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:
- If there were a marketplace for universities he’d short Stanford and go long on Cal. Stanford feels like it’s over-fished
- The Bay Area will evolve from a startup hub into a financing center for tech
- SF is the only place w/ a bench of founder CEOs w/ the ability to manage through hyper-growth
- 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
- Today, the error term in the regression has gotten so much larger b/c there is so much noise
- A person’s ability to crisply/succinctly describe what they’re doing demonstrates clarity of thought
- First, he looks for “edge.” What is the person the best in the world at, in a durable way
- The Second thing he looks for is strategy– does it make sense at a macro level and does it resonate with their skill set
- One of the problems is that performance is a lagging indicator, not a leading indicator
- 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)
- In a world where a lot of entrepreneurs have become investors, many do not think like investors and consider things like portfolio management
- You can fall in love with founders and technology, but don’t fall in love w/ the stock
- He spends his day trying to strip out luck from skill. What makes many of the great firms great is repeatability, driven by process
- Every fund manager must be able to answer, “what exit value does each portfolio company need to achieve to return your fund?”
- Every fund manager says that they have a great network and it’s their competitive moat
- 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
- A lot of new LPs and overseas money is chasing hype and returns, entering the asset class
- Venture is the fullest articulation of the idea of America
- Over 50% of IPOs have an immigrant founder
- Diverse startup founding teams outperform those that lack diversity