Ok, before y’all rise up in arms, hear me out. And if by the end of this blogpost, you still want to bring the pitchforks and torches, so be it.
Generally, I get it. Who else is investing isn’t usually a great question. Because for most investors who ask this question, it means they’re outsourcing their conviction.
POV: you're at a tech week event full of contrarian investors who back founders at the earliest stage in frontier industries pic.twitter.com/k7p1cVNHjs
In fact, I wrote a quick LinkedIn (and tweet) post about it the day before yesterday. Which admittedly got a lot more attention than I expected. And if you have the time, it’s worth seeing the discussion on that post that ensued.
So, potentially hot take, I believe investors should ask the question. Who else is investing? It’s part of the diligence process. That said, when they ask that question is key. There’s a vast ocean between the shores of asking that question before you reach conviction and after.
If you pop the question before you reach conviction, well, we’ve seen the follies of that. Most evidenced by the manic rush of 2020 and 2021 into “hot deals” largely led by names that grew to popularity around the dinner table.
If you pop it after, it’s diligence. Where the availability of names shouldn’t convince you to bat or lack thereof to otherwise. But that you now have additional opportunities to reference check and cross-diligence the same opportunity. And it extends to the LP side as well. Jamie Rhode who’s now at Screendoor, said on a Superclusters episode that one of her greatest lessons as an LP was committing to a fund where there was a bunch of soft commits but far less in hard commits, and ended up overexposing Verdis (where she was at) to a single asset and taking a much higher ownership as an LP into a single fund.
Truth is, LPs pay GPs for their opinion. Not anyone else’s. And while given long feedback loops, no one really knows what’s right and what’s wrong except over a decade later and only in hindsight, you have to really believe it, and be able to back it up.
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
I’m in my fourth year of writing this blog and never once have I called myself or identified as a content creator. As many of you know, I write to think. I do so out of joy and intellectual stimulation. In many ways, I write for myself. Or better put, as a form of self-expression. Other than posting in the morning, as is thematically helpful for my blog, I don’t really have much cadence to posting. Nor have I looked too deeply on analytics. Nor have I really optimized for SEO. In other words, finding the top searched topics in my industry and writing a blogpost for each of those highly trafficked keywords. I haven’t done that, nor do I want to. I haven’t chased people down to subscribe. In fact, there are times I try to convince people to not subscribe (due to the scattered nature of my content).
To that end, I had not been a content creator.
But with the launch of Superclusters, for the first time, and still a work-in-progress, I am designing the content for someone other than my immediate self. Although, do I take opportunities to scratch my own itches? Yes… yes I do.
But in doing so, I am starting to think about creating content for others. And to do that, I need to look at what people like and tune in to.
Now at the end of Season 1, some quick learnings…
Note: The below gets a bit nerdy on numbers. Mostly as an accountability metric to myself to be paying attention to the below. This may not be for everyone, but in case you’re curious, and/or working on creating your own content, hopefully the below might be helpful.
Between all the platforms, YouTube seems to be the most popular channel. Followed by Apple Podcasts then Spotify. Where Apple Podcasts only has half or so the number of plays than YouTube does. And Spotify has three-quarters the listens compared to Apple.
May be helpful to note that YouTube and Apple Podcast count plays as just someone viewing the video for a split second (“greater than 0 seconds”), whereas Spotify counts a play as someone who’s played the episode for at least 60 seconds.
YouTube seems to be better for discovery than the other podcasting platforms, with over 4.5X the impressions compared to the next best, Spotify. 28K versus 6K. Tracked by last 30 days, not all time.
For short-form vertical content, TikTok continues to perform better than both YouTube and Instagram, especially for new audiences. Still perplexes me since I imagine the demographic on YouTube has more of my intended audience. Nevertheless, even on YouTube shorts, the shorts are consumed by a younger audience than the long-form videos on average.
Instagram, in general, performs poorly in terms of discovery among new audiences. But that might simply be, I haven’t learned the IG algorithms well enough yet. Moreover the new algorithm seems to prioritize completion percentage. And given that it’s hard to shorten even my short-form content to less five seconds or less, unless I just make people read while playing some kind of looped video in the background, Superclusters will likely continue to perform poorly on IG.
On YouTube, 90%+ of Shorts viewership comes from non-subscribers than subscribers. where 75-80% come from non-subscribers, the average for the full podcast episodes.
On YouTube, 41% of my audience comes from the US. TO break it down further, 50% comes from the US for long-form. 27% for short-form. Spotify, 67% comes from the US. Apple Podcasts, 87%.
Interestingly, by city, according to Apple Podcasts, New York City takes the cake on where my audience reside.
Across all platforms, most of my listeners/viewers are in the 35-44 age range. Accounting for almost 50% across all platforms. Followed by the 28-34 age group, then 45-59 age group. In general, Superclusters has a larger younger audience fan base on YouTube, compared to Spotify and Apple Podcasts. The latter two with similar distributions.
Superclusters audience is also about 75% male, 25% female.
While less than 0.05%, fun fact, the only other subtitles used on YouTube to tune into my podcast was French (outside of English).
Popularity versus watch time
The most popular episode on YouTube is Chris Douvos’, followed by Ben Choi’s. Episode 1 and Episode 6 respectively. My suspicion was that while both were super fun to record, Chris’ episode came first but may by the end of Season 2 be surpassed in viewership by Ben’s.
But what’s most fascinating to me is that among the nine episodes released for Season 1, on YouTube, the top four most popular episodes have shorter average watch times than the most bottom five. On average a two- to three-minute difference, where the least watched episodes happen to have 7-8 minutes of average watch time.
In closing
All in all, there’s a lot of work to do ahead. And as I’m recording Season 2 and my team is hard at work in editing those episodes, all of the above insights are helpful to keep my finger on the pulse. Do let me know if I’m missing any areas I should be paying attention to or measuring.
Otherwise, for Superclusters, I’ll see y’all again in early March for the launch of Season 2.
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
A few years ago, in one of my favorite coffee shops on 7th Street in San Francisco, over a vanilla cold brew, a then 25-year old founder told me that he had recently taken his then-first vacation in five years. Took a full week off. Didn’t touch work at all. And just enjoyed it with his fiancée. But contrary to what one would expect, his body language that seemed to indicate the exact opposite of having a good time. Two hands cupped over his face, as he slowly dragged them both downwards in exasperation. Followed by many sighs.
He shared that in the time he was gone, the website crashed and the team had trouble bringing it back online. And when they finally did bring it back online, they were waiting for his approval to move forward. As such, didn’t bring it back online until he came back. With another large sigh, he went on to say that he’d never take another vacation ever again.
Running your own business is tough. Really tough. I get it. If you’re the founder, it’s your baby. And sometimes, it’s really hard letting go on what may seem like key decisions. Eventually, that becomes a slippery slope where I see too many founders needing to control every decision that goes on in the company. And even if you hired extremely well, you’ve capped your team’s potential by not letting them execute to their fullest capacity.
In the above dilemma, as you might know, it’s not a to-vacation-or-not-to-vacation problem. It’s a you-need-to-give-your-teammates agency problem. And it might seem obvious to you and me, to any third party observer. But it wasn’t to him. He was so frustrated that he was focused on the one new thing he did and believed that one new thing had a causal effect to a problem that was looming over his team’s head for a long time.
It is true that we are products of our scar tissue, but quite often, in an attempt to not be in the same situation again, people overcorrect. They take then run with the seemingly most extreme “solution.”
And in the times scar tissue start to form, start from first principles. Is taking a vacation really the biggest offender? Do great CEOs just not take time off? Is there something else that I’m not willing to admit about how the results played out?
What am I assuming to be true that may not have to be true? What are the raw facts, stripped of opinions and speculation?
Why was my team incapable of making that decision? Was it something that I told them before or did before that has since prevented them from making calls? What do I spend most of my day doing? Can I outsource some of my tasks? Some of my decisions? How would I do that? And only then, can I ask myself and others: what can I do from now on so that history doesn’t repeat?
Seeking and redefining excellence
And once you’re at the root of the problem, find others you admire who run organizations you admire.
Excellence is an interesting concept. One of the few words out there where its definition changes over the course of your life.
It’s one of the few words where it is not only different for every person, but that even within each person, every time you see something excellent, it sets a new bar and stretches that definition. Defined by only the most excellent thing you’ve seen.
The truth is that most great lessons happen to err on the side of examples. So to have people who define that word for you again and again are the “Sensei-s” you want in your life.
So spend time with others. Notice how they approach problems. And stretch your definition of excellence.
For the 25-year old founder who hadn’t worked any other job in his life, and only his own, there’s immense value in learning from others and building expertise at high-growth institutions. Or with people who you deeply respect.
Asking for the lesson
Tim Ferriss, on a recent episode with Noah Kagan, said, “Life punishes the vague wish and rewards the specific ask.” And I frickin’ love that line.
Be specific. No picking brains. You’re not a zombie or a vulture or a crow.
Not 30-minute coffee chats. Those quickly become recipes of asking for too much time with an amorphous ask. To a busy person, that 30-minute ask sounds like a recipe for losing 50 minutes to an hour of your life you can never get back. Including travel to and from. Time, as the only unreplenishable commodity, is precious. As Howard Lindzon said on the Superclusters podcast, when we’re young, we’re time-millionaires, but over time, we get poorer and poorer. We then become time-thousand-aires as we age. And eventually, we run out of temporal capital.
It is in times of need and struggle, that we often have the most prescient and specific ask to make of potential mentors.
“When in X situation, and after having Y results, my gut seems to tell me to do Z, but given that you’ve experienced these situations before or have likely seen these situations unfold, am I directionally accurate?”
In closing
There’s a lot of this hustle porn in the Bay Area. Loud claims of not taking any vacations or sleeping only three hours per night. Moreover media perpetuates and lionizes this way of living.
It’s not true. Science shows we do much better with eight hours of sleep. It shows that every so often, we need to take time to unwind, so that we can come back to be more efficient and inspired than before. You can clock in the hours, but that doesn’t mean you are producing quality in a one-to-one capacity.
And I worry that like the founder that took his vacation for the first time, then overcorrected, we live in a society where we’ve forgotten that we’re human. That we need breaks. That we need sleep. And that we can’t do most things alone, including building ambitious ideas and maturing as professionals.
#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
Howard Lindzon has over 20 years of experience in both public and private market investing. He previously founded and managed the hedge fund Lindzon Capital, and is currently the founder and General Partner of the early-stage venture capital firm Social Leverage. Through Social Leverage, he and his partners have been seed investors in startups like Robinhood, Beehiiv, and Manscaped to name a few. Howard was the founder of Wallstrip (acquired by CBS), and is the the co-founder and Chairman of Stocktwits, the leading social platform for traders and investors. Throughout his career, Howard has strongly advocated for and helped drive the decentralization and democratization of investing. He resides in Phoenix, AZ and Coronado, California.
[00:00] Intro [01:51] Howard’s biggest misses as a startup investor [06:21] What happens when you trust a single reference too much in the diligence process? [10:24] What kind of company does Howard think Carta should be? [14:52] Howard’s two beliefs on selling positions [24:29] What types of fund managers did Howard invest in as an individual LP? [30:46] How did Howard write a $150K LP check in Multicoin [36:06] Why Howard likes GPs who struggle to fundraise [41:16] How Howard raised his fund of funds [44:19] Howard’s LP investment thesis [47:16] How much of investing is luck vs skill? [51:57] Reframing curiosity and risk [57:37] Market risk vs execution risk in your career [59:18] Howard’s advice to young professionals [1:03:40] A founder or GP’s first interactions with Social Leverage [1:08:25] Does succession planning matter to Social Leverage? [1:10:16] The big lesson about follow-on financing from Social Leverage’s Fund I [1:14:49] Thank you to Alchemist Accelerator for sponsoring! [1:17:25] Legal disclaimer
“You can’t be a good investor if you haven’t been in there and go ‘Ahhh, that was a dumb idea.’”
“Sell when you can, not when you have to.”
“They gave me money because I’m weird. They gave me money because they trusted me, but they also know that I’m weird. Therefore, if I start to think like them, we’re all screwed. So I have to think like me.”
“If you’re curious, it’s pretty hard not to stand out over time.”
Our tiny blue marble has spun yet another lap around its closest star. From a job change to starting a podcast, between visiting Japan for the first time (and holy frick is Japan amazing!) and blacksmithing my own santoku chef knife while I was there, and from building the most unlikely friendships that will last for decades to come to realizing life rarely goes according to plan — a good reminder of Mike Tyson’s line: “Everybody has a plan until they get punches in the face.” — and from attempting to convey my year in one sentence to realizing this is the longest run-on sentence I’ve written on my blog to date, it’s been a great year.
While I wasn’t aware of this till recently — courtesy of doom-scrolling on Instagram, this year’s been a year where I’ve “used the difficulty.” To echo the amazing Sir Michael Caine. For those unfamiliar with the phrase, I highly recommend listening to the full 2002 interview, but at least this.
In short, you can’t always control the situation you’ve been given, but you can control how you react to it. If you want your life to play out like a comedy. If you want it play out as a drama. Or if you want it to play out like a feel-good movie. Use the difficulty to your advantage and act accordingly.
By the numbers
Interestingly enough, despite writing whatever I find fascinating on a weekly basis — in other words, not optimized for search engines — just under half of my blog’s views come from search engines. Primarily, and I mean 95% of which from Google. Followed by LinkedIn (which accounts about a third of my views) then Twitter (~7%).
As many other aspects of life, the viewership of my blogposts also have a Pareto distribution, where they seemingly follow the power law. With my top blogpost winning more than twice the views of the second highest. And the second highest with double the audience of the third highest, before the views plateau out across all the rest of my essays. Even for this year alone, my most popular blogpost is eight times more popular than my second most popular.
And every week I feel honored that I have readers like you who tune in to my weekly musings and our family has only grown since.
Something I’ve noticed when looking at the numbers is that I seem to have the most readers arrive at this humble piece of virtual real estate every October, barring 2021. And I wonder if it’s a function of the market’s interest crests then or that I just happen to write better pieces around then.
In addition I’ve started measuring my habits since October, only to realize, holy hell, I am inconsistent with them. While I’d love to blame travel and work, the simple truth is it’s hard to manage what I didn’t measure before. Hopefully in 2024, we’ll see a lot more consistency.
P.S. the last day, aka today, is down, since the day’s just started and I haven’t logged in anything yet. And for those curious, I’m tracking this all on a Notion dashboard.
But my favorite thing that I started measuring, is that little trophy icon in the first column of the “Evening” section. And that little trophy stands for: “Was today truly worth it?” Defined by me learning a new skill. Gaining a brand new insight about the world. Or created a core memory. And I’m happy to say that that box gets checked about two times per week. 🙂
Post publish edit: The last icon is often how I take a cold dunk/shower, as opposed to a hot one. Having friends, former housemates, and my partner exclaim and tell me “I know you shower more often than that” made me realize that icons don’t do some things justice.
2023’s Most Popular
The Science of Selling – Early DPI Benchmarks — One of my favorite lines from Jerry Colonna’s book Rebootis: “It’s buy low, sell high. Not buy lowest, sell highest.” In the world of VC, we spend a lot of time talking about when to buy, how to buy, and who to invest in. But rarely about the other side of the playbook, selling. Or exiting positions. And while different investors have shared the what behind selling — in other words, the exact percentage they sold at, how much they sold when they could — this blogpost was one of the first, and maybe first (who knows), to explore the why and how behind selling positions in portfolio companies as a private investor.
The Non-Obvious Emerging LP Playbook — The blogpost that set me down the path I am now on. To explore how I can help the next generation of capital allocators is investing into the innovation economy. Simply put, the emerging LPs.
Five Tactical Lessons After Hosting 100+ Fireside Chats — In fairness, had no idea this blogpost was going to do as well as it did. And luckily, I am now able to stress-test and get better at asking questions and hosting interviews through not only what I continue to do in the world of venture, but also through my new podcast, Superclusters. Where you’ll see some of my learnings above in action.
10 Letters of Thanks to 10 People who Changed my Life — In all honesty, it still befuddles me to this day how this blogpost consistently ranks this high. I don’t namedrop here, and I don’t use any clever SEO techniques, yet every day this blogpost seems to find organic interest. Nevertheless, I’m glad it has. And if it empowers people to be more grateful to the people around them, I’ll have done my job. There’s also a deficit of content and knowledge here for sure, but I’m still trying to figure out what that something is.
How to Think about LP Construction — Not all LPs are created equal. It’s something I’ve known for a while. Both in conversation with other LPs and GPs, but also in learning of the different types of motivations to be an LP. For some, VC is an access class, not an asset class. For others, it’s the exact opposite. The latter is more likely to be a large institution. Nevertheless, that’s one example of many. And it was incredibly rewarding to hear GPs I really respect share what they’ve learned across multiple funds.
All-Time Most Popular
The Science of Selling – Early DPI Benchmarks — Turns out you all love tactical frameworks, so my goal is to share a lot more with you in 2024. I have a couple in the works as we speak (or as I write this).
10 Letters of Thanks to 10 People who Changed my Life — If anything, I hope this inspires people to write one note or letter or record a voice note of thanks to someone who’s helped you become the person you are today.
99 Pieces of Unsolicited, (Possibly) Ungooglable Startup Advice — Don’t worry already in works of many more iterations of this. And while I can’t promise when the next one will come out since it’s I’m really only including what I think are the best pieces and most tactical pieces of advice, I will say it’s a matter of when not if. I’m 20 in for the founder one. And 12 in for the investor one.
How to Pitch VCs Without Ever Having to Send the Pitch Deck — Back in 2021, I knew that this blogpost was going to hold an evergreen spot up here. And I’m pretty sure it’ll flirt around here even longer. While it’s only been two years since, and while there’s also a mountain of public resources on how to pitch, strangely, most people still struggle to connect to the people they want to. And it’s true for both founders and VCs. Ya, the latter seems ironic, until you see that founders are pitch judges, juries and executioners as well. For them, from talent. Until you also see that our parents are often the harshest critics of our decisions. Yet some have no experience working in the world in which we do. All that to say, oftentimes it’s easier being the judge than the judged. I can’t claim much of the insight here as original, but rather have to thank the fact I have really smart friends. Smarter than me at least. The flip side to the wild performance of this essay may just be one of the closest titles I have to being clickbait-y.
2023’s Most Memorable
In all honesty, the most memorable each year to me were ones where I was scratching my own itch. Some, by the numbers, perform better than others. But for me, each of the below represent the greatest delta in either knowledge acquisition or insight development. Of course, not mutually exclusive to each other.
The Science of Re-upping — I enjoyed writing this one in particular not only because I got to work with Arkady and Dave on this — two minds I greatly admire, but it also became the perfect opportunity to learn more about the world of professional sports beyond the players and scores themselves. Two birds with one stone. I’ve always admired folks who are able to pull from various, seemingly disparate topics and analogize them to venture. And while I still have many more miles on my odometer to go, this was one of the amazing opportunities to take a stab at marrying two different worlds through stories.
How to Think about LP Construction — I will admittedly take any opportunity I can to talk to my favorite people. And this was another one of them. That said, to get them all in the same metaphoric room to talk about the same topic, where the energy of one inspired another, now that’s something special. Funnily enough I did the vast majority of these interviews for this blogpost asynchronously, but upon sharing the final product with the group the week before publication, there was an incredible amount of energy (gratitude, stand up comedy routines, and so on) in the group. And all this was over email.
The Science of Selling – Early DPI Benchmarks — This, in many ways, was an accidental piece. Not only did it come up in conversation over Friday brunch quite randomly (serendipity at its finest), it also took, at least compared to the above two, the least amount of time to write. The first draft was ready in about an hour. And including all the edits, it came out to about two hours of work. It’s a gentle reminder that sometimes your best pieces are the easiest to write.
My Ever-Evolving Personal CRM — I wrote this blogpost after some coercion from a small group of friends who’ve been fascinated by how I stay in touch with people. And when they saw how I did it on Airtable, they asked if I would sell them my template (not that I had one at the time). Nor am I selling now. But nevertheless, the web of what we do, who we talk to, who we grow with, and why we do things is increasingly complicated and so far, there hasn’t been a great product out there that tracks this (and yes, I’ve used all the CRM tools out there). And so I created my own.
#unfiltered #83 There Doesn’t Have to be a First Place — I really enjoyed writing this one. Inspired by a podcast appearance by Simon Coronel, I learned that in the world of magic competitions, first place isn’t always granted. If the judges feel like a magic act isn’t on par with previous years, even if it is the best one that competition, they choose not to award a first place. Similarly, I think the world in a lot of ways has lost itself in the noise. That our definition for quality has fallen in the past decade. And I’m sure the older generations will harken back further. But I do believe a heuristic like this keeps us honest and that as a society, we move forward together, not just optimizing for short-term maximizations.
#unfiltered #78 The Gravitational Force of Accumulated Knowledge — Another fun piece to write about the power of how knowledge compounds. Not only in isolation, but also collectively. While that is a rather obvious fact, I loved the reframing of how to look at it from Seth Godin and Bill Gurley’s public interviews.
How to Retain Talent When You Don’t Have the Cash — One of the biggest lessons I learned at On Deck was that the team was amazing — in fact, world-class — at acquiring the best talent, but was shy on retaining the world’s best talent. To this day, I believe I have never worked in a higher concentration of brilliant talent than I did when I was at On Deck. And this blogpost is an homage to my former team, how brilliant they were, but also the lessons we took away from that experience.
7 Lessons from My Time at On Deck — And in the theme of On Deck, and how much I treasure the people I work with and the experience I had while I was there, last but not least, the culmination of lessons I took away from an 18-month period that I would never trade for any other experience.
And I started a podcast. Superclusters. (Or here’s on Spotify or Apple Podcasts if you prefer). It’s still too early to tell how Season 1 will do, with only six episodes in (the most recent of which here). But by next year, I should have more than enough to share about my learnings here. But early data seems to suggest that people love true stories more than they do tactics.
Until the next, stay awesome! And see y’all in the new year!
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
Ben Choi 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.
[00:00] Intro [02:44] Ben’s childhood [07:54] What is Ben’s superpower? [16:58] What aspect of being a VC do most founders fail to appreciate? [18:46] What do GPs fail to appreciate about LPs? [21:24] The similarities between VC and the intelligence industry [24:00] What’s changed about being a VC since 2006? [27:14] How does Ben tell signal from noise? [32:46] Past track record portability [37:24] A case study on how a syndicate investor became a lead investor [41:00] Ben and David nerd out about free T-shirts [44:26] An example of how a GP convinced Ben to invest in their fund [47:53] Succession planning in a VC firm [56:51] How Legacy Venture started [1:01:28] Next Play + Legacy Venture = Next Legacy [1:04:05] Which non-profits do the carry go to? [1:05:48] What kind of GP impresses Ben? [1:07:58] Ben’s biggest professional lesson in 1998 [1:12:56] Thank you to Alchemist Accelerator for sponsoring! [1:15:32] Legal disclaimer
“The integrity of information. Does this actually stand on its own not because someone said so, but because the mechanics behind it make sense. Does this have internal integrity to it?”
“If you see a thread and you pull it, does it come out as a single piece of thread? There’s no integrity right there. If you pull it and the whole fabric starts to warp–… if you pull it and other pieces start to move, there are connections. That thread is actually holding this together.”
I wrote a blogpost last year, where I went a level deeper into my NTY thesis. In short, in what situations and in front of what kind of ideas do I ask founders: Why now? Why this? And why you?
But let’s go a step deeper. As I’m writing another blogpost slated to come out next year, I’ve had the chance to sit down with some amazing multi-cycle investors. And a common thread across all those conversations has been that they chose to be the first check in companies that would be big, if true.
Which got me thinking…
If ‘big if true’ is for the preposterous ideas out there, then possible ideas would be ‘big when true.’ And plausible ideas would be ‘big AND true.’
Let’s break it down.
Big AND true
Not too long ago, the amazing Chris Douvosshared with me that the prerequisite to being “right and alone”, where fortune and glory lie, is to be “wrong and alone.”
Imagine a two-by-two matrix. On one axis, right and wrong. On the other axis, alone and in the crowd. You obviously don’t want to be wrong and in the crowd. But you do want to be in the right and alone quadrant. Because that’s where fortune and glory are at. Most people think that to get there, you must first start in the right and in the crowd quadrant. But it’s important to note, that once you’re in the crowd, and you get the dopamine hits of validation, it’s really hard to stray away from the crowd. So really, the only way to get to fortune and glory is to be wrong and alone. To be willing to go against the grain.
Unfortunately, for big AND true, you’re in the crowd. And while you can usually make money on the margins, it’s hard to be world-defining. ‘Cause you’re too late.
The thing to be wary of here if it is any investor’s strategy to deploy capital here is to not be the last money in. Hype and compounding are dangerous. And for many companies that exist here, they have a short half life. If you’re the last one holding the bag, that’s it.
Big WHEN true
You know that saying, “It’s a matter of when, not if…” it’s just as true in the innovation space. There are some things in life that are bound to happen. Recessions. Hype cycles. Rain. First snowfall. Summer heat. Progress. Maturity. When one’s baby teeth fall out. Wrinkles. Gray hair. Some with more predictability than others.
These ideas are defined as those with early commercial traction, likely with a niche audience or only your 1000 true fans. And that’s okay. Usually happens to be some of the toughest pre-seed and seed rounds to raise. There’s clearly traction, but no clear sense of rocket ship growth.
Timing matters. Is the larger market ready to adopt the beliefs and culture and habits of the few?
For some investors, it’s why they target quality of life improvements to the wealthy made ready for the masses. Living a wealthy lifestyle is, after all, aspirational for many. On the flip side, if you have a niche audience and are looking to expand, are there underlying beliefs and traits that the broader market has but has instead applied those beliefs and habits in other parts of their life?
Big IF true
Sam Altman put out a blogpost just yesterday, titled “What I Wish Someone Had Told Me.” And out of the 17 lessons he shares, one in particular resonated the most with me:
“It is easier for a team to do a hard thing that really matters than to do an easy thing that doesn’t really matter; audacious ideas motivate people.”
While the stories of Airbnb or Coinbase or Canva seem to suggest that these are nigh impossible ideas to raise on, anecdotally, I seem to find that the most transcendent companies with CEOs who are able to acquire world-class talent to their companies have less trouble fundraising than the ‘big when true’ ideas. But more difficulty raising than the ‘big and true’ ideas.
That said, instead of many smaller checks, you just need to find one big believer. In other words, the Garry Tan for your Coinbase or the Fred Wilson for your Twitter. One way to look at it, though not the only way, is what Paul Grahamputs as the “reasonable domain expert proposing something that sounds wrong.” Crazy, but reasonable. Simply, why you?
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
Courtney Russell McCrea enjoys over 30 years of venture capital and private equity investment experience including 13 years of fund investing and 18 years of direct principal investing.
Courtney is Co-Founder and Managing Partner of Recast Capital, a 100% women-owned platform investing in and supporting emerging managers in venture, with a focus on diverse partnerships.
Prior to co-founding Recast, Courtney was a Managing Director of Weathergage Capital, a boutique fund of funds that provided its clients with access to premier venture capital, growth equity and micro-VC partnerships. Venture fund commitments included both brand name funds and emerging managers. In addition to fund investment responsibilities, Courtney led the direct co investing program at Weathergage. During her 10 year tenure at Weathergage, Courtney made commitments to 100 funds and seven direct co-investments.
Prior to Weathergage, Courtney was a General Partner with Weston Presidio, a leading diversified private equity firm based in San Francisco. After 7 years at Weston Presidio, she left in 2004 and founded Silver Partners, a private equity advisory firm where she evaluated secondary and co-investment opportunities and advised consumer growth businesses. Courtney was also a Director at Sterling Stamos, where she managed investments in buyout funds, venture capital funds and hedge funds.
Earlier in her career, Courtney made equity co-investments as an Assistant Vice President at PPM America. She also spent 5 years at GE Capital where she worked on private equity, senior and subordinated debt investing.
Courtney has an M.B.A., with honors, from the Kellogg Graduate School of Management and a B.A. in Economics from the University of Illinois, Champaign-Urbana. She is a member of the Kauffman Fellows Class 3.
Courtney is a member of the NVCA Forward Board of Directors and the Alzheimer’s Association Northern California and Nevada Board of Directors.
[00:00] Intro [02:37] What of Courtney’s past helped her co-found Recast Capital [04:02] Three reasons to invest in emerging managers [05:17] What does “institutional quality of emerging managers” mean? [06:52] How to diligence emerging managers [10:30] How to do reference checks on GPs [14:40] How has being a Kauffman fellow helped Courtney build Recast’s Enablement and Accelerate programs [19:51] How do alumni GP stay active in Recast Capital’s community [20:59] Zoom vs. in-person education for GPs [23:00] What kind of managers do Recast Capital invest in versus who ends up joining the Enablement Program versus who joins the Accelerate program [28:33] Why are the Enablement Program and Accelerate program free [30:25] Spinouts from larger funds [32:12] What are emerging manager red flags? [34:03] Should emerging managers have answers to questions on succession planning? [36:00] Challenging the 1% GP commit: How much should different archetypes of GPs commit to their own fund? [40:52] Lessons from arguments between GPs [46:30] Getting Courtney to say yes [47:46] Courtney may make some enemies with this statement! [48:54] Thank you to Alchemist Accelerator for sponsoring! [51:30] Legal disclaimer
Jamie Rhode is Principal at Verdis Investment Management, focused on venture capital, private equity and hedge fund investment sourcing and due diligence.
She joined Verdis from Bloomberg, where she held roles in both equity research and credit analysis. There, she created, managed and leveraged an extensive library of statutory and financial and market data for buy and sell-side clients that 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 [04:27] What skills did Jamie acquire while working at Bloomberg [08:45] What inspired Jamie to go into equity research [11:55] Verdis’ original allocation model [13:27] How Verdis first built their deal flow in 2016 [15:26] What Jamie likes in a cold email [16:41] What kind of cold email to VCs won Verdis an 80% response rate? [20:27] Verdis’ inbound vs outbound deal flow over the years [22:34] Why Verdis’ mandate is to invest in diversified portfolios as opposed to concentrated portfolios [27:50] The downsides of early distributions [32:12] The benefits of early distributions [36:01] Luck versus skill [40:15] Why does Verdis measure “outliers” as opposed to unicorns [44:37] The relationship between proprietary deal flow and portfolio allocation models [45:55] How does Verdis decide which portfolio funds get re-ups [48:52] Why GPs shouldn’t conform their strategies to LPs’ mandates [51:08] Why LPs should also have consistent strategies [53:28] Why Verdis invests a third of their fund in funds based in Los Angeles [58:50] A case study on what happens when you skip a step in the due diligence process [1:02:57] The two things a GP can do to win Jamie over [1:05:32] When does Verdis like to receive their tax documents from GPs? [1:08:46] Thank you to Alchemist Accelerator for sponsoring [1:11:23] Legal disclaimer
“Diversified managers have struggled a lot more to raise capital than more concentrated managers. I think it’s a little bit of a contrarian approach.”
“That venture capital bucket is the compounding machine for the family. We don’t look to that bucket for liquidity.”
“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 public market which is 11% gets you a 3.5X.”
“90% of your overall return comes from asset allocation, not individual investments.”
“If that asset is compounding at 20%, still the last 20% of time produces 40% of your return.”
“Outliers don’t truly emerge until 8-10 years after the investment.”
“If you provide me exposure to the exact same pool of startups [as] another GP of mine, then unfortunately, you don’t have proprietary deal flow for me. You don’t enhance my network diversification.”
Earlier this week, I was listening to a fascinatingly thoughtful conversation between Tim Ferriss and Kindred’s Steve Jang, where Tim said one line that stood out in particular: “I’ve been paying a lot of attention, but I’ll be honest, I don’t know how to pay proper attention.”
And well, it got me thinking. About the difference between knowing what to look at and knowing how to look at it.
One of my favorite TED talks is by Will Guidara (quite honestly I think it deserves more views on YouTube than it has). Will is probably best known for co-founding one of New York’s hottest fine dining restaurants, Eleven Madison Park, and for writing the book, Unreasonable Hospitality. And in it, he talks about how just listening to the conversations that are happening at the tables and delivering these small, unexpected pockets of joy can create experiences that transcend money and time.
In the afore-mentioned talk, he talks about how there are four diners at Eleven Madison Park. That they went to all the top restaurants in NYC. Le Bernardin. Per se. And so on. And Eleven Madison Park was the last on their to-do list. But the only regret they had was that they never got to try a New York hot dog. Of course, upon hearing that, Will storms out the door to buy a $2 dog, brings it back to the kitchen and convinces the chef to serve it over the aged duck that took years to perfect. And when he finally delivered the next course on the menu as the hot dog he just bought, the four guests went bonkers. That despite on the multiple courses and the brilliant food, that their favorite dish was the NYC hot dog.
That it was because Will paid proper attention to his guests that he was able to deliver a truly unforgettable experience.
The truth is how to pay proper attention to anything that deserves our attention is the million-dollar question.
Paying proper attention
There’s the famous selective attention test, where viewers are asked to count the number of times the ball is being passed between the players, only to fail to realize that there is gorilla that walks across the screen. We’re told to pay attention to the ball passes, but only by paying proper attention to the purpose of why the test is being administered, do we catch what is hiding in plain sight.
Similarly, Raymond Joseph Teller (or better known for being half of the dynamic magic duo Penn & Teller) did a fascinating talk a decade and a half ago about the illusion of expectation. That magic in all of its novel facets feeds off of the expectations of its onlookers. When one tries to pay attention to the coins that are “magically” jumping from one hand to the next, you might fail to catch the sleight of hand in between. But only after he reveals his secrets is the simple magic act all the more impressive. In other words, in the second half, he teaches you how to pay proper attention.
If you have eight minutes in your day, would highly recommend watching the below video.
I can’t speak for every topic, industry, relationship, and so on out there, but at least for the cottage industry of venture capital, why I choose to write an angel or an LP check is similar. I don’t really look for what will change. ‘Cause damn, it’s so hard to predict what will change and how things will change. If I knew, and if one day, I know, please invest in my public markets fund, which will be the best performing fund of all time. But I don’t. We, as pundits sitting around the table, might draw predictions. But even the smartest of us (not sure why I say us, ’cause not sure if I can put myself in that category yet) would be lying if we knew what would happen in foresight.
Instead, I look at what doesn’t change.
What doesn’t change?
The great Charlie Munger passed away last week at the age of 99. And without question, a great loss to the world we live in today. Just half a year prior, he and Warren Buffett were hosting their 2023 annual meeting. And just two weeks prior, he was still doing CNBC interviews. And one of my favorite lines from that May annual meeting was:
“Well, it’s so simple to spend less than you earn, and invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, et cetera, et cetera, and do a lot of deferred gratification because you prefer life that way. And if you do all those things, you are almost certain to succeed. If you don’t, you’re going to need a lot of luck. And you don’t want to need a lot of luck. You want to go into a game where you’re very likely to win without having any unusual luck.”
In reducing the requirement to need luck, one of the most effective ways to find what is constant in life. That despite changing times and technologies, these stay true. Or as Morgan Housel and Naval Ravikantput it, If you lived your life 1000 times, what would be true in 999 of them? In investing jargon, pattern recognition. Across my investments and more, where have I seen outperformance? What characteristics do they all share? What about human nature won’t change?
In fairness, pattern recognition gets a bad rap. And for a lot of investors, that’s because they choose to only invest in their comfort zone, and what they know best. Their former colleagues. Their Stanford GSB classmates. People who look like them, think like them, act like them. But recognizing thematic threads stretch across all facets of our life. We learn that not brushing our teeth well can lead to cavities. We learn that after stubbing our toe on the kitchen counter numerous times, we take a wider turn before turning into the kitchen. And we learn that eating piping hot foods kills your tastebuds for the next few days.
The venture corollary
In venture, we’re always taught to look at the team, product, and market. And that all are important. But if you tell a new grad or an ex-founder or an emerging angel to do just that. To them, that means nothing. They wouldn’t know how to judge. They have no benchmarks, nor do they know what’s right versus wrong. Now I don’t want to sound like a broken record, but I do believe previous blogposts like this and this are quite comprehensive for how I pay proper attention as an investor.
Emerging LPs are not immune to the lack of perspective as well. My hope and my goal is for how to be just as important if not more than the what. And for the why to be just as or more important than the how. It’s because of that, I write essays like this and this. And of course, it’s why I started Superclusters because I, too, am looking for how to pay proper attention to the next generation of venture investors. (Stay tuned for the coming Monday for episode four where we unpack the bull and bear case of early distributions in a fund!)
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.
