246. Agglomerators vs. Specialists, the Rise of the Solo-Capitalist, and the Importance of Founder-Investor Fit (Nikhil Basu Trivedi)

Full Ratchet Nikhil Basu Trivedi

Nikhil Basu Trivedi of joins Nick to discuss Agglomerators vs. Specialists, the Rise of the Solo-Capitalist, and the Importance of Founder-Investor Fit+. In this episode, we cover:

  • Why did you decide to leave Shasta?
  • What’s the plan moving forward?
  • The Rise of Solo Capitalists
    • You wrote a great piece on the rise of this behavior, ‘The Rise of the Solo Capitalists’. What do you think has caused the rise in single GP funds?
    • What are the main benefits to both investor and entrepreneur with this model?
    • What are the limitations and/or downsides of this model?
    • You wrote that an LP said that this model ‘may be the biggest threat traditional venture capital firms have seen in a long time’. Why?
  • Founder-Investor Fit
    • What do you think are the most important things for founders to consider when choosing an investor?
    • There are many firms that don’t care about the “fit” per se… they just want to get money into the best deals.  And it can be tough for a founder to turn down the best offer or the biggest name investor.  Do you think that lack of fit can lead to the demise of the company?
    • Do you think that founder-investor relationships/dynamics will change significantly over the next decade?  Why or why not?
  • Agglomerators vs. Specialists
    • Can you break down the types of focus amongst VCs? Agglomerators vs. Specialists?
    • What do you think has caused the rise of the agglomerators?
    • From a returns (TVPI) standpoint, do you think one model is superior to the other?
    • A large, institutional LP said to me this week that he doesn’t believe in sector-focused fund models and returns suggest that they underperform.  He only invests in generalists with stage focus.  Have you found that the specialists have underperformed the generalists?
    • What do you think about the future of these models?  Where will the most crowded section be, five years from now?
    • What are your thoughts on rolling funds?

Transcribed with AI

Intro 0:02
welcome to the podcast about venture capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is the full ratchet.

Nick Moran 0:17
Nikhil Basu Trivedi joins us today from San Francisco. He’s been a solo venture capitalist for the past couple months and writes essays for his popular newsletter, The Next Big Thing. Prior to going solo, he was a managing director and general partner at Shasta ventures leading early stage investments. Nikhil, welcome to the show. Thanks, Nick, so

Nikhil Basu Trivedi 0:35
much for having me.

Nick Moran 0:36
Yeah. Tell us about your background, you know, what was your path to tech and venture?

Nikhil Basu Trivedi 0:41
Yeah, so I grew up in the UK, and my family moved to the Bay Area when I was 13, in eighth grade. And when I moved out here, I got to learn about entrepreneurship, and Silicon Valley and technology. And it just blew my mind. So when I was in high school, I got to take CS. And then when I went to college, from day one, I was working on one startup project after another. And after one of those startups started to work, and when we were raising, trying to raise venture capital dollars, the light bulb went off for me that at some point, I would love to be on the other side of the table and to get to try this investing thing. And that’s what led me to join insight, Insight partners in New York first as an intern, and then full time. And then in 2012, I came out here back to the Bay Area to join Shasta ventures. And so that’s been my, my path into this. Got it? Got it and

Nick Moran 1:39
tell us more about sort of your early experience, you know, as a VC, did you have focus areas? Did you have specialties in the early days?

Nikhil Basu Trivedi 1:48
Yeah, I’d worked on a consumer marketplace business during college called artsy. And so and, you know, the area that I had the most comfort with when I joined Shasta was in consumer technology businesses. But you know, I really looked across the spectrum during my time at Shasta and ended up making several investments in enterprise companies as well, that look and behave more like consumer businesses. So think of me, as you know, focused on consumer and enterprise with a consumer, Ben. But, but But broadly speaking, I, I have a lot of interests. And that’s hopefully reflected in, in the next big thing and what I write about as well.

Nick Moran 2:29
Awesome. So why the decision to leave Chiesa

Nikhil Basu Trivedi 2:35
you know, it just was a great chapter. For me, it was a great, almost eight year journey. And I feel really grateful to my partners for forgiving me the rope to increase in responsibility and to go from associate to general partner. But it was time for a new chapter, the firm is going in a different direction moving forward. And I want to work with people who I’m aligned with on principles and values in this next phase. And it just felt like it was now or never for me to go make that move. Because, as you know, you know, the timeline in our roles and bencher are really, really long, you know, you make 1020 year decisions. Hopefully, if you get them, right, they suppose every time you you sign up for a new fund and for a new firm. And so that’s really what what drove the decision to leave. And I tried to lay a bunch of that out in a post called an ending and fallow time from from July 1.

Nick Moran 3:36
Very good. So I know you’re in this transitional time. But if you had to guess, you know, what sort of startups what stage, you know, what categories will you be focusing on? On moving forward?

Nikhil Basu Trivedi 3:51
Yeah, you know, there’s, there’s three broad sort of set of criteria for every investment that I like to make. And I think if you look at my track record from Shasta, most investments fit these these three criteria. The first is a company that has early signs of product market fit, early signs of customer love. You know, I struggled to invest pre product or pretty anything. And so usually I’d like to see a product and see but there’s something there that’s resonating with customers. And so that’s criteria number one. The second is potential for a decade’s long customer relationship. I just love investing in businesses where I can foresee a consumer or an enterprise using that product for many, many years. And then the third pillar of of every investment of mine is mission driven founders who, you know, I believe, and more importantly, they believe are working on their life’s work. And so what what I hope you’ll see from me going forward is investments that fit those three criteria. And, you know, from a state each prospective, I think that’ll translate into some seed, some Series A, maybe some rounds that have been between cDNA maybe the occasional latest seed investment as well. And from a sector perspective, a combination of consumer technology as well as focus on the intersection of consumer and enterprise.

Nick Moran 5:16
Very good. Very good. So you wrote this article, you know, the rise of solo capitalists. Is it too early to say, are you going to be a solo capitalist moving moving forward? Or is that still TBD?

Nikhil Basu Trivedi 5:30
Yeah, well, it’s still TBD. You know, I, the word or the phrase solo capitalist, seems to have resonated quite a bit. And so I’m happy about that. And excited, particularly for the solo capitalists out there, who I think I probably helped through coining that that term. You know, I think it’s a fascinating trend. And what I did in in March was, I wrote a long memo for myself, around changes that are happening in the venture industry. One of those sections of the memo was on the bifurcation of the industry into agglomerate. errs and specialists. Another section of the memo was about the rise of solo capitalists. Another section was about founder invested fit. And then, and then sort of a blueprint around the dream type of firm that I’d want to work on moving forward. And, and so I’ve turned a number of, of those sections of the memo now into blog posts. And it was really, the solo capitalist piece was, again, a reflection on a current trend in the industry. And me thinking through it as part of my thinking about what’s next.

Nick Moran 6:45
Very good. It seems like it’s a more attractive and accepted thing now than it used to be. I remember when I was raising fun one. I can’t tell you how many institutions that oh, yeah, we don’t do any single GP. Right. And now, now that we’re prepping, you know, for the next fun, and just getting people’s input on that. I’m hearing from a lot of folks that no problem with single GPS, you know, I was talking to low Tony yesterday, and he said single GPs are great. Yeah, there’s there’s no conflicts, downstream conflicts. I don’t think low is against multiple GP, but it seems like folks, at least in the LP community are much more open minded, and even endorsing sort of the solo capitalists and single GP funds. Yeah,

Nikhil Basu Trivedi 7:29
I think you’re right, you know, and, of course, there have been single GP funds for a long time. You know, what I, what I wrote about in the piece is, you know, this classification of folks like Chris Sacca, and Steve Anderson, and Michael Dearing, and others, as super angels, happened about a decade ago. But what’s I think, unique about what’s happening today, and this is, what I tried to define as solo capitalists is, these are folks who are able to write much bigger checks and make bigger investments as sole GPS, they’re raising $50 million funds, 100 million dollar funds, and they’re leading series A rounds, they’re sometimes leading Series B and C rounds as well. And they are just themselves with with the much larger fun than what the super angels or most single GPS had in the past. What do you think has

Nick Moran 8:26
caused the rise of the solo capitalist?

Nikhil Basu Trivedi 8:30
I think, you know, increasingly, in, you know, entrepreneurs are picking investor partners based on the individual. And we’ve seen that happen, even, you know, in traditional fundraisers with traditional firms, founders gravitating towards an individual partner at a firm, and deciding to take a term sheet as a result of a relationship with that individual partner, and wanting that partner to be on their board wanting that partner to be in their corner for this next phase of the business. And so I think that’s one of the reasons for this shift. I think another is, you know, platforms like AngelList products, like scalp funds, enabling more and more people to get access to being individual investors themselves, not just with their own capital as the traditional angel investors of years past, but with other people’s capital. It’s helped to democratize the investing landscape and, and enable a lot of people to think about being sold GPS and, and solo capitalists. And then I think, finally, as you pointed out with your conversation with low Tony, I think traditional LPs are finding themselves more and more amenable to backing soldiers up is not just with a $10 million fund, but with a $50 million fund with $100 million fund because they’ve seen the sort of founder investor fit between founders and solo capitalists, you know, another comment from an LP that I received up to the piece is that they really like the sole GP model, because they can properly understand someone’s track record from knowing if that’s the only person in the firm, they’ve definitely made all of the investments in that fund. Whereas it’s very challenging, often with funds and how they obfuscate things like attribution, to know who really did the work to lead to a certain investment.

Nick Moran 10:33
Such a good point, there’s so many dynamics when when you have large firms with multiple partners, and lots of things can happen with investments and in different situations, and there’s lack of clarity on who not only selected the deal, but you know, who helped it get to the next level? You know, do you think this is a net benefit to entrepreneurs? The solo GP?

Nikhil Basu Trivedi 10:57
I think I think it is, because it’s another source of capital. And it’s another option for founders, and one of the advantages of solo capitalists is their potential to make an investment decision at an even greater speed than a firm. You know, if you don’t have to talk to any of your partners, because you don’t have partners to write a $6 million check as part of an $8 million Series A round, it can be an incredibly fast decision making process. It also means, you know, exactly what you’re getting into, from a relationship standpoint, it’s what that one person and, and, you know, there’s no one else in the firm to sort of have to get to know and to have to deal with post and post investment. And so I think there are a number of potential benefits to founders of the solo capitalist model, and of working with these individuals. But of course, there are downsides too, you don’t get the benefit of perhaps a broader set of perspectives at the table. You know, it’s still unclear what reserves allocations and what follow on rounds and, and other sort of downstream decisions will be of the solo capitalists. And so and so let’s see how that unfolds. Yeah,

Nick Moran 12:23
you wrote that, an LP said you that this model may be the biggest threat today to traditional venture capital firms that they’ve seen in a long time. Why do you think that’s the case?

Nikhil Basu Trivedi 12:35
Yeah, this was from one of the sharpest LPS that I’ve gotten to know over the years. And the point that he made is that he’s already seeing how a few of these individuals such as Elon Gill, Ray toensing, Locky groom, Josh Buckley, meno Hudson r&d have are out competing, some of the best funds to lead series A rounds. And that’s just, you know, a unique sort of shift that’s happened over the last year. And, you know, a lot of LPs think about, you know, competition, and for those, those companies were, you know, several tier one venture firms are competing, who gets to win the right to invest and, and we’ve started to see a few of these individuals out compete firms, such as Sequoia and benchmark and Lightspeed and Andreessen Horowitz, and others at the Series A, and so that was his perspective on why this could be a huge threat.

Nick Moran 13:43
Yeah, I think it would be interesting, if there was a way to run a study with founders, you know, would you rather have one of these names, you know, absent the firm, you know, if they were on their own? Versus would you rather have the firm and, you know, a different partner, maybe somebody who’s has not built their status or their personal individual brand to that level?

Nikhil Basu Trivedi 14:07
I think, yeah, you’re exactly right. It would be a fascinating study. And it’s an and it speaks to another piece that I wrote around founder investor fit, which is this concept that, you know, certain types of founders gravitate to certain types of investors. And as an investor, you can’t be everything to every founder. As a partnership, perhaps you have a bigger surface area to be more things to more founders. But there’s certainly evidence right now of founder investor fit between certain types of founders and certain solo capitalists.

Nick Moran 14:46
Yeah, so we actually haven’t talked about founder investor fit on the show since like, 2015. It’s been a long time. So you know, give us a sense for what do you think founders should be vetting and evaluating when selecting their investors?

Nikhil Basu Trivedi 14:59
Yeah, I mean, I think there’s lots of dimensions for founders to think about this is a long term partnership, it’s an irreversible decision, it’s extraordinarily hard to fire investor to get them off your cap table once you have them. And so I do think it’s a very important thing for founders to think about. And, you know, as you know, that there’s several dimensions of that relationship, there’s, you know, how often you chat with your investor, and how you engage with them. And, you know, what they are going to help you with and what they won’t be helpful with. And so, you know, if you’re a first time founder, for instance, who wants an investor who’s more actively engaged, and who’s going to be the first call, and good and bad times who’s going to be accessible 24/7 to you? You know, I think you, you’re best suited working with a certain type of investor who’s going to deliver on those things, versus, and again, I’m making broad generalizations. But perhaps if you’re a third time founder, who’s built several billion dollar businesses already, perhaps you don’t want that level of engagement from your investor, and therefore you gravitate towards a very different type of investor. And so I don’t know if that’s helpful. But but that’s some of how I think about it.

Nick Moran 16:22
No, it makes a lot of sense. I mean, as I look across our own portfolio, you know, almost nearly 30 companies, the small number of founders that are serial entrepreneurs, located in the valley, you know, we haven’t been able to help much. That’s not like that. Those are great, great, businesses, don’t get me wrong, but we haven’t had an opportunity to really build a relationship and help those folks out. Because a lot of the things that we can bring to a founder and say, Omaha, Nebraska, that’s a first timer are completely different than what we can bring to somebody on the coast. So it’s the i Their, this is such an under assessed characteristic, I think is how important this fit is. And I know, you know, there’s many venture firms out there that just don’t care about fit, per se, they just want to get money in the best deals. And it can be tough for the founders to turn down really great offers from really big name investors. I’m curious to hear, you know, do you think that a lack of founder, founder investor fit can can lead to the demise of a company?

Nikhil Basu Trivedi 17:30
I do. You know, there’s, there’s plenty of public examples of companies that have, you know, gone through hard times and not made it through those. And I think, when, in particular, when times get rough, it puts pressure on that relationship between founders and investors. And if you aren’t aligned on a certain set of principles, if you if you haven’t built the level of trust in the relationship to make a high quality decision in those tough times. You know, bad decisions can get made. And so I do think it’s really important. And one of the things that I wrestle with is, the speed of financings today has increased so dramatically from when I started in the venture business, that it’s compressed the time to understand that founder investor fit on both sides. And so we’ll see how this plays out, you know, 10 years from now, but I do have a worry in the part of my brain about a number of the the sort of bound investor relationships that have been consummated, through financings in the recent past when that’s just barely been any time for each side to get to know one another. Well enough. Yeah,

Nick Moran 18:56
I mean, that brings up another good point. I mean, we’ve seen the, the supply side of capital increase, so significantly, particularly in the Bay Area, and many of that, those, those firms, at least, are at seed stage or at the early stages. So of course, you know, with capital supply increasing, we’ve seen prices go up, we’ve seen time to decision go down. We’ve seen a lot of competition around rounds. I mean, I’m seeing some strange things that I haven’t seen since I first began in the industry. How do you see that playing out? And how does that affect sort of, maybe your next step, you know, as a, as a VC?

Nikhil Basu Trivedi 19:38
Well, I think, you know, these things happen in cycles. And so, you know, let’s pick on an example that was strange from from recent past. If you remember Phenix, for instance, which took money from Sequoia Capital and then you know, I’m not even sure what ended up happening but but Sequoia is no longer an investor in Phoenix. And I think it was determined there was a conflict with sequoias investment in stripe. That’s right. And that’s an example. I had never seen that before. You know, I heard about this happening. And I do think, again, I’m crossing the net and reading between the lines, but a part of that could have been the speed at which it just went down. And, and I think, as we have public stories like that, there’ll be some pausing of the gas pedal on both the founder side and the investor side, you know, during these incredibly important decisions, and so I do hope we see some some cyclicality here and some correction. But the flip side of this, which you brought up is, there is more capital than ever before. You know, it doesn’t look like that’s going to change anytime soon. And if you purely think about things as a function of supply and demand, it becomes harder to make the argument that, you know, the speed of decision making and the speed of these rounds going, going down is going to drop, you know, anytime soon. So that’s some of how I think about it. You know, as it relates to my next step, I continue to believe that there are ways to stand out in our business, and there are ways for me to be successful and to to have sort of an arbitrage opportunity and to deliver outsized returns, otherwise, I wouldn’t be wanting to do this for the next 20 plus years.

Nick Moran 21:33
So you got to find the ARB. Right? That’s right. I think we were both maybe on a call with Josh Koppelman earlier this week, right. Yeah, he was a school conversation. Yeah, yeah. Schooling us all in finding our own ARB and differentiation. So to kill, I want to talk a bit about the article that you wrote agglomerates versus specialists, you know, this was kind of sort of went viral and feels like every emerging GPI talk to kind of it comes up and discussion. But for, you know, the minority of folks in the audience that didn’t get a chance to see the article, can you just give us a brief breakdown of the types of focus amongst VCs, these collaborators versus the specialist? Yeah,

Nikhil Basu Trivedi 22:15
this, this ties in nicely to what we were just talking about, you know, there’s a lot of capital out there. And there are a lot of different types of firms out there. And I’ve increasingly noticed, as many others have, there’s this bifurcation of firms into the agglomerate is on the one side, which are multistage, and multi sector focused firms, and specialists on the other side, that are either specialists by stage, or by sector, or by both. And that’s just how I think about, you know, where we are as an industry right now. And I tried to lay out that bifurcation in this piece. And there’s a graph if you go to it, or a chart that lays out some examples of firms on these different axes.

Nick Moran 23:01
Right, right. What do you think has caused this rise in the agglomerate errs, the a16z, ease and squeeze of the world.

Nikhil Basu Trivedi 23:10
I mean, look, first of all, several of these firms started off as specialists, but have become agglomerated over time, and they’ve had the license to become agglomerate is by raising bigger and bigger funds. By increasing the scope and sizes of their teams, they’ve had the license to do these things, because they’ve delivered for LPS, because they’ve built strong brands in the market. You know, because they’ve been able to, you know, hire talented people to run a crypto fund, as well as a bio fund as well as a regular mean technology fund. And so I think it’s important to call out that, that, you know, it’s hard for for firms to start off as an agglomerate. But you can get the licenses a firm to get there over time, with some level of success. And so that’s one of the reasons that this has happened. You know, I think another as these firms have recognized, that they have an opportunity with that brand, with what they built to go be successful as a growth stage investor, if they’re in early stage investing today. And and, you know, I think each firm in this bucket probably has slightly different reasons for having gone in the agglomerated direction. But the the final piece of this equation is of course, also on the LP side, which is LPS have been willing and excited to, to double and triple down on these firms to give them more and more capital over time for more different types of funds as well as perhaps the main fund that they started off in. And so that’s another reason for their rise.

Nick Moran 24:57
Well, and in some cases, either witnessed or observed these, these firms that are collections of specialists, right? They have partners that are specialists, either at stage at sector category or both. So there are these, you know, I come from, or at least my background was working at a conglomerate. And the conglomerate, you know, leveraged certain economies of scale and economies of scope and some shared services at the parent level, but it was a collection of subsidiaries that had no interaction with each other. And, you know, some of these firms actually feel that way. To me, they have these silos. But, you know, it’s dangerous, it’s dangerous. Anytime you get too big and you lose focus or you lose, you lose your arm at the, you know, the individual level where you can really succeed and win. Well,

Nikhil Basu Trivedi 25:48
you’re absolutely right. And we’ve we’ve seen this movie before in the venture industry, which is also what I think is fascinating about this moment in time. If you go back about 20 years, Benchmark Capital, one of the best specialist firms at the early stage of the series AMB today, at one moment in time had an Israel Fund had a Europe fund, you know, increased in fund size. And today, they are just one fund early stage focused in the US with a team based in the Bay Area. And so you’re absolutely right, that, you know, I think we will see some agglomerate eaters retreat and become specialists again. And I pointed that out in the post. Another recent example of this is Kleiner, Perkins, Bolden, then benchmark, but it also feels like a bunch of these agglomerated firms are here to stay, and may even become in a whole category of their own. Super agglomerate is, as I call them, such as Sequoia Capital.

Nick Moran 26:58
Yeah, we’re, we just had Trey Vassallo from defy on the program. And she was talking about, you know, her departure from Kleiner, and they’re kind of, you know, changing the firm substantially from being very big and diversified to much smaller and more focused. What do you think about the agglomerate, agglomerate errs, or at least maybe the mid to late stage, late stage firms that are also dabbling with these option checks, you know, at the seed stages, you know, thrown in anywhere from 50k to a few 100k. In the early rounds.

Nikhil Basu Trivedi 27:33
You know, as someone who has been a sector stage, sorry, stage specialist at Shasta at the early stage, I’m, of course biased on this point. But, you know, even working with companies, you know, where there are multiple, larger funds on the cap table with small dollar amounts. It’s very rare, those firms are involved in the building of the business in a meaningful way. You know, it’s, it’s typically a couple of intentioned higher ownership investors, who are the ones who serve on the board of the company, or are truly, you know, in the founders corner, the first call the second call, for key decisions. And so, just from a founder standpoint, I think, maximizing, you know, the sort of intentionality of a small group of high quality investors is, is the preferred direction, at least that that I would have as a founder. Again, there’s, there’s others that think differently and want different things in their investors. But but that’s what would matter to me.

Nick Moran 28:51
It’s interesting, we, we do a lot of precede and early seed deals, and often we lead because it’s very early. And what that means is typically there’s not coastal presence, right? But on occasion, right, the founder gets a network connection, or there’s a 50k check that’s thrown in by a large fund. And sometimes we run SPVs for our investments on AngelList. Because that’s kind of where we got our start. And it’s amazing to see what happens with the herd. You know, the, the the large group of accredited IDs and whatnot, when, when there’s a logo involved, and even the AngelList fund of funds. If there’s a logo involved, however, small can be 10k 20 25k 50k. If there is a big logo involved, it is like a feeding frenzy,

Nikhil Basu Trivedi 29:34
which is very good point. Yeah. And it does, it does speak to the benefit of having a bigger fund an agglomerate of fun with a bigger brand, perhaps than average specialist fund. On your cap table, which is it can drive you know, more fundraising at the early stage, it can be a good signal. But you know, signaling is complicated, it can also become a negative signal over time. But right, bigger fund is not leading a Series A or Series B, but it’s on the cap table already. That could cause some questions at least around. So I think there’s double edged swords on, you know, on this point, a

Nick Moran 30:12
grid. Nikhil, I was speaking with a large institutional LP this week, and he said to me that he doesn’t believe that sector focus fund models will produce outsized returns, he thinks that they underperform. And he even suggested that the data shows that the specialist sector category specialists underperform you don’t have you found? Or have you seen data that suggests that the generalists are outperforming the specialist.

Nikhil Basu Trivedi 30:44
I’ve not explicitly looked at this data. But what I will say is that there are several sector specialists that have delivered phenomenal returns in the last decade, look at Ribbit capital, for instance, in FinTech, which is a sector focused now multistage, focused been in financial technology, and they’ve done a really impressive job for their LPs. And so I think it’s hard to make generalizations in the venture industry, because, you know, there’s so many different ways to be successful in our business. And there’s, it’s been proven for so many years now that there’s lots of ways to succeed, and there’s lots of ways to fail. And I think the most important thing for a firm is to figure out what is authentic to them, you know, as as a partnership, what are their unfair advantages and competitive advantages on the sort of buying decide when help exit axes of the venture capital flowchart, and to go execute against those things? As part of that strategy?

Nick Moran 31:56
What are your thoughts on rolling funds, and how those might, you know, play in with the the dynamics that we’ve been discussing, really

Nikhil Basu Trivedi 32:05
fascinating model that, and the rolling fund, for those who haven’t heard about it is a product by AngelList, that enables limited partners to commit to venture funds on a rolling basis on a quarterly basis, it enables GPS of those funds to access capital on a quarterly basis. And, and it’s breaking the traditional fund model, which is you raise a bunch of capital, you have that for a 234 year investment period. And then you do capital calls with with the set of institutional LPs, to make investments, this is just a very different model. One of the things that I think is fascinating about it from a wonky standpoint, is just how it’s going to change some of the math around venture capital, the way IRR gets calculated is just gonna be very different. You know, it’s, it’s a bit unclear to me exactly how follow on decisions are going to happen, and how some of the some of the stuff around pro rata is going to kind of happen with the rolling fund model. Because, you know, it’s very hard to predict timing of these things. As you know, in a traditional fund cycle, with a rolling fund cycle, you suddenly have this capital on a regularly time basis. And so it’s really interesting to me, I think, you know, stepping back, What is exciting about rolling funds is it’s democratizing access to investing in venture capital, you know, fund managers, or a broader set of LPs. And so I view that as a real positive that more people can access the asset classes, LPs. And it’s also, you know, my bet is going to enable a bunch of people who would struggle to otherwise raise a traditional institutional venture fund to now raise a rolling fund, and to start making investments. And so I think it’s democratizing access on both sides, which is, which is exciting.

Nick Moran 34:03
Yeah, a lot of people thought when when AngelList launched syndicates a number of years ago, a lot of people projected, you know, this is going to be the most disruptive thing that’s happened to venture and prognosticated. About that. And I think, you know, a few years later, a lot of people are saying, well, that that never really happened. I mean, it’s it’s been good. It’s been interesting. Do you think the rolling fund, product or approach is more or less disruptive than the syndicates on AngelList launch?

Nikhil Basu Trivedi 34:33
It’s a great question. I mean, you know, I think it’s probably equally as disruptive which means it’s not going to be, you know, massively disruptive to the traditional fundraising landscape. I think for those folks who can access institutional LP capital. There’s still lots of benefits to the traditional model versus the rolling fund. And I find it hard right now with all the information in front of me to foresee, you know, the next couple 100 million dollar you know, the next First Round Capital, you know, incredibly high quality partnership being built on the back of raising the entire fund and rolling funds. I think it’s right, very efficient. But you know, could it get someone a start? That enables them to, to be the next Josh Kaufman to start the next first round? I think absolutely. And, and that’s what makes it really interesting. And, and similar as well to syndicates where, you know, folks like you have gotten their start. And it’s enabled them to grow their business. Really

Nick Moran 35:49
good point, I didn’t think about it that way. But in terms of it being a method for developing your MVP, as a GP, right? Certainly the SPV model, the syndicate model was our MVP, and then our fund one was, you could call it proof of concept. And we think our next fund will be more product market fit. But yeah, definitely a great way for people to get started, I can imagine the institutional LPs are going to, there’s going to be tricks, that’s going to be tricky for them, because portfolio construction and all that is very TBD.

Nikhil Basu Trivedi 36:20
Yeah, yeah. And I think again, just just to put a bow on this, you need some kind of a track record is, you know, to end up being an institutional investor who raises capital from from institutional investors. And so, to me, more ways for people to build a track record, and more access to that ability to build a track record is a good thing. And so that’s how I view these rolling funds and syndicates as well. And then also things like Scout funds that have enabled folks to build a track record.

Nick Moran 36:59
Nikhil, what resource Have you found particularly valuable that you’d recommend to listeners?

Nikhil Basu Trivedi 37:06
I’ve tried to be a student of the venture industry for the last decade, and I’ve learned so much from from different venture capitalists and their blogs. And so folks like Fred wilson@abc.com, I’m still stunned that Fred is writing, you know, almost every weekday. And he’s been doing this for so long, but he’s still, he’s still writing. And I feel like, you know, I still learn something from him on a weekly basis through that writing. And so he, he’s up in that sort of upper upper echelon of VCs, who I’ve found really valuable through their, their writing and through reading their work over time. But there are a bunch of others, you know, in that in that camp, too.

Nick Moran 37:57
Nikhil, what do you know, you need to get better at

Nikhil Basu Trivedi 38:01
so much, you know, I’m, I’m 31. I’ve been doing this for only about 10 years now. You know, the venture industry is constantly humbling, and figuring out how I get better at finding the next great investment, making investment decisions, winning the right to invest. And helping the companies I work with is something I think about every day, and I’m trying to get better on each of those dimensions every day.

Nick Moran 38:29
Any final words of advice for, you know, the founders out there that are, you know, trying to get from that early seed stage maybe MVP to to the series? A?

Nikhil Basu Trivedi 38:41
I think the most important thing in that phase is focusing on finding as many signs of product market fit as you can. You know, I think once you raise a Series A the transition often becomes how do I build a company? And how do I take this product market fit and scale it by hiring a high quality team to, to execute on it. But in that, you know, MVP to series A stage? I think it’s all about finding product market fit? I mean, what do you think?

Nick Moran 39:13
I agree, I think it’s very difficult to find product market fit in many cases. And I think I’ve seen entrepreneurs get out in front of their skis with growth before they had real product market fit. And then, you know, it’s a leaky customer acquisition situation, and the stickiness isn’t there and the CSAT scores and the NPS, you know, aren’t quite where they need to be. But yeah, the ones that really nail the product and really find the right beachhead segment, you can throw gas on that fire and it works. Yeah, it’s a really great point. Good, and then finally, Nikhil, what’s the best way for listeners to connect with you?

Nikhil Basu Trivedi 39:54
I’m trying to be more open and more transparent on Twitter at NBT. By initials on my newsletter next big thing, which is just mbt.substack.com. And so I think those are the two places to find me. And I always try to be as responsive as I can be and welcome everyone’s feedback on my writing. We’ll

Nick Moran 40:17
keep riding. I’ve had a lot of conversations with folks about some of your recent articles. So I hope you do more of it. I’m going to check out the screenshot deal mental memo article as well. And you know, best wishes with everything. It sounds like you’ve got some, some great things in the work in the works, and I can’t wait to see how they play out.

Nikhil Basu Trivedi 40:35
Thanks so much, Nick, this has been a really fun conversation. Awesome. Take care.

Nick Moran 40:44
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

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