Winter Mead of Oper8r joins Nick to discuss How to Raise a VC Fund, The YC for Emerging Managers, and Family Office Trends. In this episode we cover:
Tell us a little more about Oper8or. Why did you leave Sapphire to start this program? Give us an overview of Oper8or? Walk us through the selection process and what you’re looking for. Bring us up to speed on progress-to-date, how you measure success, and what the plan is going forward? You published your first book last year — “ How to Raise a Venture Capital Fund”. The target audience for the book is fairly obvious… was the motivation to write the book similar to why you started Oper8r? What are the most common mistakes new fund managers make? How do you think about types of LPs or profiles that fund managers should be targeting? What are the patterns, practices or even tactics of the most successful fundraisers that you’ve observed? You co-authored a research effort w/ First Republic on Family Office Investors — what were the key takeaways? What are some of the common reasons that LPs pass that might not be so obvious? What’s the biggest difference between winning fund strategies of the early 2010s vs winning fund strategies in the next decade? What factor do you find to be of critical importance that is most often underappreciated by LPs? Currently over 1500 active venture funds… Do you think the market can support this high of a volume of funds? Often, a startup investor may get early positive or negative signals on an investment within the first 18-24 months. As an LP, how long does it take to get a sense whether the decision to invest was good or you might want to have that one back? Why is emerging VC compelling as an sub-asset class of VC?
The host of The Full Ratchet is Nick Moran, General Partner of New Stack Ventures, a venture capital firm committed to investing in the exceptions. To learn more about New Stack Ventures by visiting our Website and LinkedIn and be sure to follow us on Twitter.
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Transcribed with AI: 0:00 Winter me joins us today from Salt Lake City. Winter is co founder of Oper8r a community building the next generation of institutional VCs, often called the Y Combinator for emerging funds. He is also author of the popular book, how to raise a venture capital fund, the Essential Guide on fundraising and understanding limited partners. Prior to co founding operator winter was an LP at Sapphire ventures and Hall Capital Partners. Winner. Welcome to the show. Thanks so much, Nick. Great to be here. Yeah, always a pleasure to connect got a chance to see in Chicago last week. That was that was nice. But now we’ll go a bit deeper on your background and how all this came together. So maybe give us the two minutes on how you found yourself in the limited partner world and how that led to operator. 0:47 Yeah, I love the new open air event. That is like the thing NASA. Thanks. That was fun. Good, good event last week. Yeah. So the the journey, again, like I bet a number of people on the show right Long, Long and Winding, you have been in the Bay Area for the last 12 years. calling in today from Salt Lake City. I got into investing about a decade ago before that was working on a couple of tech startups in line with my grad school dissertation that’s focused on on on innovation in the media industry. And, you know, I kept on getting pressure to move to the Bay area where it felt like a lot of people view that as the mecca for technology development. So I jumped over there in the late 2000s, I worked at a couple of tech startups, and then was recruited by a friend 1:43 into the private equity group over at at Hall Capital Partners. That was a amazing experience, learned a ton about institutional LP investing, they invested based on the endowment model school. So it really was transformational experience understanding, multi asset class investing, but really, you know, focusing on private equity and venture capital, through that experience, realized I wanted to double down on venture capital. So I jumped over to sa p ventures, which became Sapphire ventures, which is a very well known investment firm. Now, across the industry, that was a really interesting opportunity for, I think, three reasons. One, it was, you know, an ability to get a little bit closer to VC. Two, it was an investment role. So and I love investing, and it was an opportunity to help build out a relatively newer portfolio. And three, there was the operational component, which is something I don’t think a lot of LPs necessarily get, like joining a joining the firm really early, when it’s still building out its processes and systems, I actually felt that was fascinating, really an intellectual exercise, and definitely a challenge. But I love being there. And kind of work working on that, you know, as I was there was noticing just this gap, right in the ecosystem for emerging VCs, the market was changing, I’m sure, you know, this is talked about a lot now. And it’s kind of, you know, commonly accepted belief of just like the pace of fun formation. But that wasn’t always the case. You know, I’ve only been in the industry for a decade, but, you know, a little over a decade, but, but really, like, you know, you could count all the firms on two hands like a decade ago, and just like being in that seat investing into VC funds for the last decade, you could see, and a lot of those were emerging VCs, you could see this change that was happening, there were just more funds, like you’re looking around, like I’m looking around in my peer set. And it was hard to, for LPs to really grasp what was going on both in terms of innovation, but also just in terms of differentiating fund versus fund. And so I, you know, really got inspired by these people that were emerging VCs are very entrepreneurial, you know, that like, like yourself, right? Like you’re building a business around your VC firm or your VC firm is the business and then you have these other other methodologies, which you you know, employ to, like, make sure your VC strategy is effective. So, yeah, I started to see that more and more and that’s what got me really excited to do something in the space. I wasn’t sure what it was going to be. I wish I wish I had that type of foresight. But basically, when I left I wrote the book how to raise a venture capital fund really to test myself you know, I wanted to be a genuine coach and be able to like know that the insides and outs of what I was actually coaching emerging VCs that’s that’s how I thought about it, I was gonna go in and like help these emerging VCs and I wanted to be the expert there, be able to help them like really understand like the the nuances behind building a VC firm. So I wrote that book. Just to kind of test myself, and notice that I wasn’t the best, right? Like, as an institutional LP, you get this amazing, you know, investment knowledge how to underwrite funds, what’s the due diligence process? What’s an operational due diligence process. And you are, at least in my case, like you don’t fully understand, like the operations of what happens at a VC firm like the behind the scenes, and you don’t fully appreciate the hardship that emerging VCs go through, right. And so yeah, I sat sat in this very privileged position. And it was very hard, I think, to empathize with emerging VCs. And so I ended up consulting in a variety of different operational roles for emerging VCs, they’re all sub 100 million dollar target funds for about a year and a half, and hold that knowledge together and launched this program within the idea behind it was to help emerging VCs, but it was to help emerging VCs at scale. And so not be able to help you know, two or three managers at a time, but be able to help potentially dozens like what what was the talent pool in the market at any point in time, and be able to, you know, help those managers in a scalable way. Kind of a crazy idea. I know other people have thought of it. So not necessarily an original idea, but definitely one that I think takes a lot of like time and management and thoughtfulness. So definitely not a long story short here. But long story short, launched that last year with the first cohort ran through the second cohort earlier this year. And yeah, now it feels like there’s more shape to what operator is. And with all these iterations, we’re able to be more and more helpful, I think, to an emerging VC. So that’s the not long story short, 6:49 you know, it’s funny, because there’s a lot of self proclaimed experts in the emerging VC sort of world, many of them I’m friends with, have had some on the show and interacted, but I have yet to find somebody who’s developed more expertise in more networks, and is so focused on that emerging less than 100 million dollar class. So it is a pleasure to get you on the show and talk more about that. I am curious, oh, you know, at Sapphire and Hall capital before that. Did you exclusively focus on VC? Or did you have purview? You know, over other asset classes, private equity? 7:26 Yes, it’s a good question. The answer, the simple answer is no. But the longer answer is, Paul was really interesting, because they, it’s like a training program for like, if you stay there long enough for multiple asset classes. And so you actually sit on a team, like I sat on the private equity team there, and we invested in the range of fund sizes I invested in was between 20 million and 15 billion. So like a wide range, it was in international approach. So we would look at opportunities not only in the US, but China, Brazil, India, Europe, and different strategies. So distressed private equity, buyouts, growth, capital, venture capital, so like everything that would fall under the private equity bucket, you know, we would we would take a look at and try to have an opinion on, it was really interesting, because it wasn’t only a conversation about, you know, opportunities within venture relative to other venture opportunities, but it was venture capital fund investment opportunities relative to private equity fund investment opportunities, or venture capital fund investment opportunities relative to public market strategy, or something else, right. So you had to, it felt like it was a good training ground, because you had to button up a little bit better, I felt like in the due diligence process that you had to not only obviously, there’s diversification, but you not only had to like sell the opportunity, but you had to sell it relative to other asset classes or other opportunities that were in the market that could be just as interesting, if not more interesting. And so you really needed to have, I think, a strong opinion on like, why, you know, why this venture opportunity, which was high risk was actually like, you know, an interesting investment opportunity. So that was, I thought, a great place to learn about, you know, what was going on in different asset classes, then multi asset class perspective. And then, but I did like the value creation aspect of venture and it was high velocity as you started to get closer, or I started to get closer and closer to the manager’s like it, it felt like there, you know, there was a lot of good acting like trying to find like, really interesting businesses trying to grow value. It’s kind of an amazing space, like, the more I learned about it, the more amazing it became. And so that’s where SAP was just focusing on BC and so this became a place to just like focus my efforts on on VC, sort of joining firm there, and Sapphire has multiple investment strategies. So that was interesting. Because it wasn’t just joining a single venture firm with one strategy, but it was a platform that had multiple strategies. So even there, right, it was venture, but it was growth venture, early stage venture, understanding, like different types of, you know, structures of investments you could do went on that platform. So I thought that was again, like a super interesting position to be in and not just do like series A investing, but it was multiple stages, multiple geographies as well. And obviously, they had multiple strategies. So that was interesting. And then obviously, if there’s a theme here, it’s like private equity, big ranges VC, kind of the ranges of funds at at Sapphire. I may get this wrong, but it was between 8 million in a un like Target Hmm, and 450 million, so obviously a tighter range, but still, like somewhat wide. And now really, I’m focusing on, you know, almost exclusively sub 100 million dollar funds and have been for the last three years. So there is like a theme of like moving earlier stage. And I think that is it was a mike maples says like, strategy follows structure or strategy follows like fun sighs I think there is something here were like emerging managers like, like most don’t start out with $500 million funds, you have to start out small and build the right systems and kind of scale up build the right relationships to raise more capital over time. So I think that’s probably why it’s not like a consciously saying, I’m going to just focus on like this fund size, even though some of the data says smaller funds outperform? It is kind of a Where do emerging managers for the most part play it is kind of in that smaller, smaller fund area. So yeah, wider, wider range of perspectives, but kept on getting more and more excited about, you know, smaller funds emerging VCs, 11:47 you mentioned a couple times that you you have to be crazy to start an emerging fund. I think it takes one to know one, I think you’re, you’re in this camp, too, I’m sure. You know, much like when I left my career in my early 30s. Lots of people said, Nick, you’re crazy. What are you doing, it’s just taking off, you’ve had this success. If I had $1, for everyone who said I was crazy, I probably wouldn’t have this, you know, my last fund raise much more easily. But, you know, you also left this, what many would consider to be sort of a dream opportunity to be so formative in the the emerging manager and VC program at Sapphire. But you did leave and you started operator, which is a startup, right? It’s framed as this sort of yc for funds. I’ve been very fortunate, full disclosure, I just went through the program, I think you had an obscene number of applications from different funds, and you selected, maybe it was the top 20. And I was very fortunate to go through it. I loved it. But in your words, you don’t describe to us what this program is, you know, give us an overview of sort of the architecture and what the objective is. 12:58 Yeah, so the program centers around? Well, there’s a few things there. Hopefully, I’m not too crazy, but I am like passionate about the space. That’s what gets me out of bed in the morning. And it is very, very excited to keep on learning. I thought I wouldn’t hit you know, the end of the internet and learning a couple years ago. But like, the more you focus on something, I guess, like the more the more you keep learning. Yeah, I’m trying to be trying to be super focused, right, like, mile wide inch deep at all, but more focused at Sapphire. Yes, they built an amazing brand. And then it was like that thinking of how do you how do you continue to make impact right in the market. So building out operator was an evolution, it wasn’t like an epiphany that was just like, this needs to be the structure, it was a lot of market testing, there’s a lot of figuring out, like, what is the ecosystem need now, that potentially operator could bring to the table. And so the program itself, and this, there’s like a few, a few points here, this is going to be as well, a bit long winded. But the the idea behind the program is a very intensive, fully comprehensive way to understand like, what it means to build an institutional VC firm in a short amount of time. So if you talk to most people, right, like the commonly held belief is it’s going to take you years to figure this out. Well, that was kind of a challenge, right? Like, how can you make it not take years to figure that out? Right. So developing a curriculum that gave people that comprehensive perspective was was a goal. And there’s some other like ancillary effects that come out of driving Group, a cohort of very smart people through you know, a shorter length program is like the community, the community externalities there, which, which are great. But it centers on this education, this educational component. And so, you know, we have two cohorts now, and we’ve iterated each time quite a bit on the curriculum. And again, the idea is I’m never going to be smart enough to know, like all of the dynamics and everything that’s important in the market. So how can you listen enough to what, you know, the smartest VCs in the market are telling me and adapt the program to like what they need at any point in time. Right. And so I think it becomes amorphous in that sense. It’s not like one program that’s set in stone, and you know, three years down the line, it’s, it’s out of date, I think it’s constantly evolving. And that’s what I think is like one of the strengths of it like so at any point that you come in, like it’s going to be adapted to market context. And obviously, the market context today, everyone is familiar with, like, you know, it’s very, very high pace, there is more fun formation than ever. So it’s like, how do you kind of situate yourself if you’re coming in this program to really understand like, the full market context, and like how you can potentially differentiate as a VC fund, like, I think that’s really important. The, like, if I’m referencing the funds that come through, they do like the education, but it is like the peer to peer experience, it is like that comprehensive LP perspective you get from the teachers. Again, I’m quite confident that people don’t want me to teach a class for eight weeks, exclusively. So there, I think we’re correct by the numbers like 50, or 60. People that came in and help teach the modules throughout throughout the cohort program in Cohort Two, and that’s intentional, I think, like bringing that diversity of perspective across different LP archetypes is super important. Definitely, definitely needed. Because if it’s just me, then maybe you just get like the hall Sapphire to operator experience, right. And that perspective is interesting, but it’s only one institutional LP experience, and I have shortcomings. So you’re gonna have gaps, like if you only listen to me, so I tried to create this Yeah, mosaic of perspectives that I think leads to a richer experience. Throughout the cohort, it’s eight weeks, usually people commit about five to 10 hours per week, although there are some very dedicated people that do do commit more they, the feedback has been like, the more you put in, the more you get out, and I view like, operators role is just being the enabler, right? create this infrastructure, you know, manage the community, keep on like, listening to the community, what does it need, and keep on like building that and layering that into the community. And hopefully, you know, fast forward a couple years, it’ll be be a more interesting place than it is today. 17:27 I mean, I’ve been at this for seven years, right, and I’ve raised two funds. And going through the program, there was still, there was still so much material that I just had never had exposure to, right, I call on typically, I call on 35 different founding partner GP mentors out there for advice on things, but there’s a lot in between the lines, that one just doesn’t realize when they’re building this, you know, building a fund from scratch, many, many modules across this this program, you know, from building your brand to, you know, the VC tech stack to due diligence, best practices, budgeting, portfolio construction, LP reporting, you know, putting together an elpac, I mean, that’s just a small sampling of some of the various modules. So I want to make sure we do justice to you know, how much thought you’ve put into it, and the experts that you bring in to cover a lot of relevant topics for aspiring VCs and those that have launched funds and are raising funds. So winner, you know, tell us a bit about the selection process, you know, what are you looking for? Who is applying to this? And what’s what’s the data around applications and selection? 18:42 Yeah, really interesting question. Again, like coming from a place like Sapphire, one of the best investors, LPs in the industry, I thought that I was seeing like most of the market, but again, like there’s this whole other ecosystem that’s pre institutional, or like just starting to become institutional. And I think that’s become clear in the application process, right? The fact that hundreds and hundreds of people apply to the program, I think is a one, it’s a sign of where the market is. But two, it’s a probably a sign that there’s like quite a bit of demand for this type of transparency in the market. And people are people are really trying to grasp onto that, and learn which is great. The application process itself, it’s pretty, pretty straightforward. It’s a it’s it’s inspired by the fact that I invested in 80 funds before starting operator. So I had a lot of reps, I think, you know, it was almost a deal of fun per month, the whole time that I was an institutional LP. So it’s pretty active, active, like early, early career, and that I think it’s spired the application process. So the idea here is almost the application processes a lightweight due diligence process of sorts, right to create, like the right curation of folks, that means a couple things. One, it means it’s probably more intensive than other programs, the onus is on me in that case, but to it means I think like you actually get a pretty interesting group of people that are qualified. And then three, a little bit more context is like, it is pre institutional still. So you’re you’re thinking about track record and a different way you’re thinking about, like, where they are, in terms of where the fund is, in terms of articulating their strategy in a different way. You’re thinking about, okay, this isn’t a fully baked team yet, right. And so, it’s almost like taking this lens that you’ll take, when you’re investing in like presea company, or Seed Company, I have to do that same perspective for these very high potential funds, right, like, you’re pretty well known. But there’s some LPs that don’t know about you still, right. Like, you’re kind of, you’re in like the post seed a, you’re, you’re climbing like quickly. But like, You’re, you’re still for a lot of people that are in their zones, like a lot of LPs that are in their zones, like you’re still viewed as, like, pre institutional. And that’s true for a lot of funds that are sub 100 million dollars. And so the idea here is to like, do that work, that application process, that lightweight due diligence process in a way that captures, at scale, like the talent in the market that can again, like bring together that talent into this singular community, which is operator. And hopefully, that’s like really interesting for other people that are again, ancillary to venture capital, thinking about getting into venture capital, like it makes it a more interesting arena for them to come and visit and, you know, meet with you and meet with others. So that’s, that’s kind of the idea behind the the application process, 21:56 just the stats on on application, 21:58 status 453, funds applied to the second cohort, again, 21, were selected. Maybe, again, like this is of course onus on me, like maybe there could have been more. But I felt like that was the right number for really good engagement, and really good dynamics like amongst the cohort. And I think what I’m seeing now I’m recruiting for the third cohort. What I’m seeing is some people have, you know, stepped up their game in advance of applying to the third cohort, which is really interesting. I don’t know if any credit is deserved to operator, but it is interesting to see like how they’ve gone back and iterated themselves over, you know, the past six months, really trying to like, for themselves, like step into the right ecosystem step into the right communities. So I like to see that as well, which is really interesting. That’s happened over the last few weeks a few times now. And people have resubmitted applications. You know, I, I’ve even told them, I was like, I know it’s a bit of a burdensome application, it’s takes 25 minutes, which isn’t too bad. But you know, you don’t have to log on that. And I had the materials prep, it’s a couple hours. 23:18 It’s 20 minutes. 23:22 So yeah, my feedback was, you know, you can just like edit here and there. And they said, No, I want to like, you know, I’ve changed so much in six months that I actually want to resubmit the full application. And so that’s really interesting to see. And again, like that’s inspiring to see like these people who are emerging VCs that are still so early, are working so hard to build their businesses, that is, I think, you know, inspiring and interesting. And so being able to track that over time, by being disciplined around the application process is something I also find, like, pretty helpful. So I reviewed all the applications, I tried to take out bias as well. So not just taking referrals, warm firls, I do take but, you know, there is an exercise I’ll go through during the process where I will remove the names, remove the source, remove, like any kind of identifiable information for who the person is. And I’ll just look at the numbers and the qualitative, like writing that was submitted. And I’ll kind of do that exercise across a variety of different dimensions to try to like take bias out of the equation and kind of see like, who is you know, if I were just looking at the numbers, or just looking at the articulation strategy, like who is actually the best team out there, right. And it’s amazing, like a couple people got into the second cohort, because I did that exercise. And I was like, you know, I was like, if I was just taking warm referrals, which is obviously the traditional approach, then I would have missed like these teams that kind of stood out on their own by their own merit. With me taking out like the bias of my own network, so I thought that was, I thought that was pretty interesting and kind of something that I carried into or I’m carrying into the, the application process for cohort three. Considering all the rigor you put in winner, one might wonder how new stack got in to operator. But let’s talk about that another time, you wouldn’t have gotten into co or three, but you just need to 25:26 love it. 25:28 No, I mean, it is, you know, so there’s all these different community, there’s a handful of different communities out there and different groups that are trying to train and VC and I’ve been asked me like, so what one or two have recruited me for many years, and I just haven’t been interested in when people ask, Why haven’t you joined blankets, you know, the numbers have gotten so big, these things become a little noisy. And then you and I had to had a conversation earlier. And I said, You know, I, I wasn’t interested in joining this other group, because, you know, they bring on associates, and chiefs of staff and all these other folks that are a great part of the ecosystem, but they’re not going through what I’m going through, which is like a, you know, solo GP situation. And that’s not to say you only go solo GPS, but, you know, my, my peers in the program, we’re all, you know, GPS founding partners, you know, folks that we’re facing the challenges that I’m facing. 26:22 Yeah, this is a really interesting point. Because the, and this is something I haven’t appreciated. Until recently, which is like, the founder mentality is something to be analyzed, like, in more depth always like, especially when like, you’re, if you’re an LP choosing who to invest into, like spending a lot of time there is very important, right? Obviously, team strategy, performance, underwrite the fun, you’re doing the due diligence, you know, you’re running the ops DD, you’re kind of like, understanding, you know, is this structurally a good investment, it, you know, are the numbers there, but then like, that layer of like, getting into the mentality of a founder, that is very, very hard to describe. And it’s very important, I think, for just the quality of conversation, like, it’s, you have to actually solve, like, problems that just suck. Right? And you don’t want to, and it’s like, but you have to if your business is going to survive, and it’s like, you know, sometimes you don’t get that if you’re a non founder mentality. And so yeah, that’s something I don’t think I characterize it well, in the question on the application process, but that is something I, you know, think about a lot. And I, you know, I’m trying to be intentional around the community there and bringing in people that care about what they’re building. Right? It’s like they almost they, they’re at a point where like, if they walk away, there is no, there is nothing there. And so that’s kind of where I’m capturing intersecting with people. And they want to build something great, right? Like the alignment with operators, you want to aspire to build a very strong, very big business, not necessarily huge, like it doesn’t have to be one of these mega platforms. But it has to be something that’s long term, and finding the person that’s willing to like, work through those near term challenges to like, get to the other end of that. That is, yeah, like, like very, very, very, very, very important. focused on building a franchise, with intention. And that, I mean, that’s what I experienced, actually, early in the cohort, I never told you about this winner, but I was I was quite intimidated, actually, I got into the program, and the caliber of managers that were in the group, it was a bit intimidating for me. You know, fortunately, we all kind of became acquaintances, and then friends, and now we’re sharing deals and talking a lot. But it wasn’t like other emerging manager groups that I’ve been a part of over the years. It’s, it’s a very, you know, high caliber group of folks. So that I think that’s a testament to you. That is why you made it in like you like and you contributed like a ton to the community, right? Like you had had that, like the foundation of multiple years of having already, like, built out some of your firm, like, your systems are very, very good. And like people learned a ton from you. And so that is kind of a dynamic we try to curate, which is there’s some people that are a little bit earlier, that are just getting started. And some people that are a little bit later on but they’re still you know, earlier in their emerging manager journey, or about to break out, you’re probably in that latter category. Right, just sort of given given the success you’ve had to date and where you could go I think that’s, that’s that created like an amazing dynamic, I think so even though maybe you came in And realize that that you came in with with that perspective, or that hesitation. But, but I could see it and like how you’re interacting with the community like and I got feedback that, you know, what you’re bringing to the table was like, exceptionally important for how people like set up their own firms. And that was kind of cool to kind of see like how, again, like how people were independent, but like growing together through this community. 30:24 Now it’s it’s good knowledge here. It’s the only slack group I’m active in, of the many over the years. But But when let’s talk a bit about the book, right, you wrote this book, how to raise venture a venture capital funds? Fantastic read, I mean, anyone, whether you’re raising a fund or just a VC, there’s lots of perspective and insight that folks that are investors should should gain from reading it. The target audience, you know, is is fairly obvious here. But what was what was the motivation? And you know, what, 30:56 what were your goals with the book? Yeah, touched on this a little bit earlier, the motivation was really to see if I could be a good coach to emerging VCs and like, understand where my shortcomings were. At that point in time. Again, I wrote it late 2018, I believe. The there’s obviously a lot more to the operator program than the book, but I got a lot of good feedback where I wrote the book, and it, it was kind of, you know, a mind dump, which is like from, for me, it’s like, it was a little too, it was a little too much, I think for what I was trying to actually like, do, like, the intention behind the book is something that’s relatable, it’s clear, it is kind of almost like a step by step. But, you know, you could jump into different chapters later on in time, like something that you could go back and refer to, but it’s simple. And it was not intimidating. And when I was doing research, you know, as I was writing the book, like, you go and sort of pick up these college level grad school level textbooks, and they’re very interesting, at least I find them interesting, and very insightful. But they’re not relatable to someone that is like, trying to build confidence early on in their emerging manager journey. And so that was kind of how I thought about it eventually, like through the editing process, which is the hardest part of writing a book. It’s not actually writing it. Words are easy. Editing is hard. It was kind of that process where I kind of said like, okay, there’s a lot here, how do I actually, like, simplify it and make it relatable to someone that, you know, is very busy, potentially very busy, is trying to think through, like, is this the right journey for me? And doesn’t have to do, you know, complex math equations necessarily to, like, get to that answer? What are what are some of the most common mistakes that you see new fund managers making, I think going to market too soon. So if we’re talking about first time funds, being deliberate around how you form your team, how you think about your competitive advantage, how you articulate that, you know, going through just a ton of iterations, self reflective, as well as just like, you know, material like your deck. And I think creating a actual plan of attack before you go and raise the fund. And then like, the self awareness piece is like, how do you? Like, how are you really going to be perceived and like, you know, accepted by the market? Is it with open arms, right, and having that self awareness? Or do you need to like, work on what you’re doing and become better at what you’re doing? And then go to market? And I think the other that is something that’s been talked about for a while, right, like institutional LPs talk about this all the time. It’s like, what is that right journey? You know, and maybe it’s five to 15 to 25 to 50 million. Maybe it’s like, you can start with 25 million, maybe you can start with 100 million, like maybe it’s a little bit longer, like you’re starting with, you know, a few 100,000 you’re starting starting as like a scout somewhere. It’s kind of like knowing where you are, and like, always trying to figure out like, what makes you different invaluable to the founder? And and how are you going to describe that on the other end to LPs and like, why is that going to be valuable and like different in the ecosystem, I think, I’d love to see, I see it a lot. But I’d love to see more of it. You know, emerging VCs, like continuously challenging themselves on that because I think it’ll actually lead to more helpful VCs, like entering the market, helping founders and like that ability to, you know, just build better, better firms overall. would, you know on the other side, when or what What are the patterns practices or tactics that you’ve seen really successful? 35:05 Folks 35:07 execute, you know, in raising their funds? Yeah, this is, this is where I struggle sometimes to answer this question. I don’t like calling it a numbers game. But it kind of is, at times, I think the way to potentially think around that is when what you get on the operator program is like this understanding of LP archetypes, like, Who is your actual audience that you’re talking to? What is their actual structure? You know, what is their level of empathy? Like? Why are they investing into venture like understanding that? I think people that understand that really well have more success, you know, talking with larger check writers, larger LPs. I think being disciplined around the fundraising process, I think, recognizing that there are different functions of a VC firms. So you are the CEO of your VC firm. And like, you, therefore have to context change, like pretty quickly at times, maybe every day. And so I think like that, like recognizing that, and being disciplined around it, and building systems, I think you’ve, you’ve done a really well, right. Like, I think that that kind of discipline around doing that I’ve seen be very, very helpful. I think knowing, like, knowing what’s important. So this is kind of like, are you? Are you business and success oriented, like if you can boil down from a lot of complexity and a lot of information, what’s the most important thing to focus on, and, you know, actually being very thoughtful around, kind of choosing where you’re going to spend time and choosing, like, what you’re going to do, so you’re pre emptive, and like most of your actions, when it comes to like building the business. And then there is an element of personality to, like, I think this is a is an interesting dynamic, because like, I’ll try to look through personality at times, like if you’re not, like, overly energetic, but you’re very talented as an investor, and try to like find those people. And, you know, again, like curating the community, like bring those people in as well. And sometimes they just, they will be successful, but it’s harder for them to like, uncover themselves. They’re not like shouting on Twitter, or, you know, doing a huge marketing campaign, but they are like, very talented. And so I think there is an element of like, just the grit that you have to dig into. And grit to me doesn’t necessarily equate with like, marketing skills, like it equates to those underlying factors, like I mentioned, of systematizing, and discipline, and kind of knowing what’s important, and being able to, like find that I think, is what the what the role of like, the LP is kind of, in the early days, 37:59 when or what are some of the reasons that LPs pass, that might not be so obvious, you know, we’ve all been through this, we either get the pass, or we get the ghost, and we can’t get people’s attention. And it’s hard to tease out the reason, you know, the reasons why but you’ve been at this a long time, you’ve seen a lot of successful and less successful fundraisers, you know, can you give us some insight on on the reasons why LPs pass, 38:26 I think there’s a, I think there’s a few reasons, one of the big reasons is just time, like time to actually do the appropriate amount of diligence, like, especially in this market, there’s a lot of fun formation, there’s a lot of opportunity, and they’re seeing, you know, a number of inbounds per week. And so being able to like, you know, larger check writers, institutional LPs, like try to hold themselves accountable to a process, right. And many times, like, their job depends on it. So, for them to put in the cycles. They, you know, for them to put in the cycles to do that diligence, like, they just need need more time. I think another reason is like the portfolio, like how it is already constructed, it needs to be like a one in one out. So they need to fire manager before they hire a manager. And so I think that’s, that’s a reason, I think, especially the emerging manager world, like you’re talking to a ton of LPs, and some of those LPs like, are dedicated to emerging VCs and will invest in emerging VCs, but some of them are just dipping their toe in and they don’t like understand, like, how to underwrite a fund. And so they have difficulty actually doing the diligence. I think there’s a different problem than like, the institutional LP that’s crunched for time, like, you know, is is are like already thinks they have the exposure that your fund would represent in their portfolio, but it’s like that new LP that may still be like trying to build out like perspective and like understand, like, you know, their own own investment objectives and own investment. references. So I think depending on who you’re talking to you like being able to qualify like, is this someone that has done this before? Or is this someone that’s new to the space? Both may end up committing? But I think like they’re going through that they have, like different challenges, like, on the back end. So yeah, I think some of the reasons, when are you co authored this research effort with First Republic, family office investors, 40:24 you know, a, a target LP group that’s typically very important for emerging fund managers. You know, what were some of the key takeaways on on the data from this effort? 40:37 Yeah, that was a very interesting survey, a mix of family office sizes, and mainly us, but some international family offices, as well. I think I was surprised, I think there, there might have been some sample bias here. We’re just based on our networks. Like we were asking people that were interested in VC already. But I saw they had higher exposure to VCs in their portfolios than I was expecting. Like, again, like, I think the proxy that people usually say like if you’re building out a portfolio, multi asset class portfolios, five to 10%, into VC, but that has, like, based on the survey data we have, like that has flexed up. And so you know, I was surprised to see, you know, people investing 20% 30% of their portfolio, like what felt like a lot that so it, I guess it sort of shows that family offices, at least this group, were more risk seeking in their own portfolio allocation across across asset classes. So that was interesting. I thought the, the ranges, right, like family offices, in some cases, equate with institutional LPs. So I think people like to think of them as different buckets. But like, I talked to a lot of family offices that run as if they were institutional LPs. And, you know, commensurately, they write significant checks into emerging managers, which is really interesting to see. I think they, they tend to do both established VCs and emerging VCs. And they’ve, they almost view them as a separate, separate bucket. So they have like their established VC exposure, and then they have their emerging VC strategy. And they kind of think about those as like two separate things versus like, VC or as a bucket, although there’s certain family offices that almost exclusively just invest in emerging VCs. And they try to build a strategy around that, which I thought that that became clear with the data, as well, like some people, especially like, newer LPs that were coming to market just filled out an emerging manager practice. And that might be twofold. One, it might be they’re looking at the returns data and saying like, you know, smaller funds, emerging managers like this, these are where the returns are. Maybe it’s more than two reasons to like, on established VCs, they just can’t get access with their check size, given kind of where those established VCs are in their life cycles. Now, some other key points was we looked into co investments there as well. And I think maybe the last point here, this size of check, I was surprised by it was larger than I expected. So we also did some research at the end of last year, with an SPV platform called assurx, which is run like 1000s of spvs. And when you looked at the we published this research, when you looked at like the ranges of checks, like from the shirt, eight, I was like smaller checks, but when you actually just like broke that down into that subgroup of family offices writing the checks, they were writing, like quite significant, you know, many times seven figure checks into into co investment. So again, direct into startups, co investing, with fund managers. Yeah, direct investments into startups co investing alongside of investment managers. And actually, I’ll throw in one more, I said the last one, but I’ll throw in one more point was, I always viewed like if there’s going to be a strategy of investing alongside emerging VCs, that it was going to be like, first I invest into Nick, and then, you know, Nick, and I like each other. And so then we’re able to like co invest together. But that was that was kind of AB, it wasn’t disproved, but it was there’s kind of another route there, which is just like, there are a number of family offices that just do the CO investments. I don’t even know if you’d call that a co investment. It was like they didn’t even invest into the fund. And they were open to looking at, you know, deal flow from you, Nick, and potentially like investing into that and that that behavior was actually happening more significantly than I would have expected. So yeah, definitely some interesting insights that came out of that. 44:57 Well, and it’s funny because anecdotally, not Just family offices, but also institutions, in many cases have said, Nick, let’s find a deal to work on directly. And then we can use that as sort of, you know, a launch pad to invest in your fund, which, you know, I don’t know if that’s, at times, I don’t know if that’s a red herring, you know, if they’re just trying to get direct access, or if it’s true, but often what you can do is reference check those LPs and find out if that is the path in and in some cases, it very much is with, there’s a number of institutions that you can use a direct co invest as a way to get them, you know, as a substantive anchor LP investor. 45:40 Yeah, yeah, I think the back channeling there is, is really important. And yeah, it’s interesting, like, I don’t know yet, like how that plays out. So it could play out in that way that you just described, where, you know, you’re able to co invest with this person initially, and then they come into your fund, which is, you know, a great symbiotic relationship. But the data, you know, it’s hard. This is why it’s hard to sort of, like, generate insights from the data. Like, it could also mean that, you know, there’s a new type of LP out there, that’s really that sees the velocity of like, spvs. And it’s just kind of capturing that, you know, so they’re not even doing fun investing, they’re just like capturing, you know, spvs, because there’s so much velocity of deals being passed around that they have that opportunity now in today’s market. So I’m not sure what the what the actual takeaway is, but hopefully, it’s the former the one you described, because it means like, the people that are sourcing the deals at the foundational layer are, are alive and well and can continue to drive r&d and America’s innovation ecosystem. Right, 46:45 right. Yeah, Funny enough, I was having lunch with a prominent LP of mine a few weeks ago. And we’ve done a number of our spvs via Angel list. We’ve also used assur and other platforms. But he was saying to me, I’ve been, you know, investing with this guy for many years. He’s a major LP and multiple funds. But he had mentioned, you know, he does a lot of spvs through us on angellist. And he had mentioned, he’s done, you know, X number of millions across the angellist platform, because after we brought him to the platform, you know, they started really marketing other deals to them. And he started deploying, and I kind of had mixed emotions about that. I’m like, wow, you know, I just shared huge share a wallet for one of my LPs with this massive group of angellist syndicates out there. But you know, I guess that’s the trade off when you use a platform like that. Winter, we have over 1500, I think active venture funds now, which is an astounding number. I think when I started the podcast, it was in the low hundreds and big outcomes were a billion and now, you know, we’re looking at the corners of the world doing it, you know, their valuation is, I don’t even know what it is. I think it’s above 30 billion. Do you think the market can support this high volume of venture funds? You know, is it getting too noisy? And is there too much capital chasing too few deals? Yeah, this 48:09 is such? This is such a good question. There’s no great answer. I hope the answer is yes, the market can ingest these new investors. I think why that may be the case, right? Obviously, the common moniker software is eating the world. So software is moving into more and more industries like and it’s just kind of touching the surface still on a lot of industries. So there’s a long way to go there. And so, you know, when I’m looking at it, I see the potential for more specialized funds in an industry, these industries are very sectors are like very large. So like, they have the ability to, I think, to support like, almost what the VC ecosystem was, you know, 10 years ago, like each sector has the ability now, given the size to like, have what can like ingest almost a full full VC ecosystem, like a decade ago. So I think, I think you’re seeing that play out. And that means like, you’ll have more specialized funds, but you also have the ability to have a bigger market. Again, like I think it’s where, where’s the expansion opportunity? Like, how can these people find competitive advantage or be different and I think what we’re seeing in today’s market is like access to new communities, like access to new market potential access to new geographies, right, like the where’s the next Silicon Valley gonna sprout up? Right? Like you’re seeing more of these technology ecosystems, obviously, COVID has accelerated that to a certain extent of people like going back, you know, to respective communities and kind of driving angel investing or driving just talent generation there. I think that’s that’s kind of an interesting theme. And therefore, like, I imagine Fast Forward five years, you’ll see even more fun sprout up in non Silicon Valley geographies. I think there is the other thought here is the who is actually being helpful to the founders is going to, I think, solve some of this fun formation. Obviously, portfolio construction is like other elements, but realistically, like who who are the good actors that can actually like grind through, like years of, you know, hardship that is required, in many cases for emerging managers, like that personality type as to solve, like, will be solved by the market, I think, in many cases. So, yeah, I think it’s not necessarily going to lead to like 1500 funds going back down to like 200, I think it’s going to lead actually to more smaller, specialized funds, where people actually have like a reason to exist in the market. And they should exist, I think the other thought might be like, and this is kind of getting a little wonky, maybe kind of out there. But the Think of it as like the creative economy, right, like this idea of people being able to, like self sustain and have like, the Small Business equivalent of a VC firm. So there are different ways to think about where you end up on the VC journey. Like you could end up as a Harrison metal, right, like a smaller fund consistently, you could end up as a first round, right, like, bigger than Harrison metal platform base, but still not like, they could have gotten like huge, but they haven’t, right or benchmark, right? Like the craft model of venture, right? 50 to 100 per per fund, like he gets a, you know, 400 500 million, like, you feel good, maybe they’ll change, I don’t know, media is kind of saying like, they might might change a little bit. But like, that’s kind of the traditional benchmark model, then you could get like some of these bigger kind of, you know, smaller platforms. And like these mega platforms, like there are different places you can end up. And so I think like, if you take that concept of creator economy, like this is my business as a VC, you don’t have to go benchmark or small, mega or big mega platform, like you can actually like run your VC firm as a business, and be very effective at like, you know, driving results within like, wherever you’re focusing on whether that’s a geography or sector. And so I think like, I’m seeing more of that, I think the market is kind of adapting to that. And I’m hearing that from VCs as well, where Yeah, they don’t necessarily like ambition to build institutional VC firm, does it mean like, I’m going to build the next Andreessen it means like, I’m going to build like a really distinct firm, I know my competitive advantages, and I’m going to own that for, you know, my career. So I think because of that, that allows for more funds to exist, because it’s not like I’m trying to capture the full, like all the LPS market. In my one platform, you have these people that are content with their own strategy and like they know their lane and like they play in their lane. So I think that allows for more fun formation as well. And high quality funds 52:54 winner, you’ve become this specialist in emerging VC and clearly with with operator and in the book, you’re very much focusing on that emerging class. If we look at the data, I mean, operators published a bunch of this data and aggregated it from other sources. You know, emerging VC outperforms established VC and early stage VC tends to outperform late stage VC. So a lot of the bright spots in terms of alpha and performance come with smaller funds. Do you think that continues moving forward? is emerging VC going to sustain as you know, a top performing sub component of this asset class? And will it continue to be your focus going forward? 53:36 Yes, I do think it has the ability to continue to sustain. And the reason is because like, you just have the maturity of the VC ecosystem now. So it’s no longer a cottage industry, like it’s VC is mainstream. It’s, it’s much more mainstream than it was. And I think with that you have different components of the industry. And I do subscribe to the belief that manager selection is still very, very important. There’s a lot that goes into that, but figuring out like, which emerging managers are going to be successful, like that’s who I ultimately want, like in the operator community, and like, I want to help those folks be successful. But I think just looking at pricing, I know people think you know, pricing in the industry is super high. But you know, if you if you dig into early stage VC, and you actually dig into the talent, that that these folks are partnering with prices they’re getting in at and then all of the follow on capital that is there to support and like the ecosystems that these emerging VCs have built to be able to like, again, like sustain company growth and follow on capital. That’s interesting. I know those are just paper markups. But it is like the ecosystem that almost each VC firm has built that allows for them to kind of scale up interesting assets in their own portfolio and that just leads to that leads to returns. Right. So I know, there’s all these dynamics at play, like bigger firms dipping down into this smaller arena. But I think you have a lot of really smart, talented entrepreneurs, people that want to work with smaller talented funds initially, you know, as they ramp initially, and then you know, there’s a lot of downstream capital available there. So, again, it does center around manager selection, meaning like, which managers you work with, and why are they going to be successful, but I think you can still carve out, you know, there’s ample room to carve out competitive advantage in early stage VC, and be successful. And, again, that’s the exciting place for me like that still feels like where there’s a lot of advantage you can get through sourcing, there’s a lot of like, alpha generation that can be there through like how you help the companies, and what you do to make those companies successful. Like that’s much different, and much more, again, compelling for me that way you can necessarily get at the growth stage or even like dipping into public markets. So yeah, I still love this space, I still intend to, like, play here for a while. 56:05 Winter, if 56:06 we could interview any guest here on the program, what guests should we feature? And what topic would you like to hear more about? I don’t have a particular name in mind. But I think there’s this debate between like, is a 10 year lifecycle, like the right amount of time, right? And so I think like LPs, think about, you know, investing in a VC, they think about long term, but like, actually someone that maybe has a longer term life of their fund or thinking about venture on like a 15 or 20 year life cycle in terms of their investments, I think, someone that’s done a lot of thinking around that maybe with an evergreen fund, that could be that I think could be pretty, pretty interesting. Maybe it’s someone in deep tech, or someone in healthcare, or it’s like to solve some of these bigger challenges that we’re facing. Humanity today. Like that might be the that might be like someone to sort of dig into like how they think and understand like how they talk to LPs, and like, Who are those LPs looking for, like longer term bets? to think a little bit more like who that could be and send you some names? winter, what do you know, you need to get better at? And more succinct. answers to questions, so we don’t run over time. You and me both. Finally, what’s the best way for listeners to connect with you and follow along with operator? Yeah, I mean, we’re on we’re on Twitter. We have a very sparse website. You can, like I said, connect via warm referral. You can apply to the operator via the application which is on our sub stack. Yeah, probably just direct message on Twitter is the easiest way. 57:40 Well, the program is operator that’s o p e r eight. R. The man is winter Meade and the book is how to raise a venture capital fund. Winter. Always a pleasure. appreciate you sharing the time today and look forward to the next one. Thanks, Nick. Transcribed by https://otter.ai