212. Crisis Coverage w/ Samir Kaji – Relief $ for Startups via CARES Act, EIDL, PPP; & How an Extended Downturn Affects Emerging VC Funds

212. Crisis Coverage w/ Samir Kaji - Relief $ for Startups via CARES Act, EIDL, PPP; & How an Extended Downturn Affects Emerging VC Funds
Nick Moran Angel List

Samir Kaji of First Republic joins Nick on a special Crisis Coverage installment to discuss Relief $ for Startups via CARES Act, EIDL, PPP; & How an Extended Downturn Affects Emerging VC Funds. In this episode, we cover:

  • Startups…
    • The CARES Act became law on 3/27, but many are having trouble making sense of it and how it applies…
    • Let’s start out w/ the two types of loans that are available to small businesses…
    • First off, can you explain the difference between the Economic Injury Disaster Loan Program (EIDL) and the Paycheck Protection Program (PPP)?
    • EIDL – No forgiveness potential and and requires personal guarantee?
    • PPP – Forgiveness potential and no personal guarantee?
    • Affiliation…  Dan Primack was writing about how the 500 employee rule and how much of Private Equity portfolio companies will be excluded b/c of how the language is written.  Can you explain the “affiliation issue?”
    • How can this be enforced/checked… so many obscure LLCs used for investment in companies… hard to verify.
    • April 3rd – Is this the date that PPP applications are available?
    • What advice do you have for startups right now, to be prepared and get to the front of the queue?
    • How will seed stage be impacted?
    • Some of the best companies (Uber, AirBnB) first took institutional capital after the 2008 crisis; is now the time to be aggressively investing?
  • VCs…
    • How are the existing funds w/ committed capital adjusting?
    • Will we see a lot of attrition / VC firms shutting down?
    • What are the impacts on firms that are actively raising?
    • Advice for those planning to raise a fund in the next year?
    • What do VCs and LPs need to hammer out before moving forward in this environment? (projections/protocol for capital calls, projections for investments, communication plans, etc.)
  • LPs…
    • What are you hearing from institutional LPs?
    • How about the family offices?
    • Is it still in a crisis/panic mode or have some allocators put together a solid investment plan going forward?
    • If you had to estimate, what % of capital commitments will default and/or be adjusted down?
    • Final thoughts and advice for startups and investors?

Guest Links:

Transcribed with AI:

welcome to the podcast about investing in startups, where existing investors can learn how to get the best deal possible. And those that have never before invested in startups can learn the keys to success from the venture experts. Your host is Nick Moran, and this is the full ratchet.

Samir Kaji joins us today from Menlo Park. Samir is a senior MD at first republic bank. Previously, he served as an MD for Silicon Valley Bank. He’s a Kauffman fellow in the class of 2020. And he’s one of the most active and knowledgeable experts on emerging VC funds, and the capital allocators that invest in emerging managers, Samir, a very warm welcome to the show.

Yeah, thanks, Nick. Yeah, happy to be here. And that excited for this?

Yeah. Well, you know, we’ve been chatting a bit lately. And today on the call, I kind of want to cover three main topics, you know, impacts to startups, impacts to emerging managers, and then also LPs. And maybe we’ll cover it in that order. But just to kick off here, so the Cares Act became law on 327. Last Friday, many are having trouble making sense of it and how it applies. I think it would be good to start out with the two types of loans that are available to small businesses. First off, can you help us understand the difference between the economic injury disaster loan program eidl versus the paycheck protection program? The PPP?

Yeah, sure, in your writing, you know, it’s been less than a week since this was formally passed. In, we’re all you know, to be honest learning as we go, I think that, you know, there’s still a lot of information that is yet to come out. And we’ll be coming out over the next couple days. And so, you know, do you know, just keep following the people that understand what I’m doing as much as I can and tweeting out the updates. But I’ll give you a quick, just background around eidl versus PPP. eidl is an existing program under the Small Business Act, it is being modified slightly through the Cares Act, which increases the amount that you can take out for, you know, for a loan up to 200,000. without a personal guarantee in the past, it was 25,000. There in the proceeds can be used generally speaking for payroll expenses, rent and religious critical, mission critical business activities. That is not the main sort of scope that people are looking looking at, you can take any IDL and a PPP, so long as you’re not using the proceeds for the same thing. Where I want to spend most of the time is on the PPP. Yep. So the paycheck protection plan is is, you know, effectively the the term and it’s being included as part of the current seven, eight under the the SBA program. And what it basically allows for is a company a small business under 500 employees to take up to $10 million in in effectively, debt that is non collateralized non personal, guaranteed. Now there is a limiter in that it’s the lesser of 10 million, or two and a half times your average monthly payroll. Yep. And the, you know, main area of consternation, I think for the startup sector, is whether venture backed startups can actually leverage this. The reason for this is in the current seven a, there’s something there’s a concept called affiliation. Yeah. And what that basically means is a venture backed startup, if it is deemed that the VC or equity investors either have a significant stake, or have the ability to block or guide certain actions that could be deemed an affiliate. Now, of course, most VC firms don’t have a lot of employees. But the here’s where the rub comes in the rub is that it’s not just that VC firm. But that company in question is now an affiliate of all the portfolio companies of that particular venture firm, where that VC is also deemed to have control and an affiliation with and so you could be a 15 company series ache startup, you know, backed by a great VC. And that VC has control position or at least is deemed to add a current according to current affiliation, definitions. And all of a sudden, now you are aggregated with maybe 30 or 40 other portfolio companies, which which in aggregate, have more than 500 employees, and that that would actually make you ineligible under this construct. And so there’s a lot of lobbying going on right right now, the end ACA Nancy Pelosi, Ro Khanna, Senator, Senator Moran tech GC network in terms of getting more definition and potentially even getting some modification that would allow most venture backed startups to be able to leverage this.

And it’s not just on the equity side, right? There’s this majority ownership provision, which applies to equity, but But isn’t there also some sort of control provision such that if the investor can, you know, have a right to block you know, certain major, major decisions, liquidity decisions, exits, etc, that may also qualify as control?

Correct, correct. And the NVCA does a great job, they have it on their website, where they list a number of activities in effectively viewed as negative covenants that if any of those are true, that could again, I’m going to use the word could because I’m not providing legal counsel, I think every company should talk to their lawyers in assessing eligibility, but you’re but according to that you could be ineligible as a company, even if the ownership stake of the investor or whoever is sitting on your board is is nominal,

it, it strikes me that this would be exceptionally hard to track and enforce, right to know, I mean, first off, just on the equity side, I look at cap tables, and there’s so many different obscure names on these cap tables, it’s hard to really trace all of them back to the specific firms. And then to try and say that, you know, that fund or that firm has investments across this wide portfolio of other businesses that have X number of employees. I mean, I can’t even imagine I understand the provision, but I can’t imagine how it would be tracked and and forced.

Yeah, and I don’t think there’s a lot of clarity on that, unfortunately, right now. So where we are right now, so that the Treasury did put out a statement. Yesterday, it’s on the SBA website that applications will start to process on April 3, which is this Friday, the banks have not been given clear guidance in how to actually look at processing. Hopefully, we’ll get that guidance either today or early tomorrow. The fundamental to that, you know, the applications are self certification. The current form lives on the SBA website, each bank is going to digitize that form, or some some form of submission that allows people to quickly submit, thanks for not taking real credit risks, they’re taking operating risks, you know, the challenge, which we do not know, and FRP, you know, where I work is no exception is, we don’t know exactly what we are expected to verify. There are certain things we know we will, but we don’t know the entire swath of that. So for example, it’s a venture backed company, are we then verifying the self certification around affiliation? Are we looking at, you know who the VCs are the cap table? I suspect, we’ll get guidance on that. And I hope we do. Because I think that’s a necessary component for banks in this sector to get comfortable and to be able to process these at scale. Again, we’re all learning real time. And I will say the last couple of days, for us, in particular, have been a constant firehose of information. I would caution anyone to make any broad and clear and definitive assumptions right now, because it’s unfortunately just not out there yet. I would tell each portfolio company VC, talk to your bank, talk to your banker, and also talk to your lawyers to start assessing what is on that form? And are they going to be eligible if nothing changes on the affiliation concept?

And that April 3 date that you gave us is that for the PPP is that when the applications will be live? Correct.

That does not, however, indicate bank by bank. So each bank is going to have to create its own infrastructure and process. The Treasury is putting a lot of pressure on banks to be ready by the third. I can’t speak for other banks. We are doing our best in terms of meeting that guideline and being able to take applications but each bank is different. Some banks, I think are really well positioned because they’ve been SBA lenders, others are just provision for this particular PPP. And in those cases, they will have to onboard technology and bring people on and, you know, bring on the right resources to get ready. You know, again, this is one where you know, Because of misinformation, there’s a lot of panic, will the money run out? You know, it’s 349 billion. There have been whispers that it could increase. And in reality, it’s going to take some time to get through the system. We don’t know how long. So we are advising, generally speaking, everybody start moving quickly to to make sure that they are, you know, as close to the front of front of the line as possible, because the SBA has indicated this is going to be a first come first serve.

So, with the PPP, then you’d be applying through your banking partner, whereas the eidl, that would be through the SBA, is that correct?

Correct. So the eidl is a is financing provided by the SBA. PPP is financing provided by the banks, which sits on their balance sheet and could convert to a grant based on loan forgiveness,

right. Yeah, I guess that would be part of the key distinction here, right, is that if you take out more than 200k through the IDL, then forgiveness is not an option. Also, the collateral has to be offered up, ie, like a personal guarantee, in the case of an eidl. Whereas with the PPP, that’s not the case. Yeah,

eidl, there’s no guarantee up to 200,000, PPP, regardless of dollar size up to 10 million, there’s no personal guarantee no collateral, it’s a two year loan to your term loan, and an interest rate that sub 1%.

Got it? eidl. So no personal guarantee up to 200k. But personal guarantee, personal guarantee T above 200k.


Got it perfect. So you know, the application isn’t quite available yet for the PPP. eidl is available on SBA. Is there any general guidelines or advice you’d have for startups right now to be prepared and make sure they get to the front of the queue? Yeah,

well, one of the key distinctions is, I mean, there is an application that’s floating around on the SBA website, some banks have started to, at least for the queue of applications, although it’s very clear that processing cannot happen until the third, again, you know, talk to your bank, directly, most banks are just especially the larger banks more, you know, regionally focused banks are providing PPS only to existing clients. And what I mean reach a large regionals in the reason for that is, one, the flow of the number of these type of loans is going to be incredibly high. And we’re thinking between two and 4 million of these loans will be processed, banks are looking to prioritize their existing client base to manage loan capacity, not to mention that if it’s not a current client of the bank, there’s a huge KYC and AML process that, you know, banks have to go through, which would create a significant delay.

Got it? So talking about startups more broadly, some of your How do you think the seed stage will be impacted, you know, startup fundraising.

So So there’s two ways to sort of answer this. Now, on the silver lining side, there is a ton of dry powder. The the amount of fundraising that was done by VCs in 2019, was the highest point we had seen in almost two decades. So you know, roughly 50 billion raised by VCs, q1 was an incredibly busy year, of which some of those fundraisers are going to continue and close out. But at the same time, you know, while people are saying Open for Business, I think the categorical definition of open for business is very different. I think everyone’s trying to assess what is the risk construct? When do we start seeing a reduction in valuations at a point where it aligns with the risk of the follow on financing in 2021. And also just the fact that a lot of these startups are going to have a rough few quarters because, you know, things are slowing down. You know, people are remote people are not buying and so, you know, fundamentally, I think new company, investments are going to drop pretty drastically. I think the numbers will bear it out in q2 and q3. But it will be a good time, you know, maybe just not yet but at some point in the second half of the year into 2021 for investors to deploy in companies at lower entry prices, and once we have visibility and how deep COVID-19 costs.

Got it, you know, some are talking about like Jason Calacanis was reading the other day that you know, the best companies some of the best companies, Uber, Airbnb, etc. First took institutional capital after the 2008 crisis. And now is the time to be aggressively investing at the angel and the seed round. How do you respond to that?

Yeah, I mean, he’s right look at he’s right from the standpoint of great companies are going to be founded in any in any market cycle. And the reality is venture tends to overreact to small, and sometimes big in this case, transient trance. For example, if you look at, oh 809 2010 vintages, there are actually great times to invest. But I don’t think that’s a total global statement you can make, I think there’s much more nuance to it. Everyone can point to Uber and Airbnb, but there’s one Uber, there’s one air b&b, and every year, there’s maybe 50, to 100. Companies that are going to be fun returned to that type of companies. The degree of difficulty to do that right now is is much tougher than it was a year ago in terms of starting and scaling a company. In this type of environment. Obviously, this is a unprecedent time and we haven’t seen anything like this in modern economic history, especially within venture. And so yes, it will be a good time to invest. Can I say with great certainty, today is the great time greatest time to jump in and start investing aggressively, it’s hard to say because, unlike other times, we don’t even know what the second and third order effects of COVID will be, we probably don’t even know what the First Order is. Given that we’re still very early in the cycle, I think that you know, peak fires is one to two months away, it’s unlikely that we’re going to see a vaccine ready for widespread use until 2021. And because of that, it’s very difficult to prognosticate when is the right time to get in. What I would tell people is, if you are a venture capitalist, you it’s your job to look at opportunities and risk profile these and understand that, yes, there are going to be some great companies that are going to be founded, you do not want to pass up the next great company, because, you know, the valuation hasn’t dropped by 40 or 50%. It’s so we will see a lot of moving parts. You know, I’m very, very bullish on the innovation ecosystem, if you think about, you know, where we are versus 2000 2000, for example, so 2000, we’re still on dial up, you know, internet, very little, you know, ubiquity of technology. 2008. And it was around the time, the iPhone and the smartphone became really was launched. And now you have all of those systems and frameworks, where innovation now is becoming ubiquitous across every single industry sector, many of which have barely touched this touch the surface just scratched the surface on real adoption. And that could be construction, real estate, manufacturing, food and ag. And so like the next 1020 3040 50 years, are going to be defined by technological technological adoption. And so, you know, if you have money, you have to be smart and thoughtful and be a good fiduciary. But there are going to be so many opportunities for those with dry powder over the next year and a half. Couldn’t

agree more. Well, yeah. Let’s talk a little bit more about that. And maybe the emerging manager, class of VCs. So what have you seen so far in terms of how existing funds with a committed capital base are, are adjusting amidst this crisis?

Yeah, so I’ve had a couple of conversations, and I’d say a couple 1000 probably is more accurate. And you know, most people are taking a slow and methodical approach in terms of new investing, everyone is going into triage mode with their existing portfolio to the extent they have one. And, you know, working with your existing LPs, that is, you know, the number one priority in terms of new investments. You know, there’s some logistical challenges. You can’t meet people in person, you have to do zoom calls. Is it harder to do due diligence when you’re, you know, when you can’t necessarily reach the people the way you used to be able to? Is it harder to do due diligence when you’re really prognosticating? whether a particular company is going to be affected? And of course, what is the actual second and third degree effect? Based on a great unknown? And so I think that people are slowing down. For sure. I do think that the valuations are starting to come down. And in some cases, they’ve already started to come down pretty dramatically, but it’s still at a point where I think it’s more anecdotal than thematic. Got it?

Ya know, I’ve, I’ve spoken with at least 25. And I would say more than half of those are, have put the brakes on in a pretty serious way for like, the next month or two. As they’re working on the portfolio, or at least, you know, that’s that’s their plan at the moment. I agree, Samir, do you think we’re gonna see The attrition, do you think we’re gonna see some VC firms shut down?

So it’s a good question. And, you know, I think it probably requires a little bit of context. So since 2009, and coming out of the last recession, you know, we’ve had roughly 1200 firms in the US alone for, these are first time funds that, you know, raise from 2009, to let’s call it first quarter 2020. That’s a lot of firms that the super majority of those firms are seed stage. So it’s estimated about 70%, or seed stage, of which the vast majority are raising funds that are sub sub $50 million. Where it becomes a little bit difficult to, you know, really estimate the amount of attrition is looking at each of those small small firms that are instituting a non institutional tax family offices, high net worth individuals, I think those that are going from a fun one to a fun two are going to have some severe difficulty over the next 18 months in raising a fund. And there’s the macro and what LPS will do, and I’m sure it will talk about LP sentiment in a second. But it’s also a function of if I raised a fund in 2017, or 18. There’s just not a lot of traction points I can show to show people, I am a great long term manager. Sure. The, you know, a lot of people were able to raise funds on the backs of a lot of liquidity flowing. And the fact that, you know, TVP INR looked pretty good the last few years, as we saw all markups, that rising tide lifts all boats is going away. And I think a lot of LPs, you know, understandably are looking to see how some of these seat portfolios are going to weather through, you know, this first real, you know, treacherous period. And so, you know, do these, you know, do we see a lot of more casualties do we see fall on financings either go away or become so diluted, that the holdings that the C funds have are effectively getting written down significantly? So what? So what does this look like? And what is the carnage that we’ll see in some of these e portfolios over the next year, and I think people are going to wait, wait and see before putting in more money and certainly family offices, they need liquidity. Liquidity is going to be a premium over the next, I would say at least 12 months, maybe 18. And so I, you know, again, if you were if you were to ask me today, I do think we’ll see at attrition and number of active firms, I think will probably drop anywhere between 30 and 60%. In terms of active see firms, I also think that we’ll see let’s see firms come to come to market to offset that. Partly because if you’re a first time manager coming to market right now, the chance of raising a fund in any reasonable amount in any reasonable timeframe is very low. And I don’t see a lot of people shaking loose from big firms. During this time, during this time where fundraising is probably the hardest. It’s been in what 13 years.

What do you think the VCs and the LPS need to hammer out before moving forward in this environment? And or, you know, what advice would you have for the fund managers out there that are, you know, managing capital base and, and having to, to navigate with their LPs, you know, through this correction?

Well, everything everyone is looking for visibility, right? They’re looking for some signals that can help them assess the impact that COVID is going to have more macro right now. We are working on certain assumptions. Is this a six month this dislocation? Is this a 12 to 18 month major dislocation? Or is this a multi year global depression? It’s too early to tell. So I think people are just in a wait and see moment to figure out, can we get some signals that help us? Course the Fed stimulus, you know, helps punt some of those that pain a little bit further down? I do think there’s going to be more behind it. But you know, right now, you know, from a GP standpoint, the best thing you can do right now, is be transparent. Help your portfolio companies. You when you talk to your LPs, you know, pick up the phone, get on zoom with your top ones, make sure you’re messaging, not only the good, but the bad. Yep. And I think this is the time where the best will shine the brightest. And I do think that this is when careers are made. These are when VC funds and firms, you know, create, you know, the branding for their long term durability. I think that people should view this as an opportunity. It’s, you know, if you look at the long term horizon if you’re running a firm and you expect it to be 1020 30 years and may even beyond that, you know, past your own career, you know, again, this is this is a short blip, it’s a big blip. But it’s also an opportunity for you to show founders and LPs, that you are going to be the, you know, one of the best partners in thick and thin.

Well, that. So, you know, transitioning to the LP side, what are you hearing from the institutional LP crowd?

So, you know, let’s just define institutional. So we’re talking about pensions, endowments, fund to funds, large foundations, I also put some very, very large multifamily offices and institutional class in terms of how they operate. So one of the, you know, one of the most severe potential things that could impact their ability to invest in new funds, is the prospect of the denominator effect, right. So we saw the Dow go from 30, down to 18, five rebounded the last few days had been rough. And what where that impacts people is with their asset allocation. So most endowments, for example, will allocate 10 to 20% into privates, you know, roughly 40 to 60% in Publix, and commodities, you know, real assets, and all of those type of assets mark to market pretty quickly, right? So if you have a huge drop in your Publix, and then you’re looking at your privates which don’t mark to market, same way, you can go, you can be upside down and over allocated privates pretty quickly. Yep. And of course, then you have to look forward and say, What have I not even funded yet? And what is that going to do to me if this thing continues and gets deeper? And so that is going to create a lot of pause for institutional investors to make new investments Now that said, are they going to support their existing measures? Yes. Do I think a window will open where they will start investing in Priority stack after the new managers into folks that they have been tracking for a while? Yes. And are there some institutions out there that don’t necessarily have the over allocation? Because they’re so vastly under allocated? I think so. But I, I think it taken as a whole, you’re gonna see a holding pattern, a pattern in terms of new investments from institutional investors into new new managers, they have just met. And so, you know, I think that’s going to be the case through 2020. I think the next few weeks are still cooling off periods, people are going through their planning models. I also do think that this period is when you know, some of those institutional LPS call their portfolios, and maybe carve out some of the folks that have underperformed or where they feel that their investment size or interest doesn’t align with, you know, the LP strategy and more that would open more spots. And I do think that, you know, once we get past this, there is going to be a buying period, but we are certainly not in a buying period for institutional LPS right now.

Yep. Just Chris do goes on. And I think his thoughts are pretty consistent with yours. Any differences in sort of the the general family office crowd and how they’re responding?

Well, you know, there’s, there’s a joke, if you meet one family office, you’ve met one,

right? And that’s very true. And it’s so bespoke,

right. But, you know, if you try to step back for a second, from a fundamental perspective, everybody feels pretty poor right now. And it does feel like we’re moving into an environment where liquidity is going to be a premium. You know, from a family office perspective, we’ve gone from a, you know, a long, you know, era of chasing yield and finding asset categories like venture and private equity, where you can get some alpha to a period of, I need to hold a pause, I don’t know what’s going to happen, I feel poor. Liquidity is something that I should hold on to cash is king. And if I’m going to reallocate to, you know, managers, I want to see some distributions from that particular asset category first, that is a reasonable thing that we are going to see now. You know, look, there’s some exceptions. And I’ve talked to several family offices that said, Hey, we actually think this is a great time, because we are going to get vintage diversification anyway, people are going to slow down. So if I make an allocation into a manager, let’s say this quarter, next quarter, the quarter after we’re really looking at most of the exposure in terms of new investments being, you know, 2021 22 and 23. I think that’s a very reasonable approach. And it’s smart approach for those that can afford it. I think that we are still in the in the early days where human psyche and mentality has been impacted greatly because unlike past recessions are day to day life has been impacted. You know, you have family office and family members that are at home. Quarantine kids crawling all over them. So everybody right now is just trying to get the house in order before making those assessments. But I do think the I do think the phosphate will start to open probably toward the second half of the year, you know, hoping, you know, early q3,

there certainly are some groups that at least projects that they have a plan, and they’re going to invest in, they’re gonna make investment decisions this year into emerging funds. I mean, I know I’ve, I’ve spoken with probably 12 Family Offices since the crisis, and nearly half of those have canceled or pushback the meeting. And then the other half, you know, it’s a mix of responses, but some of them have not changed their plans and have not seen a huge reduction in liquidity due to the market correction.

Yeah, and you will get that and then that goes sort of this bespoke nature of the family office environment, I think that, you know, there are going to be those family opts in and by the way, this, the faucet of a putting money into venture funds, and venture backed companies is not going to go to zero, it will take a haircut, and that’s just normal. And these types of times where, you know, generally speaking, everyone’s feeling a little bit skittish, and, you know, human psychology is always governed by fear and greed. And we’ve, you know, the pendulum clearly has swung to fear and so, you know, what I would tell people that are raising and just readjust the time period, understand that, you know, the conversations that you’ve had, may now extend out a little bit longer decision. You know, trees are going to be more complex, and it just may take a little bit longer. But, you know, this is not a doom and gloom, doom and gloom, obviously, it’s just more in the health aspect, I think the economy will do fine. Over time, we’ll get over it. And, you know, the people left stand area to be in a great position. And so, you know, again, I’m like, Really, I tend to be an eternal optimist, where, you know, I am trying to operationally instructionally, you know, focus on a little bit of realism in terms of what I do and what I counsel people. But, you know, if you take a more medium to long term approach, this is something that, you know, you can get through and if you’re if you really want to be a VC, and you really want to be a VC franchise, and you want to build something on it for the for the long term, you know, you need to keep at it.

If you had to estimate, what percentage of capital commitments do you think will default or be, you know, adjusted down.

So all we can do is look at historic, alright, so if you think about 20809, we actually didn’t see institutional defaults. Most of the cases, they were, you know, there was people that were asking for relief for or asking for a more thoughtful governance of capital calls and things like that family offices, in some cases to default. And I do think we’ll see some of that I, you know, it’s too early, it’s on institutional set, I’m not getting any themes and institutional LPs are going to default. But, you know, the big caveat is, we’ve never been through something like this, if it get, if you know, six months from now, three months from now we have, you know, 10 to 20 30 million people in the US that have this, businesses are shutting down, the economy still hasn’t opened up, you know, I think all all cards, you know, are on the table. And you know, anything could happen. But fundamentally, I mean, there’s usually a strong secondary market to pick some pick up some of these positions, what I’ve told, you know, managers is, when you do reach out to your LPs, make sure that you are signaling what you expect to call from, if there is an ask for relief, be thoughtful, you don’t want to, you don’t want to surprise people with capital calls, you don’t want to do things that are, you know, in any way inconsistent with what you’ve communicated. But it is good to know now, alright, so you don’t want to be in a situation three months from now, where you have no cash on the balance sheet on your fund, and you need money for a new investment, you make a capital call, and you find out 60% of your LP base, either can’t or is unwilling to make it in the timeframe that you’ve allotted in the LPA. And so, this is the time to find out but you know, it’s just too early to tell whether widespread defaults are going to happen.

You know, crisis or not, you’re you’re one of the main voices and producers of content that I go to, to learn about, you know, what LPs are thinking how to sort of approach building a VC franchise in a venture firm fund raising? So you know, with that, what, what final thoughts or pieces of advice do you have either for the VC fund managers out there or the startups that are going through this and having to net navigate Cares Act? Any any final wrap up thoughts? Well, I’m

going to give a couple of rapid thoughts. So first of all, um, you know, we’re out We’re all in it together, I think that fundamentally, this is going to be a time to, you know, to recast expectations, understand it’s going to be a very tough, you know, 612 18 months. You know, for startups, obviously, like everyone’s giving the same advice of cut, burn, rethink how you can, you know, grow or at least stabilized during this time, and come out the other end, when, you know, capital hopefully becomes a little bit more abundant for VC firms. Look, if you’re raising a first time fund, I think that you have to look at the opportunity costs, is this the right time to launch? Do you have other opportunities that you should pursue in the meantime until the capital markets open up? If you’re an existing firm that’s on a fun to or fun three? Yes, you should rethink if you are raising your your expectations and how much you will raise, do you need to relook at Target? Do you have to recast reserves, portfolio, construction, all of those things are things you need to do right now. I always say, you know, be conservative, you know, hope for the best expect that this is going to be deep. And this is going to be very, very difficult. We are by the way, just, you know, to give a little bit of perspective and what we do, you know, our role than the emerging manager community has largely been not just as a bank, but as somebody that sits alongside with our managers to help them with all aspects of running firm, including the fundraising component, in this time, where I think our help can probably be more relevant than, you know, most years, we are doubling and tripling down efforts, I’m in process of hiring a number of people, to help our managers with everything from fundraising, to you know, financial infrastructure. And so we are going to create, effectively infrastructure as a service for emerging managers in this time of need. And so, you know, as people need help, we’re here. And, you know, we definitely want to dig in with you and roll up our sleeves. And while that’s all sounds cliche, you know, we do mean it, and I think we can create some tangible benefit here.

He is Samir Kaji. If you don’t follow him, I would highly encourage, check him out on Twitter as well as medium. He’s very open. He’s very transparent in some of the best advice and input and feedback on fundraising and allocators that I’ve come across. So Samir, thank you so much for making the time. I know it’s crazy week, but always good to chat with you and get your perspective. Yeah,

thanks, Nick again for having me and stay safe and healthy.

That will wrap up today’s episode. Thanks for joining us here on the show. And if you’d like to get involved further, you can join our investment group for free on AngelList. Head over to angel.co and search for new stack ventures. There you can back the syndicate to see our deal flow. See how we choose startups to invest in and read our thesis on investment in each startup we choose. As always show notes and links for the interview are at full ratchet.net And until next time, remember to over prepare, choose carefully and invest confidently thanks for joining us