Tag: superclusters

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Talent Networks are your Greatest Asset | Adam Marchick | Superclusters | S4E9

adam marchick

“When investing in funds, you are investing in a blind pool of human potential.” – Adam Marchick

Over the past twenty years, Adam Marchick has had unique experiences as a founder, general partner (GP), and limited partner (LP). Most recently, Adam managed the venture capital portfolio at Emory’s endowment, a $2 billion portfolio within the $10 billion endowment. Prior to Emory, Adam spent ten years building two companies, the most recent being Alpine.AI, which was acquired by Headspace. Simultaneously, Adam was a Sequoia Scout and built an angel portfolio of over 25 companies. Adam was a direct investor at Menlo Ventures and Bain Capital Ventures, sourcing and supporting companies including Carbonite (IPO), Rent The Runway (IPO), Rapid7 (IPO), Archer (M&A), and AeroScout (M&A). He started his career in engineering and product roles at Facebook, Oracle, and startups.

You can find Adam on his socials here:
X / Twitter: https://x.com/adammStanford
LinkedIn: https://www.linkedin.com/in/adammarchick/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

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

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[03:14] Who is Kathy Ku?
[06:20] Lesson from Sheryl Sandberg
[06:39] Lesson from Justin Osofsky
[07:46] How Facebook became the proving grounds for Adam
[09:26] The cultural pillars of great organizations
[10:40] When to push forward and when to slow down
[12:39] Adam’s first investment: Dell
[14:20] What did Adam do on Day 1 when he first became an LP
[17:00] Emory’s co-investment criteria
[20:02] Private equity co-invests vs venture co-invests
[21:15] Teaser into Akkadian’s strategy
[23:03] Underwriting blind pools of human potential
[29:03] Why does Adam look at 10 antiportfolio companies when doing diligence?
[32:11] What excites and scares Adam about VC
[35:36] Engineering serendipity
[37:52] Where is voice technology going?
[39:45] How does Adam think about maintaining relationships?
[43:20] Thank you to Alchemist Accelerator for sponsoring!
[44:20] If you enjoyed this season finale, it would mean a lot if you could share it with 1 other person who you think would love it!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“What’s so freeing is when you can bring your personality to work. It’s so much less cognitive load when you can be yourself.” – Sheryl Sandberg’s advice to Adam Marchick

“Take your work seriously, not yourself.” – Adam Marchick

“Be really transparent, and even document and share your co-investment criteria.” – Mike Dauber, Sunil Dhaliwal’s advice to Adam Marchick

“For an endowment doing co-invests, you should never squint.” – Adam Marchick

“When investing in funds, you are investing in a blind pool of human potential.” – Adam Marchick

Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Stress and Ambition

stress, founder stress

“The thing about working with self-motivated people and driven people, on their worst day, they are pushing themselves very hard and your job is to reduce the stress in that conversation.”

It’s something Nakul Mandan from Audacious said in a Superclusters episode earlier in Season 4. And a line that’s been gnawing at me for the past few weeks. Particularly, “your job is to reduce the stress in that conversation.” So it got me thinking… Are the entrepreneurs I back stressed (enough)?

I know what you’re thinking. But before you come at me with pitchforks and torches, here me out. If you get to the end of this essay and still feel as strongly, feel free to take a swing at me.

First off, let me define some terms in the above question. An “entrepreneur” is someone who starts something that doesn’t exist in the world already. To me, that is a startup founder, a local restaurant, an emerging fund manager, and so on. I use this term pretty liberally. “Enough” is in moderation. A balance of feeling the pressure and urgency, but not enough to make one go insane. By definition, entrepreneurs — people who dare challenge the world and create something that hasn’t existed before — are ambitious. And ambitious, action-oriented doers are, to Nakul’s point, often hard on themselves. So everything in moderation. As a friend once told me, if you’re doing anything ambitious, a third of your days will be epic. A third will be okay. And a third will absolutely suck. As long as your days feel like that proportionally, you’re on the right track.

So… are the entrepreneurs I back stressed (enough)?

Let’s start with no. Are they the underdog still, pre-product-market fit, stagnating, losing market share, and/or in a crisis?

If not, carry on. It’s okay to not be stressed all the time. In fact, it’s probably not helpful to be stressed all the time.

If so — that they are the underdogs, stagnating or in a crisis — AND they’re not feeling stressed, I do wonder from time to time. And I’d be lying if some part of me didn’t feel buyer’s remorse. Because that means one of three things:

  1. They’ve lost their ability to care. About the product. The market. The team. Or simply, their own ambition. That’s the worst.
  2. Conversely, they don’t feel comfortable enough to be vulnerable with me. And that, in part, not to sugarcoat things, is because of me.
  3. They never cared enough or were ambitious enough in the first place. And that’s something I have to take back to the drawing board so that I learn the next time around.

Nevertheless, regardless of which of the three, it warrants a conversation. A difficult one. One where I try to understand their current motivations, what’s changed. If their motivations still hold true, then I, in Danny Meyer’s words, add “constant, gentle pressure.” For those curious, Chapter 9 of his book. Nevertheless, my job is to give them the activation energy to hopefully get them back on track.

If things change, great. I eventually go back to the first question. Are the entrepreneurs stressed? If not, then I let them on a few things:

  1. I’ll spend less time time with them to prioritize the rest of my portfolio.
  2. If they have any of the money left, they can keep the money. FYI, if it wasn’t my personal angel money, but someone else’s capital (of which I’m a fiduciary), depending on how much they have left, it may lead to a different conclusion. But in general, I view it as a write-off.
  3. Wish them the best of luck in their next chapter.
  4. If they feel the fire burning again (for good reason), they should let me know. And I’m happy to have another conversation.

Now… what happens if the entrepreneurs are stressed. Then I try to figure out if it’s anxiety or stress. Let me define.

Anxiety is caused by things you cannot control. For instance, the market. Other people you cannot control. Or black swan events. Stress, on the other hand, is caused by things you can control. Your own mistakes. Mistakes made by people you hired. Volume of work that needs to be done. Procrastination. Mistakes that can be actively mitigated. For instance, missing the deadline for a quarterly report. Missing payroll due to insufficient funds. Layoffs. Bad performance. Media, publicity, and perception. Something Danny Meyer calls, “writing a great last chapter.” As Danny Meyer puts it, “the worst mistake is not to figure out some way to end up in a better place after having made a mistake.”

If it’s anxiety, my role is to calm the founders. Be the mental support they need. Help them see the bigger picture. Build contingency plans.

If it’s stress, my role is to help them build an action plan. Help get key decision-makers and doers in the same room. Get the founders in front of advisors who can help them think through key considerations and check their blind side (assuming it’s not me. Most of the time it isn’t.). Of course, you need to timebox “thinking” time. There’s a great saying. “There are no right choices; only choices we make right.”

And finally, help the entrepreneurs execute the plan. Sometimes, that requires getting my hands dirty. And that’s what I’m here for. To increase the metabolism of the organization. Or at the very minimum, leadership. Stress is often caused by indigestion of tasks that need to be done.

Alas, the job of an investor, given we’re not in the driver’s seat, that we don’t always have complete information, is to reduce the stress of the founder when we have that conversation. More often than not, ambitious founders are hard enough on themselves.

Photo by Francisco Moreno on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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The Dao of Investing in VC Funds | Jay Rongjie Wang | Superclusters | S4E8

jay rongjie wang, jay wang

“The first layer is setting up your own strategy. The second layer is portfolio construction. How do you do your portfolio construction based on the strategy you set out to do? And then manager selection comes last. Within the portfolio construction target, how do you pick managers that fit that ‘mandate?’” – Jay Rongjie Wang

Jay Rongjie Wang is the founding Chief Investment Officer of Primitiva Global, where she runs a family-backed Multi-asset Strategy. She also works extensively with emerging VC managers, and sits on the Selection Committee of Bridge Funding Global.

Jay’s background uniquely combines software engineering (at the world’s largest fintech platform) and institutional investing (at top funds including Fidelity and Sequoia), as well as general management (3x executive in tech startups). Jay has lived in 5 different countries across 9 major cities, giving her a global perspective.

Jay obtained her B.A and M.Sci in Physics from Cambridge University and M.B.A from INSEAD. In 2023 she was listed as an Entrepreneurial Pioneer Under 35 by Hurun Wealth.

You can find Jay on her socials here:
LinkedIn: https://www.linkedin.com/in/wangrongjie/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

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

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[04:12] Life atop a Daoist mountain
[10:27] Qigong and tai chi
[12:21] What is dao?
[19:18] The weapon that Jay specializes in
[21:08] Why did Jay leave the Daoist temple?
[24:24] The motivations behind Jay’s career shifts
[30:05] The difference between underwriting a VC fund and a fund-of-funds
[33:08] How does Jay get to know a fund manager?
[36:31] The 3-layer process for building an allocation strategy
[38:01] Picking the initial asset class
[45:29] How much Jay allocates to venture
[48:43] What does “reasonably diversified” mean?
[49:15] Figuring out the portfolio construction model
[54:59] At what point do you stop maximizing for portfolio returns?
[56:57] How Jay calculates a 200X target return on direct investments
[57:53] Data on returns as a function of portfolio size
[1:01:42] The biggest challenge once you’ve picked your strategy
[1:04:40] Selecting the right fund managers
[1:14:17] The difference between guqin and piano
[1:18:42] Intuition versus discipline
[1:24:08] Post-credit scene
[1:27:47] Thank you to Alchemist Accelerator for sponsoring!
[1:28:48] If you enjoyed this episode, it would mean a lot if you could share it with one friend who’d also get a kick out of this!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“If you have the deal flow and you have the energy and have the skills to construct your own portfolio, then funds-of-funds obviously are more complimentary than necessary.” – Jay Rongjie Wang

“The first layer is setting up your own strategy. The second layer is portfolio construction. How do you do your portfolio construction based on the strategy you set out to do? And then manager selection comes last. Within the portfolio construction target, how do you pick managers that fit that ‘mandate?’” – Jay Rongjie Wang

“The later the stage you go, […] capital becomes more anonymous, and […] the more you converge to public market returns.” – Jay Rongjie Wang

“I only put the regenerative part of a wealth pool into venture. […] That number – how much money you are putting into venture capital per year largely dictates which game you’re playing.” – Jay Rongjie Wang

“Your average median of a fund-of-funds is higher than a venture capital fund, and the variance, the standard deviation, is lower. So it is possible for a VC fund to have 40%, 50%, or higher IRR. It’s much, much less likely for a fund-of-funds to achieve that, but also the likelihood of losing money is much, much lower for a fund-of-funds.” – Jay Rongjie Wang

“The reason why we diversify is to improve return per unit of risk taken.” – Jay Rongjie Wang

“Bear in mind, every fund that you add to your portfolio, you’re reducing your upside as well. And that is something a lot of people don’t keep in mind.” – Jay Rongjie Wang

“Once you have a strategy, the hardest thing for me is to stick to that strategy because you just meet those amazing managers, amazing funds all the time.” – Jay Rongjie Wang

Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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2024 Year in Review

2024

Undeniably, one of the most insightful books I read this year has been Setting the Table by Danny Meyer. Someone I’ve been a long time fan of. If you’re no stranger to this humble blog, you’ll notice his cameos throughout previous pieces I’ve written. I am also remarkably late to the game. The book came out in 2008. And to this day, is as timeless as it was over a decade and a half back. Thank you, Rishi and Arpan for gifting me a copy.

That book has led to blogposts like this and this. To finally cold email him (yay, he replied! Danny, if you’re reading this, thank you for making my day, hell, and a good portion of my year!). New ways on how I support GPs. More intentional ways to hire. Inspired me to take on two more writing projects and a new podcast series in 2025 (don’t worry, Superclusters isn’t going anywhere, but expanding). And I’m sure it’s only the tip of the iceberg.

And as one last fanboy moment for Danny, there’s a line he has on page 220. A line the late and great Stanley Marcus of Neiman Marcus fame once told him. “The road to success is paved with mistakes well handled.” A line I haven’t stopped thinking about since I read it.

There’s a saying in the entrepreneurial world that it takes between 10 and 15 miracles for a startup to succeed. Each miracle is a trial by fire. A right of passage. A test of character. I’ve always believed that the job of an investor is not to be helpful all the time, or share celebrations on social media, or facilitate just connections. Despite having done many of the above myself, those are all, in my mind, table stakes. Rather, the job of an investor is to be there for at least one of those critical points of failure and to be extremely valuable. To help an entrepreneur handle their mistake well, to borrow Stanley Marcus’ line.

In another episode earlier this year, Jaclyn Freeman Hester shared one of the best soundbites ever said on Superclusters.

“If I hire someone, I don’t really want to hire right out of school. I want to hire someone with a little bit of professional experience. And I want someone who’s been yelled at.”

While it makes for a great clickbait title, the lesson extends further. One only gets yelled at by making a mistake. One learns not by making mistakes, but the public embarrassment of that mistake. If someone learn of the negative aftermath of a mistake, one won’t get the feedback mechanism necessary to grow from that experience. To analogize it to elementary math, if my afterschool teacher didn’t slap me with a ruler every time I got 9+8 wrong, it would have taken me a lot longer to learn that lesson. If no one catches you accidentally making an inconsistent calculation on the balance sheet, you may never learn from that mistake.

All that to say, someone who’s been yelled at made the mistake, received the feedback mechanism to improve, and learned to handle it better next time.

So, in my long preamble, and not to bury the lead, 2025 will be the year of big mistakes. Maybe. Hopefully, well handled. 2024 was the year of laying the groundwork. A lot of which were made explicit via this blog. I’m not saying I haven’t made any mistakes. Yes, I’ve left the toilet seat up. I should have asked for more concrete examples during certain podcast interviews. Almost forgot to file my annual tax extension. Forgot to mention a sponsor at an event (luckily my co-host had my back). Made the rookie intern mistake at work. Twice. Different things, but nevertheless twice. But those mistakes will be small compared to the ones I’ll make next year.

Nevertheless, here are the hallmarks of 2024!

2024’s Most Popular

  1. Timeless Content for the Weary Investor — Our society spends quite a bit of time focusing on results, outputs, and success. All of which are lagging indicators of the blood, sweat and tears people put in. So instead, earlier this year, I thought it’d be interesting to compile a list of content that some of the most successful investors (LPs and VCs alike) consume. What goes in their information diet? What are the inputs? Some results may surprise!
  2. The Science of Selling – Early DPI Benchmarks — With the economy outside of AI hitting a standstill and hitting record low numbers in terms of liquidity, I’ve found a constant stream of new readers via this blogpost. Many of which I imagine to be fiduciaries and capital allocators. I do hope that one day there is more content on selling and exiting positions in a liquidity-constrained environment though. Although, I may just put out a blogpost on secondaries in the new year, inspired by a number of conversations I’ve had this year already.
  3. How to Break into VC in 2024 — It may be obvious by now that there’s no one set path to get into venture. I’ve worked with colleagues who ranged in majors from history to food science to economics to computer engineering. Additionally, those who have been a founder, a banker, a consultant, a product manager, an artist, an athlete, an actress, a public relations specialist, and the list goes on. But if you were looking for the closest thing to a silver bullet, maybe this essay would be a great place to start.
  4. Five Tactical Lessons After Hosting 100+ Fireside Chats — Surprisingly, this has stayed as a perennial blogpost. I realize even now looking back, how much I’ve learned since, but nevertheless a good starting point for those who want to interview others.
  5. The Non-Obvious Emerging LP Playbook — The first blogpost I wrote on the topic of being an LP. Still my longest one to date. Since then, I’ve learned an LP comes by many a name. Capital allocator. Asset owner. And more specifically, the difference between multi-family offices and single family offices. Family businesses. Access versus asset class LPs. And more.
  6. Non-obvious Hiring Questions I’ve Fallen in Love with — I’ve been lucky enough to spend quite a bit of time around talent magnets this year. And in the surplus of applications, they’re forced to quickly differentiate signal from noise. And these are some of the questions I’ve heard them use. And well, have also used myself when hiring these past two years.

All-Time Most Popular

This list hasn’t changed much this year. One can say I have yet to outdo myself. Which may be true. I admittedly, also haven’t shared these blogposts much on Twitter. In fact, over 70% of this year’s posts never touched LinkedIn or Twitter. When in the past, I invested a bit more time in expanding to new audiences. For any essay that did go a little viral this year, it was because of you, my readers. So thank you!

  1. The Science of Selling – Early DPI Benchmarks
  2. The Non-Obvious Emerging LP Playbook
  3. 10 Letters of Thanks to 10 People who Changed my Life
  4. 99 Pieces of Unsolicited, (Possibly) Ungooglable Startup Advice
  5. Five Tactical Lessons After Hosting 100+ Fireside Chats

2024’s Most Memorable

This year was the year of LP content. Also, the year where I stopped using as many headers in my blogposts. Interestingly enough. It wasn’t any conscious decision, but at some point I just slowed my pace down. Excluding this blogpost and a few others. I wonder if I’ll use less next year.

So, to share them chronologically, here are some of my personal favorites:

  1. The Proliferation of LP Podcasts — I wrote this back in March at the beginning of Season 2 of Superclusters, and I still stand by this today. At the beginning of every content adoption curve, the question is: WHERE can I find this content? But as the content becomes fully adopted, in this case around being a capital allocator, the question will become: WHO do I want to / choose to listen to?
  2. From Demo Day to First Meeting: My Demo Day Checklist — There are times we have to make fast decisions when faced with a volume of options. Going to Demo Days and choosing who to follow up with is just one of such cases. I’m happy this year I’ve codified that practice when going to VC accelerator Demo Days. And I imagine it’s only a matter of time, before we’re faced with the volume of YC Demo Days, but for funds.
  3. The Power Law of Questions — As I’ve grown as an LP, I find myself being a lot more intentional with questions I ask fund managers. This blogpost serves as a record of questions I found myself asking quite often this year.
  4. Emerging Manager Products versus Features — In the startup world, the concept of products and features have become quite prevalent. One is a standalone business. The other is more of a subclause than a clause, incapable of being a product offering in of and itself. As I spend time thinking about an asset class, where the simplest, and likely, most facetious way of describing it, is we sell money, this blogpost serves as “value-adds” that deserve their own fund versus ones that should be built within a larger shop.
  5. Shoe Shopping — One of my posts where the title almost has nothing to do with the blogpost itself. But an observation of what differentiates VC funds beyond what they pitch the public.
  6. ! > ? > , > . — Another one of those blogposts where it’s hard to guess what it’s about from the title itself. Likely my worst essay title to date. Or best? A product of my gripe that most people don’t know how to ask for feedback. And good news! Some readers of this blog have reached out since asking for more directed feedback.
  7. Three E’s of Fund Discipline — A lot of GPs focus on entry discipline. A lot of LPs in 2024 focus on exit discipline. Both are equally as important, but both often forget about the third kind of fund discipline. Executional discipline. I give examples of each in this essay, which hopefully can help as a reminder for what is needed out of a great fund manager. A separate job description from just being a good investor. In fact, you can be the latter without ever needing to raise or manage your own fund, and still make the Midas List.

With that, 2024 comes to a close. See you all in the new year!

Photo by Eyestetix Studio on Unsplash

If you want to check out the past few years, you’ll find them encased in amber here:

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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The Pension Fund Perspective on Buyout Strategies | Charissa Lai | Superclusters | S4E7

charissa lai

“Diversification is your one free lunch.” – Charissa Lai

Charissa has experience in Investing, Strategy and Relationship Management across Private Equity and Investment Banking. She’s gained global perspective from having worked and lived in South Africa, England, Canada, China and the USA. Her expertise includes selecting fund managers and co-investments, developing alternatives strategies and building relationships. She’s a recipient of 2016 Women in Capital Markets Emerging Leaders Award with CPPIB. She serves as a Board Director at the Toronto Humane Society.

Charissa holds an MBA from Northwestern University and an HBSc. from University of Toronto.

You can find Charissa on her socials here:
LinkedIn: https://www.linkedin.com/in/charissa-lai/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

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

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[03:51] When Charissa first met the Dalai Lama
[07:08] Charissa’s early career
[08:02] Charissa’s rejection from her dream job
[11:01] Why did Charissa switch from computer science to investment banking
[12:16] How Charissa became an LP
[14:24] Pinch-me moments for Charissa
[16:04] Building the investment process for a $70B pension fund
[18:37] The duration of partner roles is quite telling
[20:58] Assessing buyout track records
[25:01] Buyout loss ratios
[26:36] When buyouts and VC are getting more and more similar
[28:19] The value of vintage diversification
[32:51] How Charissa thinks about personal portfolio allocation
[40:22] The one VC fund that Charissa invested in
[42:53] Charissa’s beer can chicken
[47:13] What memory does Charissa cherish?
[49:26] Post-credit scene
[54:38] Thank you Alchemist Accelerator for sponsoring!
[55:39] If you enjoyed this episode, a like, comment, or share would mean the world!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“Diversification is your one free lunch.” – Charissa Lai

“The four pillars of [assessing GPs]: strategy, team, track record, and alignment.” – Charissa Lai

Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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The 4 P’s to Evaluate GPs | Charlotte Zhang | Superclusters | S4E6

charlotte zhang

“Executional excellence can get you to being great at something – let’s call that top quartile – but it really is passion that distinguishes the best from great – top decile.” – Charlotte Zhang

As the director of investments, Charlotte Zhang oversees the selection of external investment managers at Inatai Foundation, conducts portfolio research, and helps to institutionalize processes, tools, and resources. Experienced in impact investing, she previously served as a senior associate at ICONIQ Capital and, before that, Medley Partners. Investing on behalf of foundations affiliated with family offices, her investments supported a variety of nonprofit work, from early childhood education to autism research. Charlotte was a founding partner of Seed Consulting Group, a California-based nonprofit that provides pro bono strategy consulting to environmental and public health organizations, and currently serves on the Women’s Association of Venture and Equity’s west coast steering committee and as a Project Pinklight panelist for Private Equity Women Investor Network. She is also on the advisory boards of MoDa Partners, a family office whose mission is to advance the economic and educational equity of women and girls, and 8090 Partners, a multifamily office consisting of families and entrepreneurs across diverse industries that is currently deploying an impact investment fund.

Charlotte earned a BS with honors in business administration from the University of California, Berkley. When not working, you can find her globetrotting (18 countries and counting), writing a Yelp review about the best bite in town, or cuddling up with a book and her two adorable cats.

You can find Charlotte on her LinkedIn here:
LinkedIn: https://www.linkedin.com/in/charlotterzhang/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

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

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[02:56] Charlotte’s humble beginnings
[07:02] Lessons as a pianist
[10:23] Lessons from swimming that piano didn’t teach
[14:52] How Charlotte became an LP
[17:44] Where are emerging managers looking for deal flow these days?
[21:23] Reasons as to why Inatai may pass on a fund
[24:35] The 4 P’s to Evaluate GPs
[29:26] How small is too small of a track record?
[34:42] How do you build a multi-billion dollar portfolio from scratch
[39:43] The minimum viable back office for an LP
[42:03] Underrated Bay Area restaurants
[47:01] Thank you to Alchemist Accelerator for sponsoring!
[48:02] If you learned something from this episode, it would mean a lot if you could share it with ONE friend!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“Executional excellence can get you to being great at something – let’s call that top quartile – but it really is passion that distinguishes the best from great – top decile.” – Charlotte Zhang

“If you have enough capital chasing after an opportunity, alpha is just going to be degraded.” – Charlotte Zhang

Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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The Holiday Special | Nakul Mandan and Ben Choi | Superclusters | S4PSE1

ben choi, nakul mandan

“VC is more about the ground game than the air game.” – Nakul Mandan

“Entrepreneurs think it’s going to be like the Michael Keaton version, and the good ones, they actually have to work through the Christopher Nolan version of Batman.” – Ben Choi

Nakul Mandan is the founder of Audacious Ventures. Audacious is a seed stage venture firm managing ~$250M. Audacious’ foundational belief is that ultimately startup success comes down to two key ingredients: Large markets and A+ teams. Accordingly, the Audacious team focuses on two jobs: 1/ Invest in force of nature founders; 2/ Help them recruit an A+ team. Then they get out of the way. Prior to founding Audacious, Nakul was a GP at Lightspeed.

Some of the companies Nakul has backed over the last decade include: Gainsight, People.ai, WorkOS, Multiverse, Marketo, 6Sense, BuildingConnected, Vartana, Tezi and Maxima, amongst others.

You can find Nakul on his socials here:
X / Twitter: https://x.com/nakul
LinkedIn: https://www.linkedin.com/in/nakulmandan/
Personal Website: https://www.nakulmandan.com/

Ben Choi manages over $3B investments with many of the world’s premier venture capital firms as well as directly in early stage startups. He brings to Next Legacy a distinguished track record spanning over two decades founding and investing in early-stage technology businesses. Ben’s love for technology products formed the basis for his successful venture track record, including early stage 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 engaged member of the Society of Kauffman Fellows and has been named to the Board of Directors for the San Francisco Chinese Culture Center and Children’s Health Council. 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 Palo Alto with his wife, Lydia, and three very active sons.

You can find Ben on his socials here:
X / Twitter: https://x.com/benjichoi
LinkedIn: https://www.linkedin.com/in/bchoi/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

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

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[04:14] Why is Nakul fascinated by Batman?
[06:41] Does entrepreneurial motivation often come from inspiration or frustration?
[10:33] Nakul’s childhood and early upbringing
[14:37] How Nakul grew from introvert to extrovert
[16:19] Did Ben see the ambition in Nakul from the day they first met?
[18:19] How did Ben’s parents’ work in Chinatown influence Ben as a teenager?
[22:47] How did Ben and Nakul meet?
[28:50] Would Nakul have raised in 2020 if he knew how hard it would be?
[33:49] Why did Next Legacy not invest in Fund I, but in Fund II?
[37:49] How did Nakul react to the pass on Fund I?
[39:56] The kinds of people at Next Legacy’s dinners
[43:49] Why Audacious kept a low profile in 2021
[49:01] Why Audacious deployed Fund I over 4 years, instead of 3
[51:46] Balancing the paradox of one of Audacious’ cultural values
[55:14] The difference between pitching individuals and institutions
[1:00:42] What is it like to be married to an interior designer?
[1:02:40] Nakul’s favorite coffee shop, bar, and restaurant
[1:05:56] What makes a sock special to Ben?
[1:07:17] Why does Ben still like venture?
[1:08:10] Why does Nakul still like venture?
[1:11:36] Thank you to Alchemist Accelerator for sponsoring!
[1:12:37] If you enjoyed this holiday episode, and want more like this, do let me know!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“The risk is slow failure. And actually that’s the worst kind of failure even for entrepreneurs that we back. They’re all talented people. Some ideas work; some don’t. It’s when they end up spending seven, eight years and then it doesn’t work. Then it takes out seven, eight years of their life.” – Nakul Mandan

“Entrepreneurs think it’s going to be like the Michael Keaton version, and the good ones, they actually have to work through the Christopher Nolan version of Batman.” – Ben Choi

“If you don’t wear ambition on your sleeve, how do people know you’re ambitious?” – Nakul Mandan

“VC is more about the ground game than the air game.” – Nakul Mandan

“Always remember there’s a human on the other side of every conversation.” – Nakul Mandan

“The thing about working with self-motivated people and driven people, on their worst day, they are pushing themselves very hard and your job is to reduce the stress in that conversation.” – Nakul Mandan

“If you have an understated personality, wear something really bright.” – Ben Choi

Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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LPs Should Get Paid More | Ashby Monk | Superclusters | S4E5

ashby monk

“Innovation everywhere, but especially in the land of pensions, endowments, and foundations, is a function of courage and crisis.” – Ashby Monk

Dr. Ashby Monk is currently a Senior Research Engineer, School of Engineering at Stanford University and holds the position of Executive Director of the Stanford Research Initiative on Long-Term Investing.

Ashby has more than 20 years of experience studying and advising investment organizations. He has authored multiple books and published 100s of research papers on institutional investing. His latest book, The Technologized Investor, won the 2021 Silver Medal from the Axiom Business Book Awards in the Business Technology category.

Outside of academia, Ashby has co-founded several companies that help investors make better investment decisions, including Real Capital Innovation (acquired by Addepar), FutureProof, GrowthsphereAI, Long Game Savings (acquired by Truist), NetPurpose, D.A.T.A., SheltonAI, and ThirdAct. He is co-founder and managing partner of KDX, a venture capital firm focused on investment technologies.

He is a member of the CFA Institute’s Future of Finance Advisory Council and was named by CIO Magazine as one of the most influential academics in the institutional investing world. He received his Doctorate in Economic Geography at the University of Oxford, holds a Master’s in International Economics from the Université de Paris I – Pantheon Sorbonne, and has a Bachelor’s in Economics from Princeton University.

You can find Ashby on his socials here:
X / Twitter: https://x.com/sovereignfund
LinkedIn: https://www.linkedin.com/in/ashby-monk-208a479/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

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

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[03:44] “I don’t know what to do with my hands”
[04:44] The origin story of Ashby’s LinkedIn skills
[09:04] Ashby’s obsession with the worst title out there
[12:54] Titles at institutional investment firms
[17:05] Building the right incentives for institutional LPs
[20:54] The decision to buy or build for pension funds
[22:36] What’s a smart way to think about the difference of gross and net?
[23:17] When are management fees not justified?
[26:06] When managers charge fees on SPVs
[28:12] When are GPs still grateful for your LP capital?
[29:40] Challenges with the endowment model in PE and VC
[31:14] Why LPs misrepresent what budget fees come out of
[35:28] Compensation structure of a pension fund
[37:59] CalPERS compensation structure
[39:19] The highest paid employees in government jobs
[42:39] Traits of an incredibly talented investor
[47:06] Hire hard, manage light
[51:07] Ashby’s journey into the LP space
[56:05] Why should a young professional work at a pension
[1:00:24] Who outside of investments influences the way Ashby thinks about investing?
[1:02:28] What is organic finance?
[1:07:08] The post-credit scene
[1:12:32] Thank you to Alchemist Accelerator for sponsoring!
[1:13:33] If you enjoyed the episode, would love if you shared it with one friend who would enjoyed it as well!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“The fastest way to become a billionaire in America today is to set up an alternative investment firm and manage pension capital. Literally. That’s the fastest path. Faster than starting a tech company.” – Ashby Monk

“Many pension plans, especially in America, put blinders on. ‘Don’t tell me what I’m paying my external managers. I really want to focus and make sure we’re not overpaying our internal people.’ And so then it becomes, you can’t ignore the external fees because the internal costs and external fees are related. If you pay great people internally, you can push back on the external fees. If you don’t pay great people internally, then you’re a price taker.” – Ashby Monk

“You need to realize that when the managers tell you that it’s only the net returns that matter. They’re really hoping you’ll just accept that as a logic that’s sound. What they’re hoping you don’t question them on is the difference between your gross return and your net return is an investment in their organization. And that is a capability that will compound in its value over time. And then they will wield that back against you and extract more fees from you, which is why the alternative investment industry in the world today is where most of the profits in the investment industry are captured and captured by GPs.” – Ashby Monk

“[LPs] want to solve the problem for their sponsor by reducing the cost of a promise.” – Ashby Monk

“Innovation everywhere, but especially in the land of pensions, endowments, and foundations, is a function of courage and crisis.” – Ashby Monk

“The highest people paid in state jobs are football coaches.” – Ashby Monk

“I often tell pensions you should pay people at the 49th percentile. So, just a bit less than average. So that the people going and working there also share the mission. They love the mission ‘cause that actually is, in my experience, the magic of the culture in these organizations that you don’t want to lose.” – Ashby Monk

“The job of an investor is to look at the same data that you and I are looking at, and be ready to make a different conclusion. That’s how you outperform.” – Ashby Monk

“Hire hard; manage light.” – Ashby Monk

“The way best practices are communicated in this industry is through role models. So, Yale model, Canadian model, Norway model… There are no schools of investing. […] And the way models emerge is you get an innovation that results in outperformance.” – Ashby Monk

“I do research projects on nothing.” – Ashby Monk on research into solutions that don’t exist in the world yet

“There are two types of innovation. There’s innovation as an invention. And there’s discovery. And a lot of what I do is discover and apply.” – Ashby Monk

Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Listening to the Heartbeat of the Market | David York | Superclusters | S4E4

david york

“Markets have a mind of their own.” – David York

David York’s thirty plus years of industry knowledge and networks uniquely equip him to be a liaison and international ambassador not only for Top Tier’s brand, but also the broader venture community. In 2000, David joined Phil Paul to lead the fund of funds team at Paul Capital, which spun out in 2011 to form Top Tier.

David has been active in the global venture capital community since the early 1990s. As a founder of Top Tier, he has led the development of the Firm for over twenty years and has been involved in every aspect of it. His involvement in the industry has led him to participate in numerous industry events and conferences, and also the NVCA, where he is an active board member. David led the fund of funds business at Paul Capital Partners, before spinning it out and founding Top Tier. Prior to Paul Capital, David spent seventeen years on Wall Street running various trading desks. In 1999, he was Managing Director at Chase H&Q, where he ran Equity Capital Markets liquidity, and from 1994 to 1999 he ran Venture Services for Hambrecht & Quist, a San Francisco-based, technology-focused investment bank acquired by Chase Bank.

You can find David on his socials here:
LinkedIn: https://www.linkedin.com/in/david-york-2407295/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

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

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[02:52] David York’s role models over the years
[07:06] Is the LP model broken?
[11:34] What David would like to see in private markets
[15:27] How did David raise $500M in the dotcom crash
[23:09] Breaking down when large LPs are ready to be pitched
[25:37] What does a thoughtful email look like?
[28:40] The liquidity needs of different kinds of LPs
[33:29] David’s favorite restaurant in Tokyo
[36:41] David’s secret starter dough recipe
[40:13] Secret post-credit scene
[40:46] Thank you to Alchemist Accelerator for sponsoring!
[41:47] If you learned something from this episode, I’d love it if you could share it with one other friend!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“Markets have a mind of their own.” – David York

“If you look at venture capital investments in general, partnership agreements are too short.” – David York

“Going to see accounts before budgets are set helps get your brand and your story in the mind of the budget setter. In the case of the US, budgets are set in January and July, depending on the fiscal year. In the case of Japan, budgets are set at the end of March, early April. To get into the budget for Tokyo, you gotta be working with the client in the fall to get them ready to do it for the next fiscal year. [For] Korea, the budgets are set in January, but they don’t really get executed on till the first of April. So there’s time in there where you can work on those things. The same thing is true with Europe. A lot of budgets are mid-year. So you develop some understanding of patterns. You need to give yourself, for better or worse if you’re raising money, two to three years of relationship-building with clients.” – David York

“To me, rejection is simply ‘not now,’ not a ‘no.’” – David York

DZ: “What do most GPs, or first-time LPs, fail to appreciate?”
DY: “The exit.”

Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Developing Taste as an LP

taste, donut, bite

Brian Chesky did a fireside chat recently where he talks about how he hired for roles at Airbnb, especially in the early days. To which, I highly recommend you checking the above link. Lots of nonobvious lessons worth noting. One thing especially stood out. Probably due to the recency bias of having a few friends text me who were thinking about investing in their first fund.

“Executives have more experience bullshitting you than you have experience detecting their bullshit. So it’s like an asymmetric game where you’re a white belt fighting a black belt and they’re just going to punch you in the face repeatedly.”

In a similar way, a lot of new LPs in venture have also yet to develop their taste for quality in the venture asset class. If you’ve never hired an executive, you have no idea what a great executive looks like. And if you’ve never invested in a fund, or seen a few, you have no idea what a great fund looks like. Most GPs, given the volume of LPs they pitch to, have more experience bullshitting you as an LP than you have experience detecting their bullshit.

And that’s okay. Everyone starts off this way. So the question then becomes how do you develop taste?

  1. Talk to as many as you can. Don’t overoptimize for quality. You have no idea what quality looks like, so don’t delude yourself that you do. Ask friends who they’ve talked to. Ask Twitter. And ask the GPs you talk to who are friends they respect who are also building a fund. Hell, try your luck at asking certain “influencers” in the space if they have recommendations. Realistically, if you raise your hand and say you’re an LP, GPs will flock to you. In 2024, deal flow, as measured by quantity, isn’t really hard for any LP out there.
  2. Prioritize references.

On the first point, as is the advice I give most first-time angel investors investing in startups, don’t invest in the first startup you see. Unless it’s for a reason outside of financial gain. To support a friend. To learn. For impact. To give back. All great reasons. But not if because your friend told you to.

Along the same thread, don’t invest in the first fund you see. Talk to at least 30-50 fund managers. Get a good understanding of what the average fund looks like. What is actually special about a GP versus what they say is special. Most of the time when someone claims that they are the special one, they usually aren’t. For instance, only [insert big name fund] invests with us. Or we are the only [insert industry or function] fund. Hell, if anyone gives you any sort of superlatives, they’re usually wrong. Only. Always. Best. Most. I’m sure there are more, but the rest are escaping me.

Secondly, prioritizes references over your initial judgment when interviewing and doing diligence. Dan Stolar from Colibri and I had a conversation recently about references, where the questions you ask are paramount. If you’re short on time, I’d recommend starting from the 25:50 mark.

In short, to existing LPs, ask:

  1. How did you get to conviction?
  2. Who else did you talk to that were comparable to this GP before you reached an investment decision?
  3. Is there anything you learned about the team after you made the investment?
  4. What kind of person do you think they should bring onboard either in the next fund or after they get to a close?
  5. Would it be possible to share your investment memo with me?
  6. What were some of the pushbacks or hesitations when this deal reached your investment committee?

To LPs more broadly:

  1. What are your primary motivations to be an LP in venture?
  2. How do you think about portfolio construction?
  3. Who are the GPs you’ve talked to that seem to stand above the rest? And why?

To co-investors/other GPs:

  1. How often do you share deals with this GP?
  2. How often do they share deals with you?
  3. Who are your top 3 emerging managers that you love seeing deals from and why?
  4. Is there an emerging manager you would hire to be a partner or GP at your firm if you could?
  5. How would you rate this GP on a scale of 1-10, with 10 being perfect?
    • What would get this GP to a 10?
  6. Did you or have you considered investing in their fund?
  7. What are some of this GP’s hobbies that I might not guess?
    • This shows you how well people know each other. You can also use this question for other reference archetypes.

To former colleagues and friends:

  1. If you were to hire someone under this GP, what traits or skillsets would you look to hire for?
  2. I hate surprises. Is there anything that could go wrong I should know now about this GP, so that I wouldn’t be surprised when it happens?
  3. Who is someone you would hire or work together again in a heartbeat?
    • Notice if they mention that GP. You don’t have to probe as to why they didn’t mention if they didn’t. But worth noticing. Also probably worth talking to that person they did mention to keep a strong talent network around you.

Obviously the above list isn’t all-inclusive. But nevertheless I imagine they’ll be good starting points. Also, I want to note that going deep is often more insightful than going wide.

Remember, almost everyone is incentivized to say good things about others. Or at least, there is little to no incentive to talk smack about anyone you know. So finding the best way to ask questions that unearth different perspectives and facets of a person is important.

Funnily enough and unintentionally, last week I wrote a similar post from the perspective of a GP, this one happened to be more for the LP.

Photo by Thomas Kelley on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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