have a lukewarm or worse, a “good” reaction.
In a way, if you’re not getting enough of an auto-immune response from the crowd, and the antibodies don’t start kicking in (aka the naysayers), you’re not really doing something new.
1 FYI, the research link redirects to its HBS case study, not the original research. Couldn’t find the latter unfortunately. But the point stands.
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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.
I came across a quote recently, which I believe originates from Qi Lu, former COO of Baidu, and the one who created Bing, Microsoft’s search engine. “Luck is like a bus. If you miss one, there’s always the next one. But if you’re not prepared, you won’t be able to jump on.”
And your bus fare comes by way of preparation. The 10-year overnight success.
Or as the classic Seneca line goes, “Luck is when preparation meets opportunity.” Or as Louis Pasteur also said, “Chance favors the prepared mind.” And by having a prepared mind at the bus stop, you’ve increased the surface area for luck to stick.
Of course, I could fill an entire blogpost with just quotes on what luck means. But I won’t.
Year 27 on this planet was simply a year to try new things. An exploration of the human mind. An exploration of what are the boundaries of the LP landscape. And what’s worth pushing on, and what’s not. The output of which culminated in events, new ways to operate, building trust circles, the podcast, more content on the blog, and of course, a lot more conversations with influencers in and away from the limelight.
The inputs of which came from my last year’s resolution.
A reflection
Last year, the goal was to find myself in the flow state at least twice a week. Truth was, at that point in time, I had yet to figure out how to truly measure it. And it wasn’t until October 15th last year when I started measuring the early semblances of it outside of just allotting time to be in the flow state. For me, it came down to a simple question. Was today worth it?
In other words, was today well spent? Defined by either:
Learning a new skill or framework
Creating a core memory
Or by realizing something I never realized before, a new way of looking at the world around me.
Each of which, at least for me, largely become possible when I am in an egoless state working or thinking about something proactively than reactively.
As of writing this blogpost, I’m 16 weeks in. And I have 18 days well spent. On average, between one and two days per week. Leaning more on one though.
Though I might be able to allot time on a weekly basis on my calendar for “flow state,” I’m not always in the mood for it. That in itself was dependent on circumstance, timing, stress, and the disciplined pursuit of inspiration. The last of which was a luxury I couldn’t always afford. Sometimes when there are more pressing matters, I can’t help but find my mind wandering and stressing over more urgent matters than focusing on doing something new.
As such, to help me do so, I focused on things I could control daily: Was I consuming a healthy and diverse diet of information? Which I measured through reading, listening to podcasts and content, and conversations with different kinds of people.
I also look back at my journal entries for the past year, and anecdotally, more than 60-70% of them are about topics and tasks I had to do, pre-assigned (often self-assigned due to constraints). And a lot of them focus on the 10%, maybe 20%, marginal improvement and refinement of what’s been done already, rather than the 10X thinking I find more common in journal entries in the years before. The difference between reactive journaling and proactive journaling. The product of consuming too much (work, podcast, and otherwise) of the same genre of information. Simply, I didn’t cover all my macros.
So, this year…
So this year’s goal is no different than the last. To explore. To find myself in creative pursuits and in the flow state. And to take risks.
While I remember the lyrics, I often forget Sanderson’s Second Law. “Flaws/limitations are more interesting than powers.” Constraints are the breeding grounds of inspiration.
Not sure how much of this is lore, but I remember reading once that Bill Gates loves hiring lazy procrastinators. As his words once rung, “I choose a lazy person to do a hard job. Because a lazy person will find an easy way to do it.” For Gates, the constraint of time and energy on a responsible individual is the forcing function for brilliance.
While it’d be ridiculous to give myself a pat on the back for “brilliance,” there is immense value in time constraints, as well as intentionally handicapping myself to produce results. To not let perfect be the enemy of good.
As such, I’m going to impose limitations on myself as a forcing function of iteration, and hopefully by product of doing so, I live more days that are worth it. For now, the count is 19 since Oct 15, 2023 (when I started counting).
How I will measure success, with a North Star of at least 2 per week
Publish the intuition vs discipline blogpost (final draft done by end of February)
Host an escape room where all the clues to escape are based on each guest’s individual stories (March)
Build a repeatable framework for backing GPs as an individual LP (by the end of February)
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.
A few years ago, in one of my favorite coffee shops on 7th Street in San Francisco, over a vanilla cold brew, a then 25-year old founder told me that he had recently taken his then-first vacation in five years. Took a full week off. Didn’t touch work at all. And just enjoyed it with his fiancée. But contrary to what one would expect, his body language that seemed to indicate the exact opposite of having a good time. Two hands cupped over his face, as he slowly dragged them both downwards in exasperation. Followed by many sighs.
He shared that in the time he was gone, the website crashed and the team had trouble bringing it back online. And when they finally did bring it back online, they were waiting for his approval to move forward. As such, didn’t bring it back online until he came back. With another large sigh, he went on to say that he’d never take another vacation ever again.
Running your own business is tough. Really tough. I get it. If you’re the founder, it’s your baby. And sometimes, it’s really hard letting go on what may seem like key decisions. Eventually, that becomes a slippery slope where I see too many founders needing to control every decision that goes on in the company. And even if you hired extremely well, you’ve capped your team’s potential by not letting them execute to their fullest capacity.
In the above dilemma, as you might know, it’s not a to-vacation-or-not-to-vacation problem. It’s a you-need-to-give-your-teammates agency problem. And it might seem obvious to you and me, to any third party observer. But it wasn’t to him. He was so frustrated that he was focused on the one new thing he did and believed that one new thing had a causal effect to a problem that was looming over his team’s head for a long time.
It is true that we are products of our scar tissue, but quite often, in an attempt to not be in the same situation again, people overcorrect. They take then run with the seemingly most extreme “solution.”
And in the times scar tissue start to form, start from first principles. Is taking a vacation really the biggest offender? Do great CEOs just not take time off? Is there something else that I’m not willing to admit about how the results played out?
What am I assuming to be true that may not have to be true? What are the raw facts, stripped of opinions and speculation?
Why was my team incapable of making that decision? Was it something that I told them before or did before that has since prevented them from making calls? What do I spend most of my day doing? Can I outsource some of my tasks? Some of my decisions? How would I do that? And only then, can I ask myself and others: what can I do from now on so that history doesn’t repeat?
Seeking and redefining excellence
And once you’re at the root of the problem, find others you admire who run organizations you admire.
Excellence is an interesting concept. One of the few words out there where its definition changes over the course of your life.
It’s one of the few words where it is not only different for every person, but that even within each person, every time you see something excellent, it sets a new bar and stretches that definition. Defined by only the most excellent thing you’ve seen.
The truth is that most great lessons happen to err on the side of examples. So to have people who define that word for you again and again are the “Sensei-s” you want in your life.
So spend time with others. Notice how they approach problems. And stretch your definition of excellence.
For the 25-year old founder who hadn’t worked any other job in his life, and only his own, there’s immense value in learning from others and building expertise at high-growth institutions. Or with people who you deeply respect.
Asking for the lesson
Tim Ferriss, on a recent episode with Noah Kagan, said, “Life punishes the vague wish and rewards the specific ask.” And I frickin’ love that line.
Be specific. No picking brains. You’re not a zombie or a vulture or a crow.
Not 30-minute coffee chats. Those quickly become recipes of asking for too much time with an amorphous ask. To a busy person, that 30-minute ask sounds like a recipe for losing 50 minutes to an hour of your life you can never get back. Including travel to and from. Time, as the only unreplenishable commodity, is precious. As Howard Lindzon said on the Superclusters podcast, when we’re young, we’re time-millionaires, but over time, we get poorer and poorer. We then become time-thousand-aires as we age. And eventually, we run out of temporal capital.
It is in times of need and struggle, that we often have the most prescient and specific ask to make of potential mentors.
“When in X situation, and after having Y results, my gut seems to tell me to do Z, but given that you’ve experienced these situations before or have likely seen these situations unfold, am I directionally accurate?”
In closing
There’s a lot of this hustle porn in the Bay Area. Loud claims of not taking any vacations or sleeping only three hours per night. Moreover media perpetuates and lionizes this way of living.
It’s not true. Science shows we do much better with eight hours of sleep. It shows that every so often, we need to take time to unwind, so that we can come back to be more efficient and inspired than before. You can clock in the hours, but that doesn’t mean you are producing quality in a one-to-one capacity.
And I worry that like the founder that took his vacation for the first time, then overcorrected, we live in a society where we’ve forgotten that we’re human. That we need breaks. That we need sleep. And that we can’t do most things alone, including building ambitious ideas and maturing as professionals.
#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.
Jeff is a partner at Renaissance Venture Capital an innovative venture capital fund of funds. Jeff’s diverse background in venture capital and technology and his experience working in various start-up ventures uniquely position him to advise startups. In addition, Jeff is quite active in the Michigan start-up community, volunteering his time to mentor young entrepreneurs, judge pitch competitions, and guest lecture student classes and organizations. Through Jeff’s work on the Fund, his volunteer efforts, and his role as the chair of the Michigan Venture Capital Association’s board of directors, his passion for fostering a productive environment for venture capital investment in the State of Michigan is evident.
Martin Tobias is the Managing Partner and Founder of Incisive Ventures, an early-stage venture capital firm focused on investing in the first institutional round of technology companies that reduce friction at scale.
Martin was previously at Accenture and Microsoft and is a former Venture Partner at Ignition Partners. Martin is a 3X venture-funded CEO rising over $500M as CEO with two IPOs who has also invested in hundreds of companies and is a limited partner in over a dozen VC funds. Martin was an early investor in Google, Docusign, OpenSea, and over a dozen Unicorns.
Martin is the father of 3 daughters, a cyclist, surfer, poker player, and life hacker. Martin tinkers with motorcycles on the weekends. He writes about Venture Capital on Incisive Ventures blog and Twitter.
[00:00] Introducing Jeff Rinvelt and Martin Tobias [04:14] What was Jeff’s pitch to their LPs for Renaissance Capital? [06:30] Why did Jeff pivot from being a founder to an LP? [08:10] Renaissance Capital’s portfolio construction model [13:00] Jeff’s involvement in non-profits [15:56] How did Martin become an angel investor? [18:03] The big lesson from being an LP in SV Angel’s Fund I and II [20:10] Why is Martin starting a fund now? [26:07] A lesson on variable check sizes [28:53] What is Martin’s value add to founders? [33:29] What stood out about Martin’s deck and email when it arrived in Jeff’s inbox? [35:43] The 2 biggest worries Martin had in sharing his deck with Jeff [36:47] What does Jeff think about generalists? [40:49] What held Jeff back from making an investment in Incisive Ventures? [42:37] What kinds of conversations does Martin usually have with LPs? [47:05] One of the greatest professional lessons Jeff picked up as a manager [49:07] Martin’s greatest lesson from his days as a CEO [51:57] Thank you to Alchemist Accelerator for sponsoring! [54:33] Like, comment and share if you enjoyed the episode
“One of the things a lot of investors don’t do is go back and be honest about where they got fucking lucky and where they had a thesis that they could potentially replicate in future investments.”
In the process of catching up with a number of fund managers this week, I was reminded of two things:
That I still have an outstanding blogpost on intuition and discipline sitting on my desk, having gone through more revisions than I would like
That Fund I’s mostly start by drawing trendlines in your previous portfolio’s winners.
Now it’s not my job to call anyone out, but many of those I caught up with this week, told me in confidence (no longer in confidence now that I’m writing about it) that their best investments were simply due to being in the right place at the right time. That they were lucky. Others invested often off-thesis to accommodate for a brilliant founder that looked and sounded like nothing they had seen before. Then retroactively, went back to LPs in a subsequent fundraise armed with the knowledge to account for their previous outlier.
Chris Paik once wrote, ““Invest in companies that can’t be described in a single sentence.”
Invest in companies that can’t be described in a single sentence
Josh Wolfe said last year, “We believe before others understand.” And sometimes the investor themselves may not fully grasp what makes someone special other than that person is special.
Other times the company in which you initially bet on may not look like the company that earns you the most capital. As Mike Maples Jr. once said, “90% of our exit profits have come from pivots.
Of course, many LPs don’t want to hear that. They want to hear that you know exactly what you’re doing. That you can predict the future. But you can’t. In many ways, VCs invest in what stays the same. Not what changes. Human nature. Great hires. Network effects. Talent pools. Intellectual curiosity. Rigor. It’s a long list.
An amazing VC once told me. The job of a VC is to:
Have a wide enough aperture so enough light can come in
But have a fast enough trigger finger to catch the light, the reflections, the shadows just at the right time so that you get a good enough shot.
The rest is all done in the editing room, where you massage the photo with your expertise and experience to help it stand out.
I love that line. But simply put, the job of a VC is to:
Cast a wide enough net so that you can see as many great companies as you can,
Have the ability and awareness to know a great company when you see it.
After all, as an investor, you don’t have to invest in every great company, but every company you invest in must be great. Big anti-portfolios don’t mean much in this world if you can still get great returns.
All that to say, the job of an angel is to increase the surface area for luck to stick. And once enough do, a thesis blossoms.
A thesis, at the end of the day, is retroactive. And the best thing a fund manager can do is that the thesis the fund ends on is as close as possible to the initial. As LPs, it is our job to bet on the future of the thesis and the discipline of the fund manager. Both are equally as important. If things do change, a fund manager must preemptively communicate strategy drift and do so in the best interest of their investors.
It’s not ideal in many cases. For individual LPs and smaller family offices, strategy drift matters less. For large institutional LPs, it matters more. Because the latter don’t want you to be investing in the same underlying asset as other funds they’re invested into are.
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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.
