Business
E222: Why 90% of Managers Fail Before Fund 3
In this episode, Conrad Chang, managing partner at Ensemble VC, shares insights on why 90% of managers fail before reaching Fund 3. He discusses the critical differences between being a great investor...
E222: Why 90% of Managers Fail Before Fund 3
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Interactive Transcript
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Today, I chat with Conrad Chang,
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who's the managing partner and co-founder at Ensemble VC,
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bringing a rare perspective with experience
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as both an institutional limited partner
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and a two-time venture capitalist.
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At Yutimko, he oversaw a $4 billion venture portfolio
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within the $81.5 billion dollar endowment,
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guiding investments across diverse asset classes and regions.
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Previously, Conrad invested in multiple unicorns
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at Northwest Venture Partners and Bane Capital Ventures,
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earning recognition as a top fund investor.
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Surprisingly, this shift from tier one VC firms
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to allocator is a rare shift.
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To have a unique vantage point,
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what do you think GPs should know about LPs
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that's not intuitive being in the GPC?
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When you're a GPs, you're so focused on putting one foot
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in front of the other.
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And what I mean by that is you're secretly focused on,
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investing in one company at a time.
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And so in some ways, you don't have the context
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that's seeing the forest, I think, from the trees.
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And that analogy can mean a bunch of different things.
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I think one of the takeaways from being in that seat
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is being a great investor is necessary,
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but not sufficient to being a great fund manager.
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Right?
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So you can have invested in great companies,
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but when you go and decide to sound this journey
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of building a fund, starting a company,
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that happens to be a venture firm,
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you're trying to build something durable,
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you're building a team.
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You're obviously fundraising, finding great LPs
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that believe in your mission.
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Single investment can be at five to seven years,
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but when you're building a fund,
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it's a minimum of 12 years effectively, 10 to 12 years.
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So the time horizon is longer.
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To be a great fund manager,
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you have to do so much more.
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You have to think about portfolio construction.
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Not just a single investment,
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but what that looks like in a collection of investments.
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And even before you're investing,
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you're thinking about how to build a great partnership.
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Not for year one or for year two,
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but for year five, six, you're 10, 12, right?
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For fun, two, three, four, five.
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And so you're actually doing a lot of reflection.
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I think before you go out to go, you know, start a fund.
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Like you really have to believe that the world
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may not need another venture firm,
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but the world needs your venture fund.
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I like that framing, which is the GP is a business.
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And some businesses get stuck in the short term,
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a little myopic, serving the next customer,
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if you think about the portfolio company
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as a customer.
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And some businesses are focused on the long term,
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which is how do we build more franchises?
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How do we be more strategic with our time,
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our money, and our resources?
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And obviously you need both.
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If you're just strategic, you're in the Ivy towers,
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you're not really getting anything done.
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So for GPs that are so focused on just making the next investment,
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what would be your one main piece of advice?
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It's easy, I think to give advice.
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I think it's very difficult to live this.
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So I don't think we're immune from, you know,
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trying to balance between, you know, short term
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and I think long term, you know, long term goals.
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I think your LPs can actually play an important role in that,
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right?
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You know, given the other managers that they've invested in,
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that maybe, you know, much further out.
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The advice I give, you know, GPs that are thinking about this
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are struggling with it.
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I think one, you know, LPs are more than just,
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you know, almost more than just green, right?
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And that standpoint, right?
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I think your LPs, you know,
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you know, besides, you know, helping you,
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you know, give you the capital to go and back, you know,
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great teams, they're also there to provide this very council of,
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you know, how to think about short term and long term.
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And you know, long term is really about durability.
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I've been in venture since 2009 when I was at being capital ventures,
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which was not frankly a great time to be in VC, right?
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I mean, is right after the financial crisis,
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you know, I was, I was worried that I, you know,
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I was concerned that I, hey, I may not even have a job.
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I mean, just candidly, right?
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And I think the lesson there is, you know, venture is,
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is some ways about survival, right?
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And I don't mean it in like, you know, I mean it in a,
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in a very serious way in that because venture is across,
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you know, multiple cycles, you, you want to play a long ball
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and you want to think about durability because you want to be
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around long enough to, you know, successfully kind of build
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that franchise.
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And I think there's an interesting data point.
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I may get this specific numbers wrong, but I heard,
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you know, Josh Copeland and talk about, you know,
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I think he looked at the numbers, he looked at the average VC
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from 1980 to, you know, 2000, right?
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Just kind of arbitrary data point.
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80, I think it was like something like 83 or maybe it was like,
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you know, 80 plus percent or 90 plus percent of the profit
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dollars made for the average VC was made in three years.
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Right? And so if you weren't a VC during this three years,
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and not surprisingly, there's like 97 to 2000, right?
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Then, you know, there's no money to be made for you or for your LPs.
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And so that data point in itself suggests you want to be,
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you know, durable, right?
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You want to, you know, be prudent and disciplined in terms of
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how you invest, you know, in that moment,
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it's incredibly difficult.
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Think about 21, 22, right?
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Which is a great example of that.
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I think at the time, you know, we thought we were doing the right thing,
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but it was difficult because I think it was almost 12 months
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that we didn't do a single deal.
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And, you know, you're not, you know, sitting on your hands
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during that time, it's super frustrating because you're meeting companies.
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The rounds are getting done by, you know, you know, great investors.
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You know, they're obviously overvalued, you know, to 20, 20 hindsight.
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And even at the time.
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And so it's really hard to look around and see all of your peers being super active.
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And then you're just sitting on your hands and everybody's looking at you.
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Like you're the, you're the crazy one.
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Like, but if you have the mentality, I think of,
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hey, I want to be in the business over 20 years.
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I want to be able to build a successful franchise.
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It's not just a, you know, I'm going to build a firm not a fund.
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Then, you know, you kind of have to put your big boy in big, real pants on.
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And sometimes kind of sit it out or be very, you know, thoughtful about, you know,
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when a deploy or how to deploy.
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It's a bit of a paradox in that all ventures driven by these extreme power laws.
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So there's two things you could do.
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You could be extremely lucky, which of course is just not a real strategy.
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Or you could be sit around and wait long enough for that power lot to hit.
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And I think that's this asymmetry that gets unlocked by staying in the game
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by having those shots on goal is one of the most underrated aspects.
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I was just speaking to Dan Ives from Wetbush, this, this famous public investor.
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And the analogy that he gave is in order to be a great public investor in the tech space,
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you have to be kind of average, most of the time, to 80 to 300.
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And once in a while, you hit this Jeff Bezos like thousand X home run.
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There's actually there's power law like dynamics in the public markets, not just in the private markets.
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If you had invested early in Apple as a public company or meta or Tesla,
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you would have these phenomenal returns.
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So I think there's this paradox in that in order to hit these extreme outcomes,
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you do have to stay in the game the way they stay in the game is doing the work.
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And also things like the boring things for further construction sizing.
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And just being in the game is such an underrated aspect.
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And it goes from when you're starting your first fund first to everything's against you.
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You don't have the track record, you don't have the LP relationships institutional,
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peace aren't taking a look at you.
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And by fund three, everything's going for you.
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But those four or five years is where 90% of managers at a minimum fail.
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100%.
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And I think I think a good example of it.
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You always hear, you know, you can be too early.
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Like you can be on time, you can be you can be you know, be late to a sector.
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You can be too early in a sector.
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Right. So when I was at Northwest, you know, they're in a you know,
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ARVR, right, it was a big thing.
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And you know, and like it didn't quite live up to expectations.
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Right. Folks were, you know, I think largely too early.
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You know, for us, when we were investing out, you know,
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we, you know, did our first, you know, I would say pilot fund.
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We invested in a company called icon.
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So this is 2000, 2019.
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An icon for those of you who may not be familiar with.
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Is a robotics company that does 3D printing.
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So they 3D print homes, you know, wrapped up a project with the NAR.
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The nation's largest home builder building out our homes.
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But they also, you know, build for the like the DOD.
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Right. So if you think you can, you know, build structures that are concrete and print them,
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you can obviously do this in a conflict zone, build walls that are bullproof and, you know,
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it's so on and so on.
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And so we invested in 2019.
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You know, defense was was not really a thing.
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Right.
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It's really there might have been dual use.
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And in many ways, it was almost like a like a like a like a knock on a company.
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Right.
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Selling into the US government.
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And it was tap.
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It was tap.
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It was tap.
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Right.
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I mean, people are liking themselves and buildings, if you remember, through that experience.
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And then recognizing, you know, over time, you know, where I think really high quality people.
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Right.
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People vote with their feet where they were.
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Saw opportunities and saw need to go build businesses.
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You know, that allowed us to go make.
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I think a super impactful investment in our current fund.
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We were in the series of Seronic.
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And then that kind of, you know, ended up, you know, further, I think educating us further seeing, you know,
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really talented people, you know, moving in to fill this great need.
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Right.
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And now it's like, you know, now it's like obvious, right.
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There's, you know, these defense tech companies, but we felt Seronic with chaos.
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You know, we invested in the.
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They're really software company early this year called manifest for the two founders for, you know, expalenteer.
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The durability aspect of it kind of back to the original question is, you know, you have to, you know, play long ball because you don't necessarily know when, you know, exact right time is.
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Right.
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But there are certain proxies that you can do, which is, you know, seeing where, you know, high quality talent is flowing, right, which founding teams are.
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You know, the biggest talent magnets, right.
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That's kind of our specialty right with, you know, our data platform.
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But you know, if you're, if you're playing long ball, right, then you can kind of make those bets.
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And you can kind of let the world kind of catch up in some ways to, you know, where you're investing, where were the, were these high quality founders are, you know, are building companies.
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I think oftentimes you hear these, these factors like talent, market size, traction, all these are positive.
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And you obviously want all of them. But where would you stack rank the flow of talent as a leading indicator of success? Is that more important than the market size?
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Is that more important than the traction? How would you stack rank that?
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You know, I think it can depend on the stage, but even I think across stages.
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Like it's kind of an easy question for us because it's a little bit on the nose, but you know, we call ourselves ensemble, right, for a reason.
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Well, it's a double in tundra, I suppose. So it was about us building a great team, but the initial idea of, you know, calling ourselves ensemble was really, you know, recognizing that it's all about the team.
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And that's really important. And I'll make the distinction between, you know, it's all about the founder or founders versus it's all about the team, right.
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I think it's an important distinction. And some people kind of, you know, kind of, you know, put everything in one bucket.
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The reality of it is, it takes a village to go create an outcome. And, you know, I had the good fortune of, you know, being a seed investor and, you know, Casper.
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I was a, you know, an early investor in you to me. And so kind of saw what it means to, you know, really require a village to go create the outcome. And that extends beyond just the founders.
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And so for us, the most important thing, you know, is the team. And so when we, you know, look at a potential investment or we're tracking, you know, a bunch of different companies.
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I think there's a lot of signal, not just in the founders and where they came from, but how they think about who is their first hire.
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Right. So is it an engineer? Is it someone on the sales side, right? Is it going to market? Right. Cause that speaks volume to, it's a reflection about how they think they're, you know, how they're going to build the company.
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And it's also a reflection of, of themselves. Right.
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Of, you know, trying to find folks that are complimentary. Right. Or, or the type of company that are building, you know, very product engineering focused versus very good market focused.
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And it also speaks volume of like, how do they find this person? Right. Is it someone that they had known, you know, for a long time? Right. Is it someone that they had worked with before?
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Or is it, you know, they put a job posting out, not saying one is really good, you know, that's a good or bad.
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But I think that dynamic of who's your first hire, you know, who's your first sales hire, who's your first product engineering hire. How do you sequence that? Right.
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What does that team look like? How are they complimentary? There's so much, there's so much of a story that tells, you know, some of it.
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You can, you can measure it, right? With data and others, you, you know, you get context for meeting the founders.
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And so what we like to do before we invest is we actually, we like to go on site, you know, not always, but in most cases.
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We like to go to their office, we like to go, you know, meet the founders and we like to go meet other folks on the team, right? Very organically.
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And that just, I think that just speaks volumes to, I think the true reflection of a company that's a particularly at their early stage.
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Going back to your time at Utimco at University of Texas Endowment, as I mentioned, you went from the GPC at Bain and Northwest Bain Capital Ventures and Northwest to Utimco.
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So what were some of the lessons you learned right away, which is like, holy crap. This is why these LPs like us, these LPs didn't like us. In other words, from the LP perspective, what is something that became immediately obvious that is not obvious to most GPs today?
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This is one that is a little bit counterintuitive, right? Think about a sports team or something in some ways, right? Like you want to find the best absolute people like in their position.
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Right? See, you know, you look at shooting percentage or whatever it is, right? And each individual person who's highly competent is going to make a great team.
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Right? The reality of it, I think, it doesn't quite translate it on the venture side. And what I mean by that is the single most important factor that I observed when I was in the seat at Utimco was trust as the number one factor for a successful partnership.
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Right? So we go back and I love the fact that you asked that question about the short-term and long-term trade-offs, right? If your goal is to go build durability and success, like repeatable success, then trust is 100% the most important factor.
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And what I mean by trust is, you know, I think it starts with the partnership. You know, who you decide to go and business with.
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In this case, it's, you know, Colin West, who I know since, you know, 2013, right? When we were both kind of junior VCs, you know, just having good with the Bay Area, you know, Colin was a was a friend of mine.
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And I had their co-founder, gopey, you know, Colin had gopey, could Colin and gopey at work together, you know, for four or five years, you know, prior to us, you know, really formalizing, you know, what ensemble is today.
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And that trust factor, you know, again, starts with the partnership, you know, you're not going to be in the same room, you know, you're, you know, all the time, you're going to 100% disagree on things. Right?
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And the question is, how do you react to that in the moment? Right? Do you let your ego get in the way, draw a line in the sand and then defend it to the death? Right? So, you know, great for your ego, but bad for the firm.
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Right? I've seen situations like that where, you know, and I argue kind of the bigger the bigger the organization harder it is to go is to, you know, do what's right for the organization.
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There's so many different personalities. But then that trust starts to extend to the folks that you hire. Right? And, you know, meaning you want to give them as much rope as you can.
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And, and you kind of like let them earn that trust and you give them more and more rope.
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And then it also extends to your LPs. Right? You know, how you communicate what, you know, what you share. Right? And even more cases, right? Your LPs not going to be in the room.
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You know, they'll make the investment, you know, you can catch up with them in the meetings, newsletters, you know, like, you know, even over text. Right? But the reality of it is that, that LPs entrusting you, you know, with dollars that are eventually going to go for scholarships. Right?
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And they're not going to be in the same room. And, you know, how do they have that that level of trust that's going to extend, you know, beyond the life of, you know, this fund and, you know, certainly into the next.
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This term trust is, is a term many LPs use and many LPs like you who are a University of Texas will say it's even more important than, than returns.
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Let's double click and define exactly what it means to have trust with your LPs. I know it sounds extremely obvious, but what are some examples and more importantly, what are some tradeoffs? So what is the skin the game for GP to have a trusting relationship with their LPs?
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People will always think about, you know, the LP world is so, so distinct. Right? But I think having been in all these different seats, there's actually way more similarities of the relationship between say founder and a GP, and an LP and a GP. I actually like, I think it's, it's super consistent.
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And so an example of that is you meet with the founder, how you got introduced to that founder, right, or how the founder gets introduced to that VC.
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And I think it's the same, you know, when it comes to, you know, the beginning or the commencement of an LP relationship, right, which is, I think in that ideal case, you're being introduced by other GPs, right?
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Maybe that is our investment and that DP, you know, it was you've well over, you know, not three months, but over, you know, years.
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And, you know, they can speak to that, that credibility and that trust factor, right? So I kind of define this as I trust my proxy.
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Right, trust is something that you cannot or a very, very difficult in most cases to establish.
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In any way outside of time, right, we're a number of interactions, right? And the way sometimes the shortcut that is what I call trust by proxy.
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Right, so you have a mutual connection that has deep relationships with, you know, the, you know, both other, you know, sides, it can kind of bridge that, right?
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Not in a, not in a perfect way, but in a way that can help kind of, you know, build that relationship.
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So that's one, right? What's the nature of the, of the commencement of that relationship? Right, ideally you want something through, you know, trust by proxy through warm introduction.
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Because it, because it sets off the relationship is not a transaction, right? What it does is it, it catalyzes it in a, in a relationship building exercise.
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And I, you know, I, I would really credit like, you know, my experience at Utimco, but also one of our recent hires, you know, Caroline, who joined us from Vista.
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And it's really this mentality of treating your LPs as, as a true partner. Right? So again, I, I kind of mentioned this earlier, but beyond capital. And that's like everybody kind of says that, right? But what does that actually mean?
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You know, what it means is that it's, it's, it's two A street, right? For the LP, you know, they obviously want a financial return, but they're also looking to educate themselves on, you know, specific, you know, areas that you may be investing, right?
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Like, by the way, they're not just running a venture portfolio, right? And even though I was running, you know, venture at Utimco, I was also doing, you know, technology investments with, you know, buyout managers.
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Right? And so like sometimes the, the GP is so narrowly focused on kind of like, you know, their world. And then forgetting that, you know, the LP, you know, venture is important.
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And in many ways, like the alpha driver and their portfolio, but you know, they're managing a public portfolio, they're managing a private equity portfolio. And what you're doing actually, you know, if you're investing in defense or investing in AI, right?
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It's going to affect the other portions of the book. And so what we do. And I think a lot of managers do is, or certainly the best ones.
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We'll take a step back and help educate their LPs on, you know, certain areas that, that they may be interested in our last annual meeting, you know, before seronic became such, in many ways, like on people's radar.
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And so our, Dina Mavruchas is the CEO of one of the co-founders, I came and spoke our annual meeting. Right? And this was like 2024. And, and so like, it kind of helped educate, I think, folks on, you know, what does it mean to, you know, what does it mean to, you know, think about shipbuilding in the US, right?
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What is the challenge that the US has relative to, you know, China, right? Which has the biggest, you know, over 200 times the capacity of the US and shipbuilding.
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And then I'd say the street goes the other way when, you know, we're investing, you know, like an example, we're, like samples, we're investing in a Fintech company.
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That was basically doing, like, you know, cross-border payments.
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And, you know, one of our LPs, actually, you know, a multi-finaly office based in Houston actually owned a lot of these different kind of businesses that would be affected by it.
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And they made an introduction to one of their, you know, like, you know, businesses that was not venture backed, right? And we were able to have a conversation with them to help us understand, you know, what are the implications of, you know, cross-border payments specifically between certain corridors, like, what does that look like?
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How is their business performing?
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Because ultimately, you know, the venture backed business, if it's successful, is going to kill that business, right? And so how do they think about, you know, that threat?
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And so, again, it goes back to, you know, thinking about building a firm, you know, with your ability, long ball, having a deep partnership with LP.
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And what that means tactically is, like, you know, this sounds crazy, but like talking to your LPs, right? Like making sure that there is, you know, active two-way communication.
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Sometimes it's one way, in the sense that you are sending probably more information than they're reacting, but you have to overcommunicate, you know, with your LPs.
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One of the reasons I was so excited about a conversation is because you had that two different Tier 1 VCCs. You had the Tier 1 LPC, you were the customer, you were the buyer, and you were in the room having these conversations.
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And I think one of the things that GPs, when they hear, you want to trust the relationship, they think, sure, great in theory. But in reality, how does that look?
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If you think about it from this concept of a partnership, which I love the framing, I have my business partner, Curtis, we sit down, we not only talk about business once in a while, we'll talk about, you know, we were both now married, we talk about our wives, we talk about our families.
spk_0
Tell me where your analogy ends, and maybe tell me the nuance in what it means to build a trusted relationship.
spk_0
Yeah, that's a great question. I, you know, the first way to answer that, again, going back to the analogy, well, what is the, what is a founder GP relationship look like?
spk_0
So all those questions that you asked, how would you answer that with your own founders? Right.
spk_0
And so if you take that lens, I think one, it's hard to treat everybody equally. Right. Like let's say everybody in your cap team, if you're the founder, right. Very, very difficult to treat everybody.
spk_0
This is practically right. Yeah, it doesn't work. Right.
spk_0
But that doesn't mean that the founder does not communicate with even the, you know, 0.1% owner on the cap table, right. So how do they do that?
spk_0
They do it in ways where they over communicate, but they do it in a more scalable way. Right. So they're constantly sending updates. Right. Maybe some monthly update or a quarterly update. Right.
spk_0
They're giving, they're giving the opportunity for even their small folks in the cap table to, to be heard and to be seen. Right. And that analogy against extends to the LP side where you may have some folks that aren't on your LPAC, maybe individual investors.
spk_0
But they should still, you know, be in the loop and updated. And then more importantly, you should reach out to them. If you, you know, if one of them has a connection that's like quite valuable, right.
spk_0
Like LPs and then GP only want to do is be helpful. Right. They don't want to be viewed as just money. Right. And sometimes it's only five days out of the 365 days in a day where that, you know, LP can be helpful. But in those five days.
spk_0
You know, it can be extremely valuable for the GP. Right. And so I think it's, you know, taking the initiative to, you know, reach out to your LPs, you know, keep them updated.
spk_0
But also, you know, make sure that you're seeking, you know, their advice when you know that they have, you know, a much better knowledge base. Right. You know, they're like in my time, good days. Like, you're raising a continuation fund. Right. Where you're thinking about.
spk_0
You know, getting the intelligence specific LP maybe in Europe that wants to come in and they may have context. Right. So it's, I think it's leveraging their unique knowledge base.
spk_0
You know, to help you make, you know, better decisions. And then, you know, where does the analogy, you know, and I actually do think it, it's really important to, you know, think about not just the professional nature of the relationship, but also personal one. Right.
spk_0
Again, I go back to the the founder GP thing, right. Like it absolutely extends, you know, beyond just, you know, a board meeting or like, hey, did you hire the VP of sales and I interviewed you know, two weeks ago. Right.
spk_0
It's, hey, I know you're about to have a kid, you know, that's super exciting. Right. You know, you must be thinking about a bunch of different things kind of had a balance that. Right. Hey.
spk_0
You know, I know you're going through, you know, you know, a family, you know, personal thing, right. Like just acknowledging you and saying, hey, like, you know, it makes sense for, you know, spend time on that or something. Right.
spk_0
Like we're all human, right. Like just like the struggles of a founder who's starting a company going from zero to one is the same for, you know, fund managers. Right.
spk_0
Or, you know, having the Lego partner or whatever it is, not all your LPs are going to be equipped right to be that coach.
spk_0
But you will know the, you know, the few that you have a very deep, you know, personal connection with where it's okay. I think to, I think to share some of this, right.
spk_0
And you have to be thoughtful like about, you know, what, what it makes sense to share.
spk_0
And so it's never like I'm going to share everything or I'm going to share nothing. Right. That's not the framework, right.
spk_0
The framework is like there's something in between. And I think a lot of folks take the mentality of one or the other. Right.
spk_0
It's, it's probably somewhere between and I would probably say it's probably a little bit more towards being open. Again, it's not to everybody who's an LP and your fund. Right.
spk_0
You know, I think it's to a handful of folks that they may not even be your biggest chapter. But once that, you know, you have a relationship with that you can be open with.
spk_0
Because the reality of it is everybody's aligned. Right. So, you know, your LPs and your fund for again, at least 12 years.
spk_0
Right. Whether or not they decided to come in, you know, the next fun or not, you have to earn that.
spk_0
But, you know, if they're, if they're in your fund, they're all, you know, it's a, it's a, it's a marriage for 12 years minimum.
spk_0
These are the conversations and how many people have certainly not, not through podcasts. But I think this is where the relationship alpha is like where the truth lies.
spk_0
One of the most prevalent memes in asset allocation today is that LPs are choosing to back fewer managers and more, more led behind fewer arrows to use the Google analogy.
spk_0
So, there's this pressure to cut managers. How do managers balance the desire to have a trusted long term sustainable relationship with LPs while also, you know, at the same time where in the market LPs are looking to be.
spk_0
And to chop managers and how do you threat that needle? What are some best practices?
spk_0
That's obviously, I think top of mind for folks. There's no silver bullet on any of this. My perspective on this and it's, you know, I kind of put my old you Temco hat on, but also, you know, the ensemble hat at the same time.
spk_0
And the way I would answer this is it is what it is, right, meaning like if you have an issue, whether it's, you know, performance or, you know, within the organization, like, it's happened, right, it's the reality of it.
spk_0
And it's not the fact that like something like this surface because that happens to every firm, right, it's, it's, it's really the question of how do you address it and then how do you communicate it?
spk_0
And I think like the, you know, I think the advice I did myself and I get of others is, you know, I think understanding the like one that I think the gravity of what it is, right.
spk_0
And so you obviously don't want to communicate like every little thing, right, to your LPs, not because you're not trying, you know, you want to avoid being transparent, but to like you want them engaged on the things that are the most important.
spk_0
Right, and if they have, you know, if they're managing, you know, I think you Tim Care had, I think it was like 16 core of at BC managers and then some other, you know, legacy ones.
spk_0
If everybody is like, you know, every time, you know, I stub my toe or something, right, I'm communicating that.
spk_0
The LP doesn't know when to engage on the things that are more important.
spk_0
Right, so there is a threshold of importance, right. And as an example, right, like, you know, you know, there's probably a lot of, you know, even have a small firm there, you know, there can be turnover at the junior level, right.
spk_0
So like, do I communicate that? Do I not? Right, you know, I'm not sure that that means kind of threshold, right. But if it's someone more senior, then obviously like that affects, you know, economics, it affects.
spk_0
You know, maybe some strategy thing. So that may be something to, you know, communicate with your LPs.
spk_0
And then tactically, what you may want to do, right, just like a founder manages his or her board, you may want to have this conversation, you know, one, one on one initially, right, with the LPs that you have a very good relationship with.
spk_0
Right, that you have this level of trust, right, and see how they react.
spk_0
And then, you know, and then bring them into the circle of trust, whether they're already in the circle of trust, and as you need to communicate that with other folks, they can help facilitate that or certainly give you advice.
spk_0
Right, meaning, you know, it's a serious issue for the firm and, you know, you think it's like, you know, the most important thing going on in your life and in the world globally.
spk_0
Right, because it's the first time you've come up with you've run across this. The reality of is, you know, for the LPs that have been in the business a long time, they see this, this is actually a more common issue.
spk_0
Right, and so they can actually give you counsel on, you know, how serious this actually is and, you know, what to do in this situation.
spk_0
Again, you think about a founder, right, who, you know, is in a situation of like, hey, you know, how this co founder, right, you know, it's not working out.
spk_0
Oh my god, like, I'm like stressing out about this. I know what to do.
spk_0
Like this could kill the business. The reality of it is, if you look at, if you're a GP and you've invested over, you know, many, many companies across, you know, cycles.
spk_0
Like you, this has happened, you know, more than a few times, right, and you're brought portfolio.
spk_0
And so you can actually have the data and the, you know, case studies to suggest, hey, like this is kind of how you might want to manage this, right.
spk_0
Just like GPs have a portfolio of founders, you know, the best LPs also have a portfolio of the Cs that they can pull from and draw experiences from.
spk_0
I think that's probably like, you know, selectively, I think seeking counsel with the folks that, you know, you trust very, very deeply.
spk_0
To summarize, one is you don't want to be like the girl who cried wolf, you don't have to send every day and you're going to seem like you're not able to regulate your own emotions.
spk_0
You want, but you do want more transparency. So probably the default human benchmark to communication is probably lower than the ideal one.
spk_0
So for some reason, GPs on average are way below their kind of optimal level of communication.
spk_0
And also you want to make sure that your communication and the narrative that you're putting out, even if it's transparent, that you explain it in the right way.
spk_0
And you might want to test on a couple trusted circle before you kind of blast it out to 150 LPs.
spk_0
Yeah, absolutely. I go back to, you know, what are the best practices that you would give a founder on communication, right.
spk_0
And, you know, it should be similar to how you communicate with your LPs. It really shouldn't be that different, right.
spk_0
I mean, there's a little bit of nuance to it. But at the end of the day, you know, you want your founder to not text you on every little thing that is an issue that comes up in the business.
spk_0
You know, surface the ones that are relevant, you know, maybe on a quarterly basis, right.
spk_0
With, you know, in this, you know, you like to have that discussion one on one prior to the board meeting, right.
spk_0
If it really warrants it. And you also want a founder to have a plan of action, right.
spk_0
In advance, you know, not, not ask you, hey, what are you doing this for this problem, but say here's the problem. This is my course of action.
spk_0
You know, am I missing something, right. What is your feedback on the course of action that I'm planning to pursue.
spk_0
One of these things that I've been thinking about is this concept of rooting things.
spk_0
So rooting investment thesis. So everybody might make the same buy decision to buy Bitcoin. But if I spent a year thinking about why when it goes up and down, I'm not going to sell.
spk_0
So it's great if you bought Bitcoin $100. If it goes up to 200 and then goes down to 140 and you sold. Then you gave up the other, you know, $120,000.
spk_0
The other, you know, the thousand X. And I think this rootedness is also applies to relationships and LPs.
spk_0
If you assume that on a long enough time horizon. And I've literally talked to Jonathan Gray from Blackstone Cliff Asnist for Make You Are about this very topic.
spk_0
If Cliff Asnist and Jonathan Gray have had issues in their franchise, I guarantee with enough time any GP on this plan will have those issues.
spk_0
And the way that they handled it also by over communicating meeting with LPs. But I would also add kind of the subtext of what they're saying is they built this trust also over time ahead of that.
spk_0
So if you think about it as the trust and the relationship as a tree trunk, you could strengthen the roots of that tree trunk through trust ahead of the crisis.
spk_0
Because just and no one wants to be transactionalized. And if you're only talking to your LPs when you need them or when there's a crisis, it's not going to feel good for them.
spk_0
And you're good, you're likely on that chopping block that we talked about. But if you build that relationship ahead of time, not only will they maybe not take capital from you.
spk_0
If there's a good market opportunity, the smart LPs, the very top top portal LPs might even double down on you and allow you to actually build build your elephant build your franchise during difficult times.
spk_0
It's easy to sometimes say these things. This is very hard to do in practice. Right. So it's not like, oh, there's like a there's an instruction manual. You do this and you do this at this cadence.
spk_0
I think it's just if you just think about it, right, as a priority for the firm, then you know, it'll naturally kind of follow, you know, some of the things that you do, right. It's it's an aspiration, I guess, in some ways, right.
spk_0
You kind of have to aspire to build partnerships with your LPs, even if some of those don't look like that today. Right. And then this the second thing I'd say, and look, I was I was guilty as this guilty of this when I was at you, Tim, go as well.
spk_0
Right. Like, yeah, I'm not I'm not casting stones on on on anybody here.
spk_0
But you may over communicate you may do everything to try to establish a great relationship with your LP, but that LP may just not reciprocate. That's going to happen. Right. That's okay. Right.
spk_0
But I think like again, if you're thinking about playing long ball and durability, you just kind of have to go the extra effort to recognize that hey, they're, you know, they're managing a bunch of stuff, not just you're fun and not just venture.
spk_0
And so you may be setting them all this, you know, all these different materials asking to catch up when you visit, you know, you know, wherever they're based and they may not, you know, get back to you. That's okay. Right.
spk_0
I think making the effort, you know, making sure that you're thinking of them is in itself, I think what it means to be a good, you know, a good partner. Right. Say all this stuff. And I think some people's reaction is like, I tried that, right. But I'm not getting any love back.
spk_0
And that's happened to us also. But every now and then, you know, you'll get a note and say, hey, you know, like we, you know, one of the things that we pride ourselves on since we, since we started was we will write a mid-year letter.
spk_0
Right. Like, and it's, you know, the first one, it was, you know, it took like months to write it because we never wrote one of these before. It actually wasn't that it was like, okay, when I go back and read it.
spk_0
But we've made it, we've made the effort to write a mid-year letter every single year. And then, you know, what's the greatest feeling in the world is when someone, you know, someone that you reached out to multiple times doesn't respond.
spk_0
But on this latest one, you know, they say, hey, like, you know, great, great mid-year letter. Right. Really enjoyed reading it. Right. And so like, it's, it's, you kind of have to, you get credit for being active and being thoughtful and, and, and being consistent.
spk_0
Right. You'll get feedback occasionally, probably not as much as you would like.
spk_0
But, you know, you should make sure that you're always acting like you're thinking of them. Right. I think that's, that's kind of like an intro, like a, I don't know, like one principle to, to think about.
spk_0
So Rahul McDowell, he's one of the greatest fundraisers alive. If, if not the greatest, he's raised $99 billion.
spk_0
And he tells the story on the podcast I did with him in that he talked to one of 1.2 billion dollar foundation. The CIO told him that just that past year, he got 934 voicemails, not calls voicemails from managers, not in his portfolio and not even talking to him about investing.
spk_0
About how he should invest. And this is just this very, I guess, visceral way of showing how busy LPs are, how overwhelmed they are.
spk_0
It truly is oftentimes not you. It's them not you.
spk_0
Did you find you were at Utemko, which in many ways is, is today I think it has 60, maybe 70 billion.
spk_0
It's endowment. It's one of, if not the most kind of coveted LPs in the world, tell me about your lived experience as a LP at it, such a prominent endowment.
spk_0
So I joined, you know, right a little bit before the new CIO, Bert Harris joined, Grot was actually in our office, I don't know, like month ago.
spk_0
And he had come from TRS, which is the teacher retirement system of Texas.
spk_0
And so I think one of the things that I really give, you know, Bert, a lot of credit is, you know, I think further institutionalizing what was already a great endowment.
spk_0
And what I mean by that is, the way that you operate a, you know, $2 billion endowment versus a, you know, 60 or 70 billion endowment, right, like intuitively has to be different.
spk_0
One of the exciting things about Utemko is that the size of the endowment grew very, very dramatically over, you know, the last 20, 30 years.
spk_0
Right. And there's, you know, there's a lot of history to it. But you know, some of it, you know, being a Texas, this was money coming from the Permian Basin, right, like just some random historical context there.
spk_0
And so Utemko had this really amazing opportunity in task of not being short on cash and cash inflows, but making sure that it was being, you know, invested, you know, at scale.
spk_0
But in a very thoughtful and strategic way.
spk_0
And to do it, you know, actually relatively quickly, right.
spk_0
And, you know, as that endowment, I think, you know, grew, you know, I think the Utemko board, I think rightly recognized the need to really institutionalize and really help, you know, evolve the endowment from, you know, smaller endowment to, you know, one that, you know, frankly rivals the size of like a pension fund, right.
spk_0
I think Utemko is like number one or number two, depending on how you, you know, it's, you know, like how you measure it. But effectively, it's like one of the, you know, it's like the largest endowment in the world.
spk_0
And so, you know, when I was there, it was kind of thinking about, you know, what processes that we want to apply, you know, across Utemko to bring, you know, an additional level of rigor, but also a way to invest more repeatedly and consistently.
spk_0
Right. And, you know, what that tends to mean is like, I think formalizing, you know, the investment process, you know, how opportunities got surfaced, you know, as the organization grew, making sure that everybody in different parts of the organization were informed on, you know, what was coming down the pipeline, right.
spk_0
Again, you know, an endowment is not just venture, right. Not everybody who sits around the table is, is equally versed in what that means, how to invest.
spk_0
Not everybody's here as a quiet, right. And so making sure that there was a mechanism in place to, you know, get everybody on the same page.
spk_0
And, you know, in some ways kind of standardized, you know, that process. At the time, you know, you know, whenever you put new process in place, you know, and you're learning and you're figuring things out, and doing something new, like their moments where it's not that fun, right.
spk_0
But, you know, now that, you know, I'm in the seat at ensemble, you know, found the firm, it's really important to put process in place. Right.
spk_0
So you're not collecting a bunch of shiny objects for one thing, right. And then to, you can have repeatability in your performance, right. And the, and the grandest scale, it's an endowment, like the down it is going to live beyond me, beyond you, my kids, your kids, your kids, your kids, your kids.
spk_0
You know, everybody's kids regeneration. That's the hope, right. And so the time horizon is almost infinite. And so we have to, you know, in order to fund, you know, my scholarship, and then, you know, maybe my kids will go to UT on a full ride too.
spk_0
You have to create like repeatability, you know, consistency. And that was kind of an important lesson that we applied on ensemble. So, you know, we're, you know, I kind of bucket ourselves as an emerging manager.
spk_0
Right. But when we've, you know, put together ensemble, we always had the mentality again at being aspirationally like institutional. Right. So taking some of the lessons, you know, not from like, you know, true venture is fun one, but from true ventures fun five.
spk_0
Right. And saying, well, you know, how do we look more like them? How do we avoid, you know, maybe some hard lessons. And so how do we make ourselves institutional?
spk_0
Vinod Koso pop up is zero million dollar business versus zero billion dollar business. How they function from from day one. And you did see a simulation of dozens, if not hundreds of funds venture funds at you, Tim, including some of the best funds in the world.
spk_0
What were some practices that the very top GPs or the GPs that made it, let's just define it in the outcome.
spk_0
What did they do from the very beginning that was different from the ones that were even second or third quarter tall?
spk_0
The best managers were the ones that could give you a sense of what they were looking at, how they saw the world in a given moment.
spk_0
Right. So that goes back to like over communicating and transparency.
spk_0
So I'd say that's kind of, you know, the outcome of it was, you know, knowing kind of where folks were spending time, how they kind of thought about the world.
spk_0
You may not agree with it or you may have questions about it, but you had a sense of like who they were and like how they were thinking about things.
spk_0
I think the second thing that the best managers did was, you know, I think go out of their way to make sure that you knew what they were thinking.
spk_0
You know, meaning that they would travel, you know, countless managers would make the effort to travel, you know, down to Austin.
spk_0
Austin's a great place, right.
spk_0
But some of our managers remember a land or, you know, Tel Aviv, but they would make that trip be very proactive about.
spk_0
You know, certainly you could read it and I'm, you know, midyear letter or an update, but more importantly to build on that relationship, that personal relationship and that takes effort.
spk_0
So I think the best managers did that.
spk_0
And then I think three, the best managers also made sure that the LP relationship was with the firm in addition to maybe having a strong, you know, like a close relationship with a specific partner.
spk_0
And so when I would go and visit specific managers, I'd have the opportunity to go meet with like multiple folks on the team.
spk_0
I'd have exposure to the whole partnership I'd meet with folks.
spk_0
And you know, that way you can kind of, the LP has a sense of, you know, how is this, how are these, you know, how is this partnership functioning, right, our folks in the same page.
spk_0
You know, how are they, you know, how are they, how are they complimentary, not when you're diligently.
spk_0
Them, whether or not to re up in this fund or to invest in the fund.
spk_0
But, you know, how they're, you know, working together, you know, after you've committed to the fund, as are deploying the fund.
spk_0
But those are just, I think some of the ways that.
spk_0
You know, GPs, I think have, you know, like, hopefully I think worked with, you know, some of their LPs.
spk_0
It's downstream of this partnership mentality. If you have a true partner, you're not going to send them a letter.
spk_0
And you're going to make an effort to actually meet with them.
spk_0
And again, like, this is a hard thing to do. I'm not, again, it sounds like, like you listen to this, like, oh, of course, like, the Conrad, like, you know, I'm a solo GP, right, or Conrad.
spk_0
You know, there's like three people on the team, right, like, we had to experience all this also.
spk_0
And, you know, there's sometimes where we probably could communicate it better, could have done things better.
spk_0
The reality of it is like, again, this is aspirational, right. So you have to make this a priority and kind of work towards best in class.
spk_0
Right. But if you're not thinking about it, then you're not like, you know, it's like you go to the gym, like, you know, and you're not working a specific muscle continuously.
spk_0
There's no expectation that like you're going to, you know, run faster when you go on the track or something, right.
spk_0
You kind of have to constantly cultivate this, even knowing that, you know, this isn't going to like excellence is not overnight.
spk_0
Right. It's this mentality. And we kind of, we practice this ourselves. I think a lot of the credit goes to go be who's my other co founder, who's our head of data science, head of engineering, of taking this mentality of building software, right, which is like V1 is not going to be like lights out. Right.
spk_0
V1 is probably going to be, it may be pretty, pretty crappy. Right. But we're going to constantly iterate. It's not a point in time.
spk_0
And this is kind of it. This is a constant iteration. Interaspiration is to get to like V infinite or every version of it will continuously be better.
spk_0
I know for a fact, next week we're going to be better, the products me better than the week before and next year, it's going to be like dramatically different.
spk_0
And so we have that mentality, not just in us building product for, you know, for ensemble, but ideally in how we're managing like, you know, marketing, how we're managing, you know, you manage relationships with the LPs, like we're no, we know we're not the best.
spk_0
We're far from it, I think, in a lot of different ways.
spk_0
But we're constantly looking inward and saying, hey, like what can we do better? And then having the expectation that a lot of things we do aren't going to work and they may fail.
spk_0
But that's not an excuse not to constantly try to, you know, try new things, you know, to push the boundaries and do better.
spk_0
If you think about it, all venture, performance or any asset classes relative, if you think of this as relationship alpha, so you have your returns, you have your information alpha, you have this relationship alpha, a little bit goes a long way if your peer group is never flying to maybe Austin's a little bit easier, but maybe it's North Dakota or Alaska and you're flying once a year.
spk_0
That goes a long way. So a little bit goes a long way as well.
spk_0
So let's talk about ensemble, your fund mutual friend told me that you have a 12x mark on your fund one. First of all, is that true? And two is tell me about how you went about constructing fund one.
spk_0
Well, one yes, like we're very proud of the performance and our phone one, it was our pilot fund.
spk_0
And you know, we had the great fortune and maybe misfortune of like, you know, having a very novel concept at the time when we raised the first fund in 2018, which was around this idea that you could bring up a product engineering culture and mindset.
spk_0
To a venture fund, right? So, you know, obviously that means being data driven.
spk_0
But really having this very different approach of in order to get better, right, we're going to go build software, we're going to go build product.
spk_0
Right, we're not going to throw more people at it. Like we're not going to, we're not going to, we want to grow exponentially or step function through software versus grow linearly through people.
spk_0
And so at the time, right, the use of software and data was, you know, not super obvious. And so it was a very difficult fund to raise, right, kind of passed the hat. It was a very, it was also a small fund.
spk_0
But, you know, we had the opportunity to go incubate this actually within coffin fellows to really experiment, you know, test this out.
spk_0
And our sole objective in that phone one was to really prove that we could use data and use software and product in a way that could significantly change how venture firm would function.
spk_0
And then in turn, deliver better performance than, you know, like, you know, the typical venture fund, right. So that was kind of the thesis, right. Could we radically implement more product engineering into venture firm.
spk_0
Did we expect it to be, you know, like a 12 x fund. And hopefully, like, you know, you know, greater than that, which we think it can't give in some of our positions.
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It's outperformed or kind of wildest imagination, right. Of, you know, of very, very specifically, you know, finding great teams, right, not just great founders, you know, early, right through a bunch of different signal that we could measure and track.
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And then also use that early advantage to translate into collaboration with other funds and then earning access. Right. And so that was the thesis that we proved.
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We had 12 investments. I think it was like five or six of the 12 ended up, you know, being ended up companies being valued over a billion. Right. So we had, you know, you know, big, you know, zoom in that portfolio as an example.
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We had grow, which is a Robin of Indian that portfolio.
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And so that was, I think the initial, you know, proof of concept that allowed us to go think about, you know, the national question after that is, well, how do you scale this strategy.
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Right. You can you scale this strategy. Right. When, you know, you're writing bigger checks. Can you actually earn bigger access. Right. You know, can you actually collaborate with other funds.
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Like, you know, you know, can you have this kind of repeat hit rate in the next fund. And so that thesis around using data and product engineering has evolved significantly.
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You know, since our fun one and the best reflection of that is from, you know, the co the founders were now a team of 12.
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Half of the folks on the team are data scientists and engineers and the other half are investors and like folks in operation.
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So, so people kind of say, oh, well, you know, every fund is a data driven fund now.
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Like, I hope that's the case, right. Because I think that'll actually deliver better allocation of capital. So I want more and more folks to be data driven.
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But, you know, to like, there's a spectrum of what it means to be product engineering focused, you know, fund.
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And, you know, we've extended, I think that software advantage into every aspect of the venture fund. So not just on the sourcing side, but also in the winning and value outside.
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We've built products to help our founders access customers, you know, find great people to hire and then, you know, other functions as well.
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Give me a very specific example of how data helps you make better investments.
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The simplest way to describe it is thinking about how venture has been done, you know, since the very beginning, right, in the evolution of that.
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And maybe the minimal evolution of that, which is historically, you know, it's venture for started. You put your firm on San Hill road.
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Right. And, you know, founders, you know, there weren't that many firms. And so, you know, founders would, you know, find out about X firm and go visit you. Right. Over time, that's evolved to, you know, more nodes, right, in other cities and other places.
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And, you know, founders don't necessarily just come to specific firms.
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But you basically find opportunities based on folks in your immediate network. So, you know, maybe you used to work at Stripe or maybe, you know, you've been invented for, you know, X number of years, you know, had, you know, had companies might public and so you're backing those folks that are leaving those companies, right.
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But it tends to be a very kind of, you know, finite network of folks.
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And you really don't know where to hunt. And so, you're, you know, think of it almost like a random walk, you're, you're top of funnel, you're meeting a bunch of folks.
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And, you know, very few of them end up translating into investments.
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And the headline of that, and I always found this really odd, is, you know, VCs would always say, hey, you know, hey, you know, now it's not you, Tim, like, hey, Mr. LP.
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You know, I met 10,000 companies or a thousand companies last year, right. And I made one and, you know, I made one or two investments, right out of meeting a, you know, a thousand companies. And you're like, you know, and they're like, they're so proud because it demonstrates the rigor that they have.
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And, you know, how, how high a bar that they have the reality of it is that conversion is pretty bad. If you, if you think of any other, you know, sales organization, right, you get fired.
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Right, if you had to meet a thousand people and you sign up one customer or you know, like, like a P from doesn't work like that, right.
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And so the question is, is well, how do you actually change that funnel very dramatically? Right, because the reality of it is you don't want to be spending time aimlessly meeting folks, right, even folks that get recommended to you, right, because you saw that conversion rate.
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The reality of is you want to redistribute your time, right, from below value activities of first meetings to the high value activities of building the relationship, finding them early, and then positioning yourself to win what is, you know, very, very competitive, you know, deals.
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And so it's shifting kind of what that funnel looks like from, you know, peer, appear, maybe, you know, a diamond in terms of like time allocation.
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And so what we've done is build a platform internally we call it unity.
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We have offshoot products called discovery, you know, you have a value add product, like GTM 2.0. There's multiple products that we have internally, but within unity, what we're trying to do is dramatically change.
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You know, where time is spent, right, so if you can actually refocus all of your energy on a smaller set of opportunities that have a higher probability of generating, you know, big outcome, right, not a guarantee, right, then you can fundamentally reallocate all of your time to be a diligence in these opportunities, you know, and also, you know, winning them.
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And so the question is like, well, what is that, what does that look like? And so for us, you know, that means not just having a box checking exercise of, hey, we, you know, we use chat GVT or we buy a bunch of data from, you know, so and so that anybody can do, right.
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It means, you know, building things, you know, vertically integrating, right, so building our own product internally, right, like we don't, you know, there's nowhere else to get kind of what we do, right, because we've actually built all the infrastructure internally, right, not just the application layer.
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And that also means fundamentally building new process in the firm, right, so how we meet as a team and how we run our process looks very, very different than when I did at Northwest and also being capital, we run it like a software company, right, every month we know what opportunities that we're going to be focused on, we're probably 70% outbound as a result of that.
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And then I'd say the latest kind of evolution of the firm is we've actually changed how we've hired, right, and so that's probably the biggest distinction between, you know, at least outside looking and of what it means to be a, you know, a data to refund is that we fundamentally re architected what the organization looks like.
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So not only is our, is my co founder, what are my co founders, you know, you know, head of data science, head of engineering, right, gope came from IBM Watson, but we've hired, our most recent hires have been, you know, two of which have been on the engineering side, right, and so half of us are on the engineering and data science side, right, it's not a box checking exercise to say, okay, hey, you know, we have the enterprise license for chat, GPT and we hired a data scientist, right, like we're good to go, like we're data driven and we're going to be able to do that.
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And we're going to have the advantage, right, the reality of it is like you're constantly iterating your constantly building your product.
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And you know, the new product that will release at the end of the year, like we just thought about six months ago, right, or even three months ago, and so we're constantly like, you know, innovating and building new things internally.
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You know, versus, you know, like waiting for chat GPT to release, you know, chat GPT five and, you know, or doing a deep research report or something, right, like, great, like anybody can go do that, right, it's fundamentally changing how your investment processes, your decision process, and then what your organization looks like.
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Give me some of your secret sauce. What is some data that you're looking at that narrows down your top of funnel, dramatically, that you look for investing at the early stage, people always ask that I'll give you a couple of examples of it.
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It's not like a Harvard Business School study, right, which is, you know, you know, the person that's like, you know, left handed that went to Stanford, that, you know, you know, came from, you know, an immigrant family is going to be like, you know, amazing.
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So, they're gonna help, as a tribe, and such information.
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So they got really soon in the back, there's these universal things, these things, sometimes changing things again.
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All they get, at least passengers, Stunden rangeDKS is going to be cooked.
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So anyway, I think a couple of times when it don't mean, they say their hard work's going to work if you don't want them to live or it will really work on their problem, and at the expenseglicher feed.
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for us. Meaning, if you're building a company that's in a consumer world versus building
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something in the healthcare world selling to health systems, how you build that team
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will look dramatically different. Each team could be very, very high quality. Both founders
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could have come from, I don't know, like, stripe or something. How you build that team
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out and what that team looks like and maybe what your co-founders will look like will
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look dramatically different. And it's intuitive because you go to market motion for consumer
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companies very different than a healthcare AI company selling into health systems. So,
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because we built the infrastructure, all of our data is not just the stacking of a bunch
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of different signals, but as the contextualization and knowing and understanding what a company
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does, so saying, hey, this is a great team, but not a great team for a consumer company.
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Or, hey, this is actually a great team within healthcare within the AI and also relative
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to the stage. You have to contextualize it. So, that's kind of like, I off that class
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an important framework. And then, on the specifics, one example that you can actually track
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and measure that folks kind of use intuitively, and I mentioned this earlier, is like, did
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people on the team work together in the past? Right? And so, like, you know, what will happen
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in an interstitial sense is you'll meet a founder and then you'll maybe meet the head
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of engineering and be like, oh, like awesome. Like, oh, like, no wonder there's great chemistry
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that they seem to work well as a team because they had worked together for four or five
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years, maybe not in the last job, but in a prior job at Facebook or something. Right?
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So, you're like, oh, that actually is great. That makes a lot of sense. Right? There's
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probably less team risk there because, you know, they've known each other, they've worked
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each other. They kind of know the skeletons and their closets or something. Right? But
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it's kind of, it's like, you know, X and T, right? X, you know, after the fact of you
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meeting the founder, what we've done, and it's not the only thing we look at, and sometimes
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it's less important. But, you know, when founders choose to come together to work together,
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right? Or their first, second, third hires are folks that they had worked together in the past.
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There's a lot of interesting signal, right? You know, where, you know, eight players, you
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know, tend to want to work together again because they have the context of knowing, you know,
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how people, you know, work in high-pressure environments, right? When the company's
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growing really quickly, right? Or their hand picking, right? The best within a certain
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group. Right? Like we do a fair amount of, you know, you know, AMD or like, you know,
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like defense investing under the bottom row of deep tech. And you see, you know, folks
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that Andrew will kind of leave together in, you know, and pockets, right? Andrew will
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probably may not love that, right? But you're seeing, you know, someone who's leaving
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things as a founder, being very selective about the folks that they're bringing on to the
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team, right? Maybe an old colleague, not in the same group as this other group in Andrew.
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Like, like we've seen that, you know, across the board. The reality of it is like, you
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can actually measure that, right? The challenge is that a human just can't do that at scale,
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right? But, you know, building a product, you can measure that one attribute, but you
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can also look at a thousand attributes. And you can do that across, you know, a hundred
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thousand companies. And you can do that across, you know, 30, 40, 50 million people, right?
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Because the beauty of, you know, software infrastructure is that it's infinitely customizable
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and it's infinitely scalable, right? So we don't have to go higher and build a giant
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team, right? Which is, like people are linear, right? We're a software and, you know, and data,
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you know, can be exponential. And it's at the very least, it's a step function. And so that's
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kind of our framework of how we solve problems.
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Awesome. Well, this has been fascinating conversation. I appreciate you jumping on and looking
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forward to continuing this conversation live. This is great. Thanks, David. Thanks for listening
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my conversation. If you enjoyed this episode, please share with a friend. The subsist grow
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