Beezer Clarkson from Sapphire Partners joins David on El Pack to answer your questions on how to build a venture capital fund. We bring on four GPs at VC funds to ask four different questions.
Precursor Ventures’ Charles Hudson asks what is the one strongly held belief about emerging managers that she no longer believes is true.
NextView Ventures’ Stephanie Palmeri asks how much should an established firm evolve versus stick to their guns.
Humanrace Capital’s Suraj Mehta asks what the best way to build brand presence is.
Rackhouse Venture Capital’s Kevin Novak asks if you’ve deployed your capital faster than you expected, what’s the best path forward with the remaining capital you have left?
Beezer Clarkson leads Sapphire Partners‘ investments in venture funds domestically and internationally. Beezer began her career in financial services over 20 years ago at Morgan Stanley in its global infrastructure group. Since, she has held various direct and indirect venture investment roles, as well as operational roles in software business development at Hewlett Packard. Prior to joining Sapphire in 2012, Beezer managed the day-to-day operations of the Draper Fisher Jurvetson Global Network, which then had $7 billion under management across 16 venture funds worldwide.
In 2016, Beezer led the launch of OpenLP, an effort to help foster greater understanding in the entrepreneur-to-LP tech ecosystem. Beezer earned a bachelor’s in government from Wesleyan University, where she served on the board of trustees and currently serves as an advisor to the Wesleyan Endowment Investment Committee. She is currently serving on the board of the NVCA and holds an MBA from Harvard Business School.
[00:00] Intro [01:22] Where does Beezer’s advice come from? [04:03] Charles and Precursor Ventures [04:47] What’s something Beezer used to believe about seed stage venture that she no longer believes in [08:04] Why did Charles choose to bet on pre-seed companies? [10:21] What did LPs push back on when Charles was starting Precursor? [12:18] Definition of early stage investing today [14:38] Steph and NextView Ventures [18:13] When do you stick your knitting or move on from the past as an established firm? [30:48] Is venture investing in AI fundamentally different than investing in other types of companies? [32:52] Does competition for a deal mean you’ve already lost it? [36:09] Suraj and Humanrace Capital [36:54] How should emerging managers build their brand? [38:38] The audience most emerging managers don’t focus on but should [40:39] How much does visible brand presence matter? [43:47] Useful or not: Media exposure in the data room [45:40] Backstreet boys [46:37] Kevin and Rackhouse Venture Capital [47:28] What Kevin is best known for [48:03] Updated fund modelling when you’re ahead on your proposed deployment period [58:00] The typical questions Beezer gets on LPACs [1:03:22] Is venture broken? [1:06:41] David’s favorite Beezer moment from Season 1
“Whatever the evolution of venture is if you’re just following someone else, the odds of you doing as well as them is just harder and that is probably a truism about life.” — Beezer Clarkson
“If you’re going to get a 2X in venture over 20 years, frankly, as an LP, there are alternatives from a pure dollars in the ground perspective. But if you’re looking at trying to capture innovation, which AI is now one of the great innovations, where are you going to capture that if not playing in venture? So is venture broken is a question of who are you.” — Beezer Clarkson
“If you’re competing for the deal, you’ve already lost it.” — Beezer Clarkson
“I think the competition is more: Did I see it with enough time to build the conviction and build the relationship relative to the other people that might be coming in?” — Stephanie Palmeri
“Recycling is incredibly important, but incredibly hard to plan for, especially as early as you’re coming in, unless you’re seeing evidence of acqui-hires today and you know you’re going to have those dollars coming in. Obviously, really hard. So I would not bank your farm on that.” — Beezer Clarkson
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.
“You need to make space for weird types of conversations to happen on the fringes that really inform you what’s going on at the frontier.” — Thorsten Claus
Thorsten Claus is a venture investor and builder with more than 15 years of private equity and venture capital experience. He has raised nine funds, managed over $4.8B across global platforms, and led or overseen more than 120 direct investments, generating returns of 3x–7x net to investors.
His current work focuses on dual-use technologies at the intersection of defense, security, and national resilience. Guided by the discipline of Howard Marks, the systems-level thinking of the Consilience Project, and a commitment to internalizing externalities, he invests in teams and technologies that strengthen sovereign capability and long-term societal stability.
Beyond capital, Thorsten is a hands-on builder. He machines defense-critical and space components, restores historic race engines, and writes on production systems and resilience at blog.thinkstorm.com. This grounding in physical production complements his investment practice, keeping judgment tied to real-world constraints.
[00:00] Intro [02:31] Downhill skateboarding [05:58] How do you see behind a corner when downhill skateboarding? [07:42] Hill hunting [10:15] How long does it take to go down the Sierras? [11:41] The most important part of the body for downhill skateboarding [16:02] David’s dumb question of the day [17:25] The accident that pivoted Thor’s life [19:34] The first race car Thor bought [20:51] Why Thor is a terrible race car driver? [23:52] How did Thor come to use the race oil that Porsche Racing uses? [24:59] The 3 things you need to welcome fringe conversations [27:07] Just another David misattribution [27:34] Truth is difficult these days [29:20] How do you prioritize which advice to take? [30:33] Thor’s weird definition of risk [31:59] How do you know if someone is giving you authentic advice? [34:40] How does Thor understand someone’s past without asking about it? [39:42] Lessons from fictional storytelling in diligencing GPs [43:22] Questions and responses that reveal a GP’s past [46:10] Books that Thor read to ask better questions [49:18] What is the USMC Christmas Tree? [53:40] The Christmas Tree in an investor’s portfolio [57:49] Can beggars be choosers? [1:00:41] The difference between capital formation and fundraising [1:03:00] Production vs product for a GP [1:06:54] Thor and cardistry [1:10:21] What are moments that reminds Thor we’re still in the good old days? [1:13:50] The post-credit scene
“You need to make space for weird types of conversations to happen on the fringes that really inform you what’s going on at the frontier.” — Thorsten Claus
“Risk is the probability of a fatal outcome within given resources.” — Thorsten Claus
“Is it really out of conviction that they’re acting on [the advice] or is it just a belief? You know, I believe in many things, but do I act accordingly? That’s the difference between belief and conviction.” — Thorsten Claus
“The self audit of our actions, behaviors, processes, and decisions is so important.” — Thorsten Claus
“What I find more interesting than the question about ‘what’s the one thing you don’t want me to know about you’ is what it reveals about what you think about me. So, a social interaction is always with me with others, or you with me as well, and a group with others. If I’m worried that you know something about me, that reveals something more about what you fear my attitude is or how this is seen or how you would think I would act. And that is super insightful.” — Thorsten Claus
“If you want to find out something about the why and the what, you ask open-ended questions. If you confirm bad news, you voice it for them.” — Thorsten Claus
“There are no bad teams, only bad leaders.” — Jocko Willink
“There was a whole time when I grew up here in America where everything was great. […] Everyone gets a participation prize. I hated that because it really devalues people who are truly great. And the fact is that there are only very few truly great people.” — Thorsten Claus
“Capital formation is a design principle. Fundraising is a sales process. Without true design around a customer base and a product, you will fail eventually.” — Thorsten Claus
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.
Two years ago, Dave and I sat down less than five blocks away from where we were sitting when those words escaped the clutches of Dave’s mindscape. That piece has since been cited a number of times from fund managers I’ve come across. And sometimes, even LPs. While each part of that piece was written to be evergreen knowledge, what we want to do is to add nuance to that framework, along with examples of how we might see the internal conflict of early distributions and long-term thinking manifest.
In effect, and the premise for this blogpost, you’re in Year 7 of the fund. You’re now raising Fund III. What do you need to do?
The urgency to sell at Year 7 is relatively low. Although booking some amount of DPI may motivate LPs to re-up or invest in Fund III. The urgency to sell at Year 12 is much higher. So, what happens between Years 7 and 12? If you do sell, do you sell to the market or to yourself via a continuation vehicle?
For starters:
Knowing when to sell WHEN you have the chance to sell is crucial. The window of opportunity only lasts so long.
Consider selling some percentage of your winners on the way up to diversify, but be careful not to sacrifice too much potential future DPI. Yes, this is something we’ll elaborate more on with examples of what exactly we mean.
Optimize selling price efficiency
At the moment the next round is being put together, you have no discount to the current round price. The longer you wait to transact, the more doubt settles in from outsiders, the deeper the discount as time goes on. And so, if you have the chance to sell, sell into the (oversubscribed) primary rounds in order to optimize for price efficiency. Unless maybe, you’re selling SpaceX, OpenAI, Anthropic, Anduril, Ramp, just to name a few. There is a BIG tradeoff in TVPI (versus future DPI) when selling a fast-growing asset early (assuming it keeps its pace of growth). There is also a BIG risk to holding on to a large unrealized gain if the company stumbles or the market crashes.
We live in a world now that multi-stage venture funds have become asset management shops. Their primary goal will be to own as much of an outlier company as possible to maximize their potential for returns. As such, they will choose, at times, to buy out earlier shareholders’ equity.
To sell your secondaries, you have a very small window of opportunity to sell. Realistically, you have one to two quarters to sell where you can probably get a fair market value of 90 cents to the dollar of the last round valuation. Ideally, you sell into the next round at the price the next round values the company. As Hunter Walk once wrote, “optimally the secondary sales will always occur with the support/blessing of the founders; to favored investors already on the cap table (or whom the founders want on the cap table); without setting a price (higher or lower than last mark) which would be inconsistent with the company’s own fundraising strategy; and a partially exited investor should still provide support to the company ongoing.” If you wait a year, some people start questioning the data. If you wait 2 years, you’re looking at a much steeper discount. And if it’s not a “Mag 10” of the private markets—for instance, Stripe, SpaceX, Anduril, just to name a few, where there is no discount—you’re likely looking at 30-60% discounts. As Hunter Walk, in the same piece, quotes a friend, “‘I think friendly secondaries are easy, everything else feels new.’” As such, Dave and I are here to talk through what feels “new.”
So, how do you know how much to sell?
First of all, lemons ripen early. In Years 1-5, you’re going to see slow IRR growth. Most of that will be impacted by businesses that fall by the wayside in the early years. In Years 5-10, IRR accelerates, assuming you have winners in your portfolio. And in the latter years, Years 10 onward, IRR once again slows.
Before we get too deep, let’s address some elephants in the room.
Why are we starting the dialogue around secondaries at Year 5? Five things. Year 5, 5 things. Get it? Hah. I’m going to see myself out later.
One, most investment recycling periods are in the first four years of the fund. So, any non-meaningful DPI is recycled back into the fund to make new investments. While this may not always happen, it usually is a term that sits in the limited partner agreement (LPA).
Two, most investments have not had time to mature. Imagine if you invested in a company in Year 1 of the fund. Five years in, this company is likely to have gone through two rounds of additional funding. If you come in at the pre-seed, the company is now at either a Series A or about to raise a Series B, assuming most companies raise every 18-24 months. If you were to sell now, before the company has had a chance to really grow, you’re losing out on the vast majority of your venture returns. And especially so, if you’ve invested in a company in Year 3 of the fund, you really didn’t give the company time to mature.
Three, by Year 5, but really Year 7, venture’s older sibling, private equity, should have had distribution opportunities. And even if we’re different asset classes by a long margin, allocators will, even subconsciously, begin to look towards their venture portfolio expecting some element of realized returns.
Four, QSBS grants you full tax benefits at Year 5. And yes, you do get some benefits with new regulation sooner by Year 3. But if you’re investing in venture and hoping to get to liquidity by Year 3, you’re in the wrong asset class.
Five, you will likely need to show (some) DPI in Fund I, in order to raise Fund III or IV. It’ll show that you’re not only a great investor, but also a great fund manager.
Outside of our general rule of thumb in our writeup two years ago, let’s break down a few scenarios. The obvious. The non-obvious. And the painful.
The obvious. Your fund is doing well. You’re north of 5X between Years 7 and 10. You have a clear outlier. Maybe a few.
The non-obvious. Your fund is doing okay. This is the middle of the road case. You’re at 3-5X in Years 7-10.
Then, the painful. You’re not doing well. Even in Year 7, you haven’t crested 3X. And really, you might have a 1.5-2X fund, if you’re lucky. 1X or less if you aren’t. But your job as a fund manager isn’t over. You are still a professional money manager.
In each of the three scenarios, what do you do?
It’s helpful to frame the above scenarios through four questions:
How much do you sell?
When do you sell it?
What is the pricing efficiency of those assets?
And what is the ultimate upside tradeoff?
The obvious (5X+ TVPI)
Here, it’s almost always worth booking in some distributions to make your LPs whole again. Potentially, and then some. At the end of the day, our job as investors is to—to borrow a line from Jerry Colonna’s Reboot—“buy low, sell high.” Not “buy lowest, sell highest.” As such, you should sell some percentage of your big winners to lock in some meaningful DPI. Selling at least 0.5X DPI at Year 7 is meaningful. Selling 1-2X DPI at Year 10 is meaningful. As you might notice, the function of time impacts what “meaningful” means. The biggest question you may have when you have solid fund performance is: How much should you sell knowing that in doing so, it might meaningfully cap your upside? Or if you should even sell at all?
Screendoor’s Jamie Rhode once said, “If you’re compounding at 25% for 12 years, that turns into a 14.9X. If you’re compounding at 14%, that’s a 5. And the public market which is 11% gets you a 3.5X. […] If the asset is compounding at a venture-like CAGR, don’t sell out early because you’re missing out on a huge part of that ultimate multiple. For us, we’re taxable investors. I have to go pay taxes on that asset you sold out of early and go find another asset compounding at 25%.” Taking it a step further, assuming 12-year fund cycles, and 25% IRR, “the last 20% of time produces 46% of that return.” She’s right. That’s the math. And that’s your trade off.
But for a second, we want you to consider selling some. Not all, just some. A couple other assumptions to consider before we get math-y:
20% of your portfolio are home runs. And by Year 5 of your fund, they’re growing 30% year-over-year (YoY). And because they are great companies, growth doesn’t dip below 20%, even by Year 15.
For home runs, we’re also assuming you sell into the upcoming fundraising round. In other words, perfect selling price efficiency. Obviously, your mileage, in practice, may vary.
30% of your portfolio are doubles, growing at 15% YoY. And growth doesn’t fall below 10%, even by Year 15.
For doubles, just because they’re less well-known companies, we’re assuming you’re selling on a 50% discount to the last round valuation (LRV).
20% of your portfolio are singles, growing at 7% YoY. Growth flatlines.
For singles, even less desirable, we’re assuming you’re selling on an 80% discount to LRV.
The rest (30%) are donuts. Tax writeoffs.
For every home run and double, their growth decays by 5% every year.
We’re assuming 15-year fund terms.
Example 1: Say you have a $25M fund, and at Year 10, you choose to sell 50% of the initial fund size ($12.5M). If you didn’t sell at Year 10, by Year 15, you’d have a 5.7X fund. But if you did sell at Year 10, you’d have a 3.8X fund. To most LPs, still not a bad fund.
The next few examples are testing the limits of outperformance and early distributions. Purely for the curious soul. For those, looking for what to do in the non-obvious case, you can jump to this section.
Example 2: Now, let’s say, in an optimistic case, your home runs—still 20% of your portfolio—are growing at 50% YoY in Year 5. All else equal. If you didn’t sell at Year 10, by Year 15, you’d have a 11.6X fund. If you did sell at Year 10, by Year 15, you’d have a 9.3X. In both cases, and even when you do sell $12.5M of your portfolio at Year 10, you still have an incredible fund. And not a single LP will fault you for selling early.
Example 3: Now, let’s assume your home runs are still growing at 50% YoY at Year 5, but only 10% of your portfolio are home runs and 40% are strikeouts. All else equal. If you sell $12.5M at Year 10, at the end of your fund’s lifetime, you’re at 4.8X. Versus, if you didn’t, 6.6X.
Hell, let’s say you’re not sure at Year 10, so you only sell a quarter of your initial fund size ($6.25M). All else equal to the third example. If you did sell, 5.6X. If you didn’t, 7.4X.
Example 4: Now let’s stretch the model a little. And play make believe. Let’s take all the assumptions in Example 1, but the only difference is your home runs are growing at 100% YoY by Year 5.
If you sell at Year 10, by fund term, you’re at 108.8X. If you don’t sell at Year 10, you have 110.7X.
And as we play with the model some more, we start to see that assuming the above circumstances and decisions, selling anything at most 1X your initial fund size at Year 10, at Year 15, you lose somewhere between 2X and 3X DPI.
If you sell three times your fund size, assuming you can by Year 10, you lose at most around 5X of your ultimate DPI at Year 15. If you sell five times your initial fund size (again, assuming the odds are in your favor), you lose at most 7X of your final DPI by Year 15.
Now, we’d like to point out that Examples 2, 3, and 4 are merely intellectual exercises. As we mentioned in our first blogpost on this topic, if your best assets are compounding at a rate higher than your target IRR (say for venture, that’s 25%), you should be holding. Even a company growing 50% YoY at Year 5, assuming 5% decay in growth per year, will still be growing at 39% in Year 10, which is greater than 25%. That said, if a single asset accounts for 50-80% of your portfolio’s value, do consider concentration risk. And selling 20-30% of that individual asset may make sense to book in distributions, even if the terms may not look the best (i.e. on a discount greater than feels right).
Remember what we said earlier? To re-underscore that point, it’s worth saying it again. There is a BIG tradeoff in TVPI (versus future DPI) when selling a fast-growing asset early (assuming it keeps its pace of growth). There is also a BIG risk to holding on to a large unrealized gain if the company stumbles or the market crashes.
If you’d like to simulate your own secondary sales, we’ll include the model at the very bottom of this post.
The non-obvious (3-5X TVPI)
This is tricky territory. Because by Year 7-10, and if you’re here, you don’t have any clear outliers (where it might make more sense to hold as the assets are compounding faster than your projected IRR), but you don’t have a bad fund. In fact, many LPs might even call yours a win, depending on the vintage and public market equivalents. So the question becomes how much DPI is worth selling before fund term to make your LPs whole, and how much should you be capping your upside. How much of your TVPI should you be selling for your DPI knowing that you can only sell on a discount?
We’re back in Example 1 that we brought up earlier, especially if you have a single asset that accounts for 50-80% of the overall portfolio value. Here if the companies are collectively growing faster than your target IRR—say 25% on a revenue growth perspective, hold your positions. If your companies are growing slower than your target IRR and are valued greater than 1.5X public market comparables, you should consider selling 20-30% of your positions to book meaningful distributions.
The painful (1-3X TVPI)
You’ve got a dud. No two ways about it. You’re really looking at a 1.5X net fund. Maybe a 1X. And mind we remind you, it’s Years 7-10. It’s either you sell or you ride out the lie you have to tell LPs. LPs will almost always prefer the former. And for the latter, let’s be real — hope is not a (liquidity) strategy. And if put less charitably, check this Tina Fey and Amy Poehler video out. I don’t have the heart to put what’s alluded to in writing, but the video encapsulates, while humorously framed, the situation you’re in. You’re going to have to try to sell your positions on heavy discounts.
In closing
If you made it thus far, first off, you’re a nerd. We respect that. We are too. And second off, you’re probably looking for the model we used. If so, hereyou go.
We also do cover how this blogpost came to be in the first ever episode of the [trading places] podcast. And if you’re interested in the topic of secondaries, the [trading places] podcast might be your new guilty pleasure.
Shoutout to Dave for the many iterations of this blogpost and building the model in which this blogpost is based around!
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.
Kelli Fontaine from Cendana Capital joins David on El Pack to answer your questions on how to build a venture capital fund. We bring on three GPs at VC funds to ask three different questions.
The Council’s Amber Illig asked what happens when a solo GP is incapacitated or passes away.
Oceans Ventures’ Steven Rosenblatt asked why most LPs follow the decision-making of other LPs.
NeuCo Academy’s Jonathan Ting asked what LPs think about GPs asking for help.
From investing in great fund managers to data to investor relations, Kelli Fontaine is a partner at Cendana Capital, a fund of funds who’s solely focused on the best pre-seed and seed funds with over 2 billion under management and includes the likes of Forerunner, Founder Collective, Lerer Hippeau, Uncork, Susa Ventures and more. Kelli comes from the world of data, and has been a founder, marketing expert, and an advisor to founders since 2010.
[00:00] Intro [01:26] Kelli’s new data discoveries [04:32] How did Kelli underwrite a manager with no LinkedIn? [06:19] Is too much data ever a problem? [08:18] Vintage year benchmarking [09:49] Telltale signs on GPs’ social profiles [10:57] Data Kelli wishes she could collect [15:59] Enter Amber and her new podcast [18:08] Amber’s background and The Council [19:08] How does Amber define top companies? [24:25] How can a solo GP set the firm up well in case they’re no longer there? [26:11] Kelli’s number one fear with solo GPs [28:30] Best practices for generational transfers [32:28] Solo GPs and their future plans [36:51] Enter Steven and Oceans [42:38] Would Kelli ever include AI summaries as part of the get-to-know-someone phase? [44:18] Why do LPs follow other LP’s decision-making? [48:43] What are the traits of an LP who is likely to have independent thinking? [51:16] Why don’t LPs talk directly with founders? [57:59] Enter Jonathan and NeuCo Academy [1:00:05] Is Kelli seeing more secondaries firms? [1:01:56] How often should GPs lean on LPs for help? [1:07:22] Are most LPs helpful? [1:12:21] What kinds of questions does Kelli get from her own GPs? [1:15:39] Kelli’s last piece of advice
“If that fund deployed over a year versus a manager of ours that deployed over four years, they’re going to look very different. So we do vintage-year benchmarking to see how their MOIC stacks up against how the revenue of companies stack up.” – Kelli Fontaine
“Team risk is the biggest risk in venture.” – Kelli Fontaine
“The same top ten firms are not the same that they were 15 years ago, and probably Silicon Valley. Generational transfer is very hard.” – Kelli Fontaine
“If you make the brand bigger than just you that it comes from DNA, support systems, things that you stand for that have had support to get there—so once that brand is made, the other team members embody that brand as well. That’s the way to do it. It’s really empowering other team members to own a part in that brand-building—outwardly and inwardly in decision-making.” – Kelli Fontaine
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.
“19% of our GDP attracts about 55% of capital inflows, aka venture activity, and 81% is underinvested.” – Vijen Patel
We’re back with one of our crowd favorite formats, where we bring on one LP and one GP, and share why that LP invested in this GP. This time, we have Grady Buchanan, co-founder of NVNG, and Vijen Patel, founding partner of The 81 Collection.
Vijen Patel is an entrepreneur and investor. He founded The 81 Collection, a high growth equity firm in boring industries. Previously, he founded what is now known as Tide Cleaners. He bootstrapped what eventually became the largest dry cleaner in the country (1,200 locations) before selling to Procter & Gamble in 2018. Before Tide Cleaners, he worked in private equity, McKinsey & Company, and Goldman Sachs. He lives in Chicago with his wife and two kids.
Grady Buchanan is an institutional and risk-based asset allocation professional with a passion for bringing venture capital to those who have the interest. He founded NVNG in late 2019 and oversees investment strategies, the firm’s venture fund pipeline, manager sourcing, due diligence, and external events. Before launching NVNG, Grady worked with the Wisconsin Alumni Research Foundation’s (WARF) $3B investment portfolio, focused on private equity and venture capital initiatives, including fund diligence, investment strategy, and policy. Grady is based in Milwaukee, WI.
[00:00] Intro [02:41] The pressure of quitting a PE job for dry cleaning [05:09] Vijen’s self talk as a founder [06:50] How to overcome doubt [09:00] How Vijen learned customer success [10:35] What did Pressbox become? [12:41] The dichotomy between society’s needs and what gets funded [14:19] How did Grady go from selling pancakes to being an LP? [23:51] Why did Grady think he bombed the LP interview? [29:15] What is The 81 Collection? [32:22] How did Vijen meet Grady? [34:39] How is Vijen fluent in Spanish? [36:40] How did Grady meet Vijen? [42:21] How did Grady underwrite 81 Collection? [44:44] What about Vijen made Grady hesitate? [48:35] What’s one thing about 81 Collection that could’ve gone wrong? [50:33] The 3 things that create alpha [52:42] Why does NVNG have the coolest fund of funds’ names? [53:47] The legacy Grady plans to leave behind [56:06] The legacy Vijen plans to leave behind
“I wrote down everyone’s concerns, and I just sat on it. A lot of the founders we like to work with, the ones who we really love are the ones who take it in and listen, write it down, then take some time to synthesize everything and then they’ll act with conviction. ‘Why is this stupid? Tell me why. Let’s go deeper and deeper.’ And oftentimes these reasons are very rational and slowly over time, what if I derisk this by doing that?” – Vijen Patel
“19% of our GDP attracts about 55% of capital inflows, aka venture activity, and 81% is underinvested.” – Vijen Patel
“There’s this crazy stat we recall often: the 50 richest families on Earth, who often build in this 81, they’ve held, on average, their business for 44 years.” – Vijen Patel
“We invest in only amazing managers; we will not invest in every amazing manager.” – Grady Buchanan
“Alpha’s three things: information asymmetry, access, and, actually, taxes.” – Vijen Patel
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.
Pattern Ventures’ John Felix joins David on El Pack to answer your questions on how to build a venture capital fund. We bring on three GPs at VC funds to ask three different questions.
Atria Ventures’ Chris Leiter asked about the common mistakes LPs make when underwriting solo GPs.
Garuda Ventures’ Arpan Punyani asked how quickly do most LPs get to conviction. First 10 minutes? First meeting?
Geek Ventures’ Ihar Mahaniok asked how LPs evaluate Fund IIs when the Fund I has no distributions.
John Felix is a General Partner and Head of Research at Pattern Ventures, a specialized fund of funds focused on backing the best small venture managers. Prior to Pattern, John served as the Head of Emerging Managers at Allocate where he was an early employee and helped to launch Allocate’s emerging manager platform. Prior to joining Allocate, John worked at Bowdoin College’s Office of Investments, helping to invest the $2.8 billion endowment across all asset classes, focusing on venture capital. Prior to Bowdoin, John worked at Edgehill Endowment Partners, a $2 billion boutique OCIO. At Edgehill, John was responsible for building out the firm’s venture capital portfolio, sourcing and leading all venture fund commitments. John started his career at Washington University’s Investment Management Company as a member of the small investment team responsible for managing the university’s now $13 billion endowment. John graduated from Washington University in St. Louis with a BSBA in Finance and Entrepreneurship.
[00:00] Intro [02:20] What’s changed for John since our last recording? [04:08] What is Pattern Ventures? [06:22] Why is Pattern’s cutoff for funds they’re interested in at $50M? [07:32] How does John define noise? [09:34] Do non-sexy industries require larger seed funds? [11:36] How does think about overlap in the underlying startup portfolio? [15:22] Enter Chris and Atria Ventures [18:03] Should solo GPs scale past themselves? [24:14] Partnerships have more risk than solo GPs [26:10] How does John think about spinouts from large VC firms? [27:53] The psychology of being a partner at a big firm versus your own [30:38] Enter Arpan and Garuda Ventures [31:26] Geoguessr [32:52] Garuda’s podcast, Brick by Brick [34:52] How quickly do LPs know they intuitively want to invest in a GP? [38:02] The analogy to what GPs do to founders [43:50] There are many ways to make money [44:57] Quantifying intuition as an investor [49:12] Enter Ihar and Geek Ventures [49:36] How do LPs evaluate Fund IIs when Fund I has no DPI? [53:01] How do you know if a GP did what they said they were going to do? [54:47] What if the key value driver is off-thesis, but everything else is on-thesis? [56:21] Is signing 1 uncapped SAFE per fund reasonable? [57:14] What is the allowable percentage of exceptions in a fund? [1:01:32] Good vs bad exceptions [1:06:06] Reminders that we are in the good old days [1:07:31] John’s last piece of advice to new allocators [1:09:00] David’s favorite moment from John’s last episode
“In life, it’s always easy to justify ‘why now’ is not the right time. I think it’s hard to justify ‘why now’ is the right time to do something.” – John Felix
“We love investing in things that are contrarian and non-consensus, but there has to be a path to becoming consensus because something can’t remain non-consensus forever. There has to be a catalyst that the market eventually realizes this or else the company’s not going to be able to raise venture capital. It’s not going to be able to sustain it and continue to grow and survive.” – John Felix
“The type of spinouts we want to back are the people who are successful in spite of working at the big brand, not because they worked at the big brand.” – John Felix
“You need to earn the right to start your new firm to do your own thing. I don’t think enough people realize that.” – John Felix
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.
“It’s not the probability; it’s the consequence. It’s not the probability when something goes wrong. It’s the consequence when it goes wrong.” – Wendy Li
Wendy Li is the co-founder and Chief Investment Officer at Ivy Invest, a fintech investment platform bringing an endowment-style portfolio to everyday investors.
Before Ivy Invest, Wendy was Managing Director of Investments at the Mother Cabrini Health Foundation, where she built the Investment Office from the ground up and managed a $4 billion portfolio. Prior to Mother Cabrini Health Foundation, Wendy was Director of Investments at UJA-Federation, investing across a broad range of asset classes. Wendy began her career in the Investment Office at the Metropolitan Museum of Art. She has a Bachelor of Arts degree from Columbia University and is a CFA charterholder.
[00:00] Intro [02:29] Wendy’s family’s history with Columbia University [07:55] The importance of understanding family history [11:09] Why Wendy chose to work at The Met [15:16] How did Wendy know in the interview that Lauren would be her mentor? [19:18] Specialist vs generalist in 2006 [22:58] Pros and cons of using AI as an LP [29:02] The 80-20 rule for how an LP thinks [29:29] The one mistake EVERY SINGLE LP makes [33:27] What is the Takahashi-Alexander model? [39:38] Who do you learn from when your LP institution is so small? [41:22] The wisdom of an open-sourced LP reading list [45:34] What is headline risk? [47:09] What does ‘uncompensated risk’ mean? [50:20] Why now for ‘endowment-in-a-box’ [55:07] Wendy’s proudest dish from her mom’s recipe book [57:09] Wendy’s last piece of advice
“Where [using AI] is a challenge and can present a challenge to somebody’s development is in the utilization of these tools where perhaps there’s not an innate understanding of why the data is important.” – Wendy Li
“The pattern of mistakes that I certainly made and I saw the others make—and I know those listening and are earlier in their investor journey—will inevitably make-… We all make it. Even knowing this is a trap that we all fall into… even though they are all going to be aware of this trap, they’re still going to make the same mistake because we all do it, but we all have to learn this one and develop our own scar tissue on this one. It’s the exciting investment manager that other really smart LPs are invested with that is a ‘hard-to-access’ manager – that has a window in which they will take your capital. And there’s this sense of urgency. Sometimes real, sometimes forced. And there’s this sense that all these really smart investors are doing this thing. And the added layer on the endowment foundation side is oftentimes that there’s an investment committee member who is super excited about the investment because—and I’ll use a real quote that someone once said to me, ‘It would be a trophy manager to have in the portfolio’—and that is invariably a mistake that we all make in our investment careers. I would say that when I have been regretful of avoidable mistakes, it has had that pattern.” – Wendy Li
“I deeply subscribe to, ‘There’s always another train leaving the station.’” – Wendy Li
“There’s a great risk in being overconfident. There’s a great risk in assuming a normal distribution of events and returns.” – Wendy Li
“It’s not the probability; it’s the consequence. It’s not the probability when something goes wrong. It’s the consequence when it goes wrong.” – Wendy Li
“In-the-moment decision-making is always harder than you might remember post-mortem.” – Wendy Li
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
“The revenue and economic models for groups are misaligned with how human nature functions.” – Samira Salman
Samira Salman is a generational force—a rare blend of financier, strategist, and connector—revered for her ability to move capital, catalyze ventures, and cultivate the kinds of high-trust relationships that shape industries and define legacies. With over $5.5 billion in closed transactions spanning multiple asset classes, she is not merely a dealmaker—she is a trusted consigliere to some of the world’s most sophisticated families, investors, and visionaries.
Samira is the Founder & CEO of Salman Solutions, a bespoke advisory firm, and the visionary behind Collaboration Circle, an invitation-only global ecosystem recognized by Fortune Magazine as the premier “by families, for families” platform—curating aligned capital, deal flow, and meaningful connection across generations of wealth. She also serves as Chief Operating Officer of a private single-family office, overseeing a portfolio that blends venture capital, direct investments, and multi-generational governance.
Educated as a mergers and acquisitions tax attorney, Samira’s early career at Arthur Andersen, Deloitte, KPMG, and Shell Oil laid the foundation for her structural brilliance and financial fluency. She holds an LL.M. in Taxation, a JD, and a BS in International Trade and Finance—with a minor in Economics. Her legal acumen, combined with a deep intuition for human behavior, gives her a unique edge in structuring elegant, effective solutions that drive growth, mitigate risk, and unlock hidden value.
Samira’s proprietary methodology for business growth and ecosystem development has positioned her as one of the most connected and trusted figures in private finance. Her work spans advisory mandates, capital formation, co-investment syndication, family office strategy, and the orchestration of transformational events for UHNW families and industry trailblazers. She is the rare operator who bridges worlds—money and meaning, structure and soul, intellect and instinct.
Her multicultural upbringing and global exposure across dozens of countries have imbued her with a refined sensibility, cultural fluency, and a fierce commitment to authenticity. Samira doesn’t just build businesses—she builds trust-based systems that endure. Her work is rooted in the principle that Relationships Under Management (RUM) are the new AUM—and she is the embodiment of that thesis.
A passionate advocate for women’s economic empowerment, arts and culture, and global impact, Samira has served as an Honorary Advisor to the United Nations for Social Impact Projects and the NGO Committee on Sustainable Development. She has held board roles with numerous arts, education, healthcare, and professional institutions including the Houston Ballet, Center for Contemporary Craft, and Fresh Arts.
[00:00] Intro [02:27] How did Samira find herself at TASIS? [04:17] How did TASIS feel when she first arrived? [07:27] From tax lawyer to family offices [09:55] How did Samira decide to quit being a lawyer? [17:12] Why did Samira want to be a tax lawyer? [19:44] Journaling [22:39] The blessing of a lawyer brain [25:19] The Oprah episode that changed it all [29:45] How did Salman Solutions start? [33:28] Samira’s first interaction with family offices [36:43] Show and tell with Samira’s journals and pens [41:27] What did Samira mean that most family offices fall short of raising their own capital? [42:54] What is the common family office hero arc into VC? [44:05] Family office trends that Samira’s seen [47:17] The starting point for families interested in VC [50:13] Advice to a friend who wants to invest in VC [53:31] Book, podcast and conference recommendations [55:42] How does one qualify for Collaboration Circle? [56:21] Content recommendations, continued [59:57] How Collaboration Circle started [1:06:59] The 3 pieces of Collaboration Circle [1:09:49] Community economic models and human nature misalignment [1:12:43] How to create safe environments [1:18:02] The Dior bag tradition [1:21:20] Reminders that we’re in the good old days
“The very first thing everybody has to do is give themselves permission to lean into what they are interested in and what does it for them and what they understand and what they have an affinity for, regardless of what everybody else says you should be doing.” – Samira Salman
“Never doubt that a small group of thoughtful, committed, citizens can change the world. Indeed, it is the only thing that ever has.” – Margaret Mead
“The revenue and economic models for groups are misaligned with how human nature functions.” – Samira Salman
“Numbers and volume are not what programs humans to feel safe and to be authentic and to create. In order for us to do our best work and be our most thoughtful, our most creative, we have to be fully dropped down into our bodies and safe in our nervous systems. And some of the environments our industry has curated are literally the exact opposite of that.” – Samira Salman
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
The entire Screendoor team joins me on El Pack to answer your questions on how to build a venture capital fund. We bring on three GPs at VC funds to ask three different questions.
Kyber Knight Capital’s Linus Liang asked about why LPs choose to bet on new managers as opposed to investing in more established funds.
NOMO Ventures’ Kate Rohacz asked about what parts of venture do LPs think is most opaque.
Articulate’s Helen Min asked if every emerging manager should scale into a larger firm.
The Screendoor team is a powerhouse of experienced LPs, bringing together institutional investment experience that spans over a decade. Lisa Cawley, Layne Johnson, and Jamie Rhode have each built institutional venture programs within innovative family offices, financial institutions, and pensions. They have invested in venture capital across stages, sectors, and geographies, and in particular are known as a go-to for emerging managers.
Lisa Cawley is the Managing Director of Screendoor. Previously, Lisa worked with a private multi-billion-dollar global investment firm where she was involved in all aspects of managing the firm’s private market portfolio, including sourcing and manager due diligence, asset allocation and forecasting, and creating and implementing the firm’s investment data tools and analytics. Lisa started her career at Ernst & Young, where she served on private equity, venture capital, and public CPG clients. Lisa earned an MBA and an MSF from Loyola University Maryland, and she obtained a BBA in Accounting with a double minor in Information Systems and Spanish from Loyola University Maryland. She is a CFA Charterholder and holds a CPA.
Layne Johnson is a Partner at Screendoor. Previously, she led the Venture & Growth Equity manager selection effort at the Teacher Retirement System of Texas (“TRS”). At TRS, Layne was responsible for setting the venture capital strategy, including portfolio construction, new manager sourcing and diligence, and increasing exposure to emerging venture managers. She had previously been at Goldman Sachs, since 2012, in the External Investing Group (“XIG”), based out of the New York and San Francisco offices. At GS, Layne initially worked on the hedge fund manager selection team and then moved over to the private side of the business to focus on technology and venture manager selection and secondaries. She also helped lead the Launch with GS Program, including sourcing, investing in, and building portfolios of diverse managers. Layne holds a BA in History from Yale University and currently serves on the St. David’s Foundation Investment Committee.
Jamie Rhode is a Partner at Screendoor. She previously spent 8 years at Verdis Investment Management, an institutional single family office that manages capital for generations 7 through 10. At Verdis, Jamie focused on venture capital, private equity, and hedge fund investment sourcing and diligence. Using a data-driven approach, she helped revamp the asset allocation strategy and rebuild these portfolios. Specifically, through Verdis’s first institutional venture fund program, Jamie played an integral role in shifting the portfolio’s exposure from multi-stage to emerging managers and early-stage VC. Prior to Verdis, she spent four years at Bloomberg, where she held roles in both equity research and credit analysis. There, she created, managed and leveraged an extensive library of statutory, financial and market data for buy and sell-side clients who use Bloomberg to make investment decisions. A licensed Chartered Financial Analyst, she earned her bachelor’s degree in Finance and Marketing from Drexel University’s College of Business Administration.
[00:00] Intro [05:58] Enter Linus and Kyber Knight Capital [10:06] Why take the risk of betting on an emerging manager? [18:40] The types of pushback Linus got when he was fundraising [19:47] The incentives of an LP when investing in VC [21:49] How do GPs ask LPs how they’re compensated? [24:47] Enter Kate and NOMO Ventures [28:31] What part of venture is most opaque? [38:18] The things venture LPs look at beyond the metrics [43:47] “Bad” advice from LPs [46:27] Enter Helen [46:48] Helen’s new podcast, Great Chat [49:34] What is Articulate? [52:43] Should emerging funds scale? [1:00:47] How often do GPs say they want to scale [1:03:03] Layne’s advice for GPs [1:03:39] Jamie’s advice for LPs [1:04:55] Lisa’s advice for LPs and GPs [1:07:35] David’s favorite moment from Jamie’s episode [1:09:53] David’s favorite moment from Lisa’s episode
“My original intention was never to target emerging managers. My intention was actually to target funds that were the first institutional check into a startup because I was looking for a way to compound capital at an extremely high rate. And that just led me to backing emerging managers because finding a fund that was willing to invest at the pre-seed/seed consistently over a very long term either meant by the time they had a track record that underwritable with DPI, I couldn’t get in or they were an established manager that was slowly creeping up into bigger and bigger fund size so they were closer to Series A and Series B. What I ended up realizing is to go access that part of the market, I had to do emerging managers.” – Jamie Rhode
“A lot of what we do in underwriting is backward-looking, but really in VC, you want to be forward-looking. So it’s really important to be taking in those datapoints, but if you’re making a majority of your decision on those backward-looking datapoints, I would argue that you’re probably missing the mark when it comes to emerging managers. You actually want to be asking how do I know this firm–this team–is still going to have an edge in, inevitably, what would be a new market environment. There are going to be new competitive forces. There are going to be new technologies–new innovation. New at every level.” – Lisa Cawley
“I’m a firm believer that if you are waiting to see the proof smack you in the face, you’re actually not participating in the proof. You’re not getting that performance. You’re not getting those returns. You’re sitting and you’re waiting. And by the way, everyone else is doing the same thing, so you’re competing against them. Just because someone can identify that’s a great brand at that point, it doesn’t mean just because you have capital, you can get access.” – Lisa Cawley
“Don’t get swayed by capital.” – Jamie Rhode
“You can’t be all things to all people.” – Lisa Cawley
“Scaling is not synonymous with increasing fund size. To me, scaling means you’re increasing in sophistication. You’re increasing in focus. And that’s really a sign of maturity and fund size is a byproduct of that.” – Lisa Cawley
“GP-market fit is so crucial and you want to make sure you’re setting yourself up for success by being able to shine in what you’re best at and what your background and experiences set you up for as well.” – Layne Johnson
“Speed to fundraise does not always equate to a strong investor.” – Lisa Cawley
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.
Ahoy Capital’s founder, Chris Douvos, joins David on El Pack to answer your questions on how to build a venture capital fund. We bring on three GPs at VC funds to ask three different questions.
Pachamama Ventures’ Karen Sheffield asked about how GPs should think about when and how to sell secondaries.
Mangusta Capital’s Kevin Jiang asked about how GPs should think about staying top of mind with LPs between fundraises.
Stellar Ventures’ David Anderman asked Chris about GPs who start to specialize in different stages of investment compared to their previous funds.
Chris Douvos founded Ahoy Capital in 2018 to build an intentionally right-sized firm that could pursue investment excellence while prizing a spirit of partnership with all of its constituencies. A pioneering investor in the micro-VC movement, Chris has been a fixture in venture capital for nearly two decades. Prior to Ahoy Capital, Chris spearheaded investment efforts at Venture Investment Associates, and The Investment Fund for Foundations. He learned the craft of illiquid investing at Princeton University’s endowment. Chris earned his B.A. with Distinction from Yale College in 1994 and an M.B.A. from Yale School of Management in 2001.
[00:00] Intro [01:03] The facade of tough times [05:03] The last time Chris hugged someone [06:53] The art (and science?) of a good hug [08:32] How does Chris start his quarterly letters? [10:35] Quotes, writing, and AI [15:13] Venture is dead. Why? [17:33] But… why is venture still exciting? [21:13] Enter Karen Sheffield [21:48] The never-to-be-aired episode with Chris and Beezer [22:55] Karen and Pachamama Ventures [24:19] The third iteration of climate tech vocabulary [26:55] How should GPs think about secondaries? [33:53] Where can GPs go to learn more about when to sell? [36:53] Are secondary transactions actually happening or is it bluff? [38:44] “Entrepreneurship is like a gas, hottest when compressed” [42:26] Enter Kevin Jiang and Mangusta Capital [44:21] The significance of the mongoose [46:36] How do LPs like to stay updated on a GP’s progress? [59:35] How does a GP show an LP they’re in it for the long run? [1:03:57] David’s Anderman part of the Superclusters story [1:05:41] David Anderman’s gripe about the name Boom [1:06:31] Enter David Anderman and Stellar Ventures [1:10:21] What do LPs think of GPs expanding their thesis for later-stage rounds? [1:21:43] Why not invest all of your private portfolio in buyout funds [1:25:48] Good answers to why didn’t things work out [1:28:13] Chris’ one last piece of advice [1:35:18] My favorite clip from Chris’ first episode on Superclusters
“Every letter seems to say portfolios have ‘limited exposure to tariffs.’ The reality is we’re seeing potentially the breakdown of the entire post-war Bretton Woods system. And that’s going to have radical impacts on everything across the entire economy. So to say ‘we have limited exposure to tariffs’ is one thing, but what they really are saying is ‘we don’t understand the exposure we have to the broader economy as a whole.’” – Chris Douvos
“Everybody is always trying to put the best spin on quarterly results. I love how every single letter I get starts: ‘We are pleased to share our quarterly letter.’ I write my own quarterly letters. Sometimes I’m not pleased to share them. All of my funds – I love them like my children – equally but differently. There’s one that’s keeping me up a lot at night. Man, I’m not pleased to share anything about that fund, but I have to.” – Chris Douvos
“There’s ups and downs. We live in a business of failure. Ted Williams once said, ‘Baseball is the only human endeavor where being successful three times out of ten can get you to the Hall of Fame.’ If you think about venture, it’s such a power law business that if you were successful three times out of ten, you’d be a radical hero.” – Chris Douvos
“Tim Berners-Lee’s outset of the internet talked about the change from the static web to the social web to the semantic web. Each iteration of the web has three layers: the compute layer, an interaction layer, and a data layer.” – Chris Douvos
“Venture doesn’t know the train that’s headed down the tracks to hit it. Every investor I talk to—and I talk mostly to endowments and foundations—is thinking about how to shorten the duration of their portfolio. People have too many long-dated way-out-of-the-money options, and quite frankly, they haven’t, at least in recent memory, been appropriately compensated for taking those long-term bets.” – Chris Douvos
“Entrepreneurship is like a gas. It’s the hottest when it’s compressed.” – Chris Douvos
On communication with LPs, “come with curiosity, not sales.” – Chris Douvos
“Process drives repeatability.” – Andy Weissman
“The worst time to figure out who you’re going to marry is when you’re buying flowers and setting the menu. Most funds that are raising now, especially if it’s to institutional investors—we’re getting to know you for Fund n plus one.” – Chris Douvos
On frequent GP/LP checkins… “Too many calls I get on, it’s a re-hash of what the strategy is. Assume if I’m taking the call, I actually spent five minutes reminding myself of who you are and what you do.” – Chris Douvos
“One thing I hate is when I meet with someone, they tell me about A, B, and C. And then the next time I meet with them, it’s companies D, E, and F. ‘What happened to A, B, and C?’ So I’ve told people, ‘Hey, we’re having serious conversations. Help me understand the arc.’ As LPs, we get snapshots in time, but what I want is enough snapshots of the whole scene to create a movie of you, like one of those picturebooks that you can flip. I want to see the evolution. I want to know about the hypotheses that didn’t work.” – Chris Douvos
“We invest in funds as LPs that last twice as long as the average American marriage.” – Chris Douvos
“The typical vest in Silicon Valley is four years. He says, ‘Think about how long you want to work. Think about how old you are now and divide that period by four. That’s the number of shots on goal you’re going to have to create intergenerational wealth.’ When you actually do that, it’s actually not very many shots. ‘So I want to know, is this the opportunity that you want to spend the next four years on building that option value?’” – Chris Douvos, quoting Stewart Alsop
When underwriting passion… “So you start with the null hypothesis that this person is a dilettante or tourist. What you try to do when you try to understand their behavioral footprint is you try to understand their passion. Some people are builders for the sake of building and get their psychic income from the communities they build while building.” – Chris Douvos
“There’s pre-spreadsheet and post-spreadsheet investing. For me, it’s a very different risk-adjusted return footprint because once you are post-spreadsheet—you talk about B and C rounds, companies have product-market fit, they’re moving to traction—that’s very different and analyzable. In my personal opinion, that’s ‘super beta venture.’ Like it’s just public market super beta. Whereas pre-spreadsheet is Adam and God on the ceiling of the Sistine Chapel with their fingers almost touching. You can feel the electricity. […] That’s pure alpha. I think the purest alpha left in the investing markets. But alpha can have a negative sign in front of it. That’s the game we play.” – Chris Douvos
“Strategy is an integrated set of choices that inform timely action.” – Michael Porter
“I’m not here to tell you about Jesus. You already know about Jesus. He either lives in your heart or he doesn’t.” – Don Draper in Mad Men
“If there are 4000 people investing and people are generally on a 2-year cycle, that means in any given year, there are 2000 funds. And the top quartile fund is 500th. I don’t want to invest in the 50th best fund, much less the 500th. But that’s tyranny of the relativists. Why do we care if our portfolio is top quartile if we’re not keeping up with the opportunity cost of equity capital of the public markets?” – Chris Douvos
“In venture, the top three funds matter. Probably the top three funds will be Sequoia, Kleiner, and whoever gets lucky or whoever is in the right industry when that industry gets hot.” – Michael Moritz in 2002
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.
