156. Chaos Capital, the new Micro VC Movement and LPs Chasing Hype (Chris Douvos)

The Full Ratchet Chris Douvos VIA Super LP

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Chris Douvos of VIA joins Nick to discuss Chaos Capital, the new Micro VC Movement and LPs Chasing Hype. In this episode, we cover:

  • How his mindset as an LP has evolved
  • Startups out of Standford vs Berkley and if the valley is over-fished
  • How the micro VC movement has changed
  • Chris’ selection criteria and what he looks for in managers
  • Why he most often says no
  • The impact on LPs of companies staying private longer
  • The impact of new LPs coming into venture on asset class
  • How the LP community interacts… adversarial, collaborative, competitive or othewise
  • The areas where Chris can grow most as an LP
  • and we wrap up w/ his thoughts on co-investment alongside GPs as well as follow-ons in later rounds

 

Guest Links:

Quick Takes:

  1. If there were a marketplace for universities he’d short Stanford and go long on Cal. Stanford feels like it’s over-fished
  2. The Bay Area will evolve from a startup hub into a financing center for tech
  3. SF is the only place w/ a bench of founder CEOs w/ the ability to manage through hyper-growth
  4. During the initial micro VC movement, investing as an LP was a bit like shooting fish in a barrel. There were so many good funds to choose from that he said NO to Baseline and SoftTech
  5. Today, the error term in the regression has gotten so much larger b/c there is so much noise
  6. A person’s ability to crisply/succinctly describe what they’re doing demonstrates clarity of thought
  7. First, he looks for “edge.” What is the person the best in the world at, in a durable way
  8. The Second thing he looks for is strategy– does it make sense at a macro level and does it resonate with their skill set
  9. One of the problems is that performance is a lagging indicator, not a leading indicator
  10. Top quartile persistence is going down. If you’re a top quartile firm, it is less likely that you’ll remain in the top quartile (~13% chance that next fund is in the top quartile)
  11. In a world where a lot of entrepreneurs have become investors, many do not think like investors and consider things like portfolio management
  12. You can fall in love with founders and technology, but don’t fall in love w/ the stock
  13. He spends his day trying to strip out luck from skill. What makes many of the great firms great is repeatability, driven by process
  14. Every fund manager must be able to answer, “what exit value does each portfolio company need to achieve to return your fund?”
  15. Every fund manager says that they have a great network and it’s their competitive moat
  16. With the increase in companies staying private longer, many institutional investors’ allocations are locked and they don’t have capacity to invest in new funds or successor funds
  17. A lot of new LPs and overseas money is chasing hype and returns, entering the asset class
  18. Venture is the fullest articulation of the idea of America
  19. Over 50% of IPOs have an immigrant founder
  20. Diverse startup founding teams outperform those that lack diversity
FULL TRANSCRIPT