430. LPs Seeking Alpha – Decoding the Myths and Mastery of Fund Structure, Size, Reserves, Access, and Selection (Alex Edelson)

430. LPs Seeking Alpha - Decoding the Myths and Mastery of Fund Structure, Size, Reserves, Access, and Selection (Alex Edelson)


Alex Edelson of Slipstream Investors joins Nick to discuss LPs Seeking Alpha – Decoding the Myths and Mastery of Fund Structure, Size, Reserves, Access, and Selection. In this episode we cover:

  • Evaluating Emerging VC Firms and Co-Investing Opportunities
  • Overcoming Challenges in Investing in Emerging Managers with Limited Track Records
  • Evaluating Venture Capitalists’ Competitive Advantages and Sustainability
  • Venture Capital Incentives and Non-Consensus Investments
  • Fundraising Challenges for VCs, With Advice on Structuring Fundraising Efforts
  • Using Reserves in Venture Capital Investments
  • How a GP Can Pitch Themselves to Limited Partners LPs to Build a Successful Partnership

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Transcribed with AI:

0:18
Alex Edelson joins us today from Bethesda, Maryland. He’s the Founder and General Partner of Slipstream Investors, a firm investing in early-stage venture capital funds that are difficult to find, evaluate, and access. Prior to Slipstream, he was COO and General Counsel at QED Investors. Alex, welcome to the show!
0:39
Thanks, Nick. Thanks for having me.
0:40
Always a pleasure, sir. So tell us a bit about your backstory in your path to becoming an investor.
0:45
Yeah, it doesn’t honestly make a lot of sense. I practised law for seven. Yeah, I practice law for seven years. I tried to get out of law for most of those years, I finally got out I joined a friend’s two year old fin tech startup, that company didn’t work out. I then fortunately found my way to QED. I started there during fund five as Nigel Morris’s Chief of Staff. I became the COO and the General Counsel, I was still shooting stuff, and decided to leave towards the end of funds six at the end of 2020, and started slipstream in 21. Based on the experience and observations, I had acuity. Tell us more. What was the insight? Why did it compel you to start your own fund of funds? You know, there were just some eye opening learnings there. And the first was, as we grew, it just became clear how hard it is to scale venture and not like QED is well positioned to do it. But it’s hard, you just can’t get enough ownership and enough winners. And the winds aren’t big enough to continue outperforming on these bigger funds. And so it was like, Oh, these big brands, they can generate great returns, they can be consistent top quartile performance, and sometimes even better. But often the majority of the highest performing funds in any vintage are these emerging management. They’re small, early stage funds with limited track records. Of course, it’s only fair to also acknowledge they are some of the worst funds, I don’t mean to suggest, like, you know, just go invest in emerging managers, and you’re gonna do great. Like it’s hard. And it’s not like turnips, Alex, you can’t do. Yeah, exactly. And so or you shouldn’t be definitely shouldn’t do as well. So that was the first like, sort of surprising observation was that it’s not the big brands, it’s often the small funds that are generating the best returns in venture. And the next thing that was happening, was it, I was realising like a lot of people struggle to evaluate these funds, because they have limited track records. And so you’re evaluating them based on qualitative criteria, you really need to understand venture and I mean, I was learning venture, QED is well, it’s not the only way. I was learning from the investment team that had 10 years of really successful investing experience before I started and learned from them in a variety of ways, just like being on the job, but also like a lot of internal reflection on what works and what doesn’t, and what we’ve done well, historically, and what we didn’t and could have done better. And just like talking about topics internally that we thought impacted fund level returns. And we’re getting founder feedback from our founders, like every two years or so. And we had that going back 10 years. And I was responsible for collecting that with an executive coach, when I was there. And it was really rich feedback. So if you were just a step back, I think just being acuity was helpful. And like gave me a pretty unique perspective on what it takes to succeed in venture. But like those internal conversations, acuity was like kind of going to venture school. For me, it was like sitting in a venture class. And then we’re talking about like, Well, how do you generate returns in venture, and then you’re seeing this founder feedback, and you’re like, these are great founders. They’re not all actually great. They haven’t, or they haven’t all been successful, but there are a lot of them, like over a long period of time. And they’re kind of telling us like, what do we expect from a great venture firm? Why did we pick these firms? Why did we work with you? How is it going? How can you improve? And so you’re getting that perspective, from those different groups, like a successful investment team, and a big group of founders kind of telling you like, what is it? What does great look like in early stage venture? And then you realise like, it’s all qualitative characteristics, and like, none of this is track record. If you have a way to test for the qualitative characteristics, then you can probably figure out like, who’s likely to succeed? And what does that require that requires real relationships with the founders, who know these emerging managers, and real relationships with other VCs, especially at the next stage, but who can help you test for the qualitative criteria that you’re looking for in emerging managers? And so simultaneously, we are working with emerging managers acuity, we’re sourcing deals from them. We’re bringing them into deals, we’re doing events, we’re doing a bunch of things then and what we’re seeing is like I speak for myself, folks, I thought were great. Like my belief about their quality did not always correspond to their ability to fundraise. So I might think someone’s great, but that doesn’t mean they’re able to raise their fund. And so someone who was great, would hit their target fundraising, let’s say they they hit their target fund size, nine months in, that’s really successful fundraisers.
5:00
Let’s say that someone else this is true reached like less than a quarter of their target Fund says took them many years tonnes of nose. That’s a great firm. And that was just confusing to me. Like, how is it so clear to us that these folks are like two of the best funds in a given category, but like, their ability to fundraise is very different. And so it just felt like there was big opportunity there. And maybe we had some, like, maybe we knew what we were doing. We certainly cutie been successful for a very long time. And if you just apply that, that kind of the learnings there, I speak for myself, like my own learnings there. And you talk to founders, the other VCs, you know, you can figure out who has a pretty good chance of outperforming. And then, you know, if you reflect on that years later, we were right, like we didn’t know the right funds. And we were working with them for years. And we had the qualitative data, because we knew the founders they worked with, and we did deals with them. And we knew other ECC to deal with them. And I was realising like, oh, like, obviously, a lot of LPs struggle to evaluate these funds. I’ve got this unique framework and this unique experience, I was building relationships to those emerging managers to and what was happening, in some cases that some of them, like wanted to talk about building their venture firms. They wanted to talk about portfolio construction, or team composition, or investor relations, or fundraising or their investment process or information that they might want to track now that after making an investment that could be actionable down the road, it could impact their reserve strategy, or, in fact, whether they want to raise an opportunity fund in the future, just through tactical back office stuff, not all those back office, but largely back office stuff. And the learning for me was like I thought, if you raised a fund as an emerging manager, like you know how to run a venture firm, but the learning was like no, I think they started a firm because they think they can source pick when some of them think they can add value after they entice, but they didn’t necessarily start a venture because they want to run a venture firm. And then some of them valued having help and a thought partner on that. And I was involved in QED and a time we were kind of transitioning from an emerging manager to an established venture firm with like, real institutional outside capital. And I think people just thought I could be helpful and I was kind of confused as as like, I’m just a lawyer. But over time, like I was building a little flywheel in the community here of emerging managers. And I was realising like, oh, they seem to want me involved, and they seem to think I can help and maybe I can build my own flywheel here like QED builds a flywheel with founders in the FinTech community. And so those were the main observations. There were also co investments, we had co investment opportunities, and we’re learning that many more LPS said they wanted to co invest in actually co invest. And that felt like an opportunity. From the inside. We’re like, No, these are great companies. So it seemed like maybe I had a unique perspective. Maybe there aren’t that many folks focusing on emerging managers who’ve had my kind of experience like mine at a top decile venture firm. And yeah, like maybe that uniquely positioned me. So simply, what is slipstream? Yeah slipstream three things. So we’re a venture fund of funds. We invested in pre seed and seed funds, typically 100 million and smaller, but we invest in funds larger as well. Most of them are emerging managers, first three or four funds, happy to dig deeper on that relatively concentrated portfolio. The next thing we do is we work with single family offices, multifamily offices, and increasingly institutions who are looking for help building up their venture strategy. To some extent, sometimes it’s very complimentary. Like they have a team they’re doing it, but we help them the top of funnel, we compare notes and diligence. Sometimes it’s like a little more involved, like they don’t really have a team and or they’re just early in building out a venture strategy. And we help them find funds, evaluate funds, deploy more capital into funds. And then the last thing we do is we can use a portion of the capital in the fund to co invest. And we also bring co investment opportunities to our LPs. So if they’re interested, they can invest additional capital into the companies that are breaking out of the funds that we invest in. Do you have a standard ticket or a desired percentage of fun size?
9:01
No, I’m very flexible, and some funds were very small p and some funds were pretty significant LP, and I don’t have strong feelings on that. So Alex, why should LPS invest in fund to funds instead of directly in funds? It’s a great question. So I think about this like, Well, how do you get returns and venture? One of these, one of the ways is you invest in brand name firms, they can be very high performers, they might have high minimums in terms of commitment size, those can be very difficult to access oversubscribed funds, or you can try to find smaller funds. These make up a significant portion of the highest performing funds in the asset class. But there’s a high degree of dispersion in venture. And so you really want to be in the right ones. And if you want to be in the right ones, like you probably need to see a lot of funds. And you need to have a framework for evaluating funds with limited track records and a network that helps you test for that framework.
10:00
And then it’s also difficult because you might not be able to get allocations in these funds. Sometimes these funds have trouble fundraising, and you could put plenty of capital to work. And sometimes they don’t. And they’re oversubscribed, allocations can be difficult to get. And it’s very hard for, it’s hard to get exposure to the highest performing emerging manager funds for those reasons. And especially if you’re not focusing on this full time, it’s just hard to see enough funds and to know when you have a great one in front of you. So a fund to fund is a way to get exposure to, you know, hopefully top quartile, hopefully, top decile funds. And there are some funds or funds that focus on like the larger brand name firms, and can get you exposure to those that you otherwise may struggle to get. That’s not our strategy. But I’ve seen some fund to funds do that. And that makes sense. And some Fund of Funds focused on the emerging managers, it’s usually all they do, or they have folks who are dedicated to those to that part of the asset class full time. So they’re seeing a lot of funds, they have a framework for how to evaluate those funds, they’re in the right networks to help test for that framework. Hopefully, they’re good in picking the right funds, and they may have a better chance of getting allocations in oversubscribed funds, then other types of LPs who are just like less committed to less a part of the venture ecosystem, and have less of a track record and less of a reputation as being a type an LP who GPS want to work with. So then I think about this. Yeah, I guess more specifically, like so who are the types of folks of venture fund to funds appealing to so for me, it’s a few different folks. One is single family offices and multifamily offices and and institutions who have some exposure to Vc, they may have folks working on their venture strategy, but they want to complement it with a fund to funds and sometimes multiple fund to funds. Like we have LPS who are LPS of ours, they’re also a piece of other funds, we partner with them to help them build out their venture strategies, we help them find more funds diligence, those funds get access to those funds, some of them want to co invest in the breakout portfolio companies of those funds, and we bring them deal flow. Some of them do it for like learning and insights, that’s usually not the primary reason they’re doing it. But you see a lot of funds, you see a lot of companies, you’re learning about the asset class, that’s a reason why some folks do it. Some larger entities, you know that small emerging managers are some of the best performing funds, but they’re too large to invest in them. And so they might do that through investing in a fund of funds focused on emerging managers, and another group of our LPs, it could be high net worth family offices, who made money in other industries, they would like exposure to venture, but there’s, they don’t really have a way to get it, they’re not really trying to get it, it would be very hard for them to do that on their own. And it’s not a good use of their time. For example, they don’t know venture well enough to figure out who’s good, they don’t have the time to see a lot of funds. And so these could be lawyers, doctors, people in real estate folks who’ve made money in other industries. And they’re not getting into the big grand firms for obvious reasons. And they just like don’t necessarily know how to pick from the handful of emerging managers they’re meeting so they’d rather get that exposure through a fund to funds. Yeah, it’s funny to me, I’ve met with a bunch of LPs over the years and a lot that maybe newer to the asset class are not experts in the asset class, they want to see some track, they want to see some track record some results, given some confidence. This person knows what they’re doing, they know how to select. But if there’s a track record, and the funds at like fun for five, and you’re getting access as somebody who’s not deep in the industry, you kind of have to ask yourself, why are you getting access to this fund? Right? Because the the best ones, there is no access, right? Like fun five, like those are oversubscribed. And then the ones you can’t get access to are like funds 123. And those are unproven. The track records are super early, probably no dpi or limited dpi. And those are the toughest ones to evaluate for somebody without the expertise because there’s very little proof. Right, right. Exactly. Exactly. It’s tricky. How do you overcome? You know, we have premium fees in new stack. And I have LPS that push back on that. Right? And I’ve got ways I overcome it. But like, you’ve got an extra load fees on fees fund to funds like how do you overcome that objection?
14:27
Yeah, it’s a good question. So a few thoughts on that, like the first is we need to be able to generate good returns, net of our fees and carry. That’s like I think the most important thing, and you have to be honest with people about like, what is what are reasonable returns to expect from a vehicle like this, like what success look like and if that’s good for you, if that’s like a good outcome for you, great if it’s not like it may not be the right thing. The second is like for folks who aren’t devoting a significant portion of their time to this and or who otherwise don’t know eventually that well
15:00
they’re not seeing a lot of funds, they’re not able to get conviction on them. For those folks, you probably better off paying an extra layer of fees and carry for, you know, hopefully a pretty high likelihood of getting top quartile top decile funds, you should wonder like, what’s better at that point? Like, is it better that you make your own choices? Where the odds are kind of not in your favour in light of the dispersion of performance in the asset class? Like, would it be better to just sit out the asset class, or to get exposure in a slightly higher cost way, but to like, have increased odds of getting exposure to top quartile top decile funds, get that, like the ones that, you know, get heartburn around the fees? You know, how do you overcome it? Like, how do you respond? Yeah, and one last thing I should say, and then I’m maybe I’ll be put a finer point on it. But like, some folks are considering some folks we’re talking to, are at a point where they are considering hiring a team for this, to do this internally, or working with funding funds in like more of an outsource way. And for those folks, like you could actually argue like the fees are cheaper than building out a team to do this. And so like from a cost perspective, like this may make more sense. But like, when people are really pushing back on, on cost, like there are a few other responses set. The first is we invest through our fees and expenses. So like if we have $100 million dollar fund for round numbers, not $100 million, we don’t have $100 million to invest today, because we have fees expenses. But we are over committing, like we will commit $100 million to underlying funds, we’ll be investing even though we don’t have $100 million to invest today. Because the time diversification of the strategy. And the fact that related to this 100 risk diversification, some of these funds will be returning capital, while others are still calling capital, you can make up a shortfall through recycling. And so to some extent, the fees and expenses argument is a little overstated. But if I were to be like very intellectually honest here, I’d say like, Well, if there were no fees and no expenses, then we could just recycle more. So instead of investing 100% of committed capital, we were just baking that we’re investing 115% of committed gallon, right. So the fees, and expenses are bringing down your ability to deploy capital into underlying funds. But it’s not as clear cut, as you know, we’re paying these fees. And we’re not getting returns on these dollars, because we are investing through fees and expenses. Make sense? So you know, you’ve talked about this a couple of times. Now, I’m curious, what are these characteristics? You mentioned qualitative character? Like, what are you trying to tease out in these emerging managers that gives you signal that they’re special? Because the track records are going to often be very limited? I would assume? Yeah, yeah, that’s right. So it’s, I mean, I think about it in two ways. But the primary way is, I’m looking forward for five things. And the first two are like the most common reasons I pass. The first is just like a particular portfolio construction, such that you’re getting enough ownership relative to the refund size. So that modest venture outcomes can generate meaningful fund level returns and great venture outcomes can generate excellent fund level returns. So we don’t want to rely I don’t want to rely on if the bet is, hey, we need five or $10 billion exits to return the fund. That’s typically that’s not the right fit for me. The second thing is folks who have some competitive advantage, unique to them, that I think is sustainable. They execute at a high level. And that is the reason why they should see great founders, and the best founders should want to work with them. It often Yeah, it relates to sourcing, picking, winning, usually adding value, it could be some combination of domain expertise operating experience. The third thing is, and I should say about that, they also need a strategy that is really built around their edge like that competitive advantage.
19:17
The third thing is founders who love working with them, and who are their advocates with other founders. The fourth thing is great VCs, usually, like most importantly, a next stage. Think really highly of this emerging manager want to see their deals, think they see great deals, pick and win allocations in great deals. They want to stay close to their companies. And when their companies are ready, they want to invest in those companies. Because like, that’s great for us if the best investors of the next stage are investing in the companies we have exposure to. And the last thing is just like, you know, you want to suss out whether people are hungry and gritty and resilient with venture is such a long game. And it’s really hard, I think
20:00
There have been times, you know, over the last few years where he has felt like man ventures just up into there, it’s all up into the right. Is this so easy? But it’s not my experience? And like over many cycles, I think, yeah, you realise just like how hard it is. And so people who are in it for the long haul and, and are ready and who are hungry? That’s
20:23
yeah, and you’re talking to founders, you’re talking to other VCs, you’re talking to people who know them to get a sense for it. I wish it was easy. You know, there’s, it’s tempting to be like, Oh, they’ve already been successful financially, like, how hungry could they be? That is not a good test. I think we’ve all realised that there’s no easy way just talking to folks, you know, how responsive are they understanding, like, how they found how someone source deals, how closely they work with companies, how thorough they are, you can get a sense for it. So that’s like one framework. And that would be my main framework. But if, but that sort of misses some things that are really important to me. So for completeness, like, there’s another framework I think about which is like, what’s this? Like a five tool baseball player? Like, what’s the six tool venture capitalists? To me? It’s like, someone who can source kick when add value, get liquidity, and get portfolio construction, right. You mentioned that this piece, sustainable competitive advantage. Is there anything sort of non obvious about that? I mean, there there are funds with certain networks and sector advantages, etc. But is there anything else that you would share with listeners about developing that, or one that you’ve seen, that’s really good as an example? Well, I guess what I would say is like having a competitive advantage is like necessary, but not sufficient. Like, maybe that’s the non obvious point, at least for me, like having an edge is great. But being able to sustain it is different. And you like a fund needs to have founders who love working with them, because you can have an amazing edge. But if the founders don’t have a great experience with you, and they aren’t, you know, your advocates out there in the world, especially among other founders, the value of reg can go away. It’s just not it won’t be sustained. Because eventually people find out and you won’t see the best founders, and you’ll get adversely selected deal flow. And yeah, that’s tough. So I would say like the most, maybe the most non obvious thing to me, or at least the thing I can think of off the top of my head is that like, having a competitive advantage is not enough. Like you still need to sustain. And you got to pick, right, it’s one thing to have the access, but you got to be able to pick the winners. No, it’s right. And like, especially in a market like this, I mean, it’s so competitive right now, folks who can, you know, sort of like Nonconformist, confident, have the courage of their own conviction and are doing deals that like others are passing on, are doing deals that may be overlooked or non consensus, for some reason, that’s important. So you know, especially a few years ago, a really common strategy was like, Hey, I have these great connections to these tier ones, I can invest alongside them. And like they share them investment memos, and I’m like, really close to them. And I had the benefit of all their diligence. And so we’re getting great deals. And yeah, I mean, that can work is typically not what we’re looking for, though. Like we’re looking for people who are really their own independent, confident, courageous pickers. That’s really important. And I think, like increasingly so in a very competitive market. Yeah, we got our start on AngelList. And I had some debates with nivi. And Jake over there, because, you know, the deals we put on the platform, if you had a big logo attached to it, like a lightspeed or an a16z, then they’d spray it out to their entire network. But if you’re somebody like us that, you know, our tagline is investing in outsiders, so they’re super unproven startups that didn’t come from like central casting. Those were not the ones that, you know, got heavily promoted on the platform. Yeah, well, but like, major kudos to you. My My guess is and I’d be curious to hear about your experience, like, you know, what percentage of your deals that have gone? Well, historically, were from folks who were Yeah, more overlooked. And which of them were just like, very competitive kind of consensus, you did win an allocation. And they turned out to be good. Like, I’m curious how that looks for you. I would say 85 to 90% of our deals are non consensus outside of the deals and then the 10 ish percent that were more pedigreed have not gone. Yeah. Right. So I mean, it felt like that’s inevitable, but Right, right. It’s just funny because over the years like we often felt fortunate when we got into a deal like that, and then I don’t know you put on the rose coloured glasses and you don’t see all the problems as well. So I just I like staying in my lane now. You know, focus on the undiscovered and we can really vet the heck out of them because they don’t walk in with the silver spoon and the big ego like they are hustle in for that money. What’s interesting is like the incentives and venture you know, are not all
25:00
is like to do the overlooked founders, right? Because isn’t it great, you can put these tier one venture firm logos in your head, look who we invested alongside or, you know, it’s like, and that gets people excited. And I guess I’m not here to say it shouldn’t just more than it’s not quite what I’m looking for. But you know, there are incentives to do that for folks. And it’s tricky, because in the long run, yeah, you do wonder whether that’s like the short term greedy move, or the long term greedy move. There are a lot of short term incentives and venture that I see people chase. And yeah, I don’t know, depends on how long you’re trying to be in the game. So Alex, this is a little surprise question from enrolling a mutual friend of ours. Yeah. Dan asked Alex, how do you get LPs to care about firms rather than funds? Yeah, that’s a great question. I think venture is very personal. I think the relationships that VCs and founders have, are very, very personal. And I think the relationships that LPs and VCs have, are also, ideally very personal. And I think if you build that personal relationship upfront, you know, you’re really investing with each other in a real partnership. And in a perfect world, the VC cares about the LPs, like they’re aligned, they have a real relationship. And it’s long term, just because of the life of a fund. And vice versa, you hope the LPS like care personally about the VCs and are invested in them personally, too, because I mean, the success of a venture firm ultimately comes down to the success of its people. And so you want, you want your GPS and the funds you invest in, to have the resources they need to be in the place emotionally from a mental health perspective financially, to be able to perform at the highest level that’s best for returns. And so I guess that’s how I think about his question. That’s a good question. I haven’t thought about that much before, when you do make a commitment to a fund, is it? Are you making a multi fund commitment? Is that how you communicate with the GP? Or are you like, look, we’re going to try this out? And we’ll see about the next one. Yeah, I mean, my hope is that it is a multi fund commitment until they, you know, if they reach a point, in terms of fun size, where they are just beyond our strike zone, then it doesn’t, then obviously, like we can’t continue investing. But yeah, my hope is that these are multi fund relationships. I don’t commit to it usually upfront, but I want to be open about it upfront. And so like, I want everyone’s expectations to be aligned. And I wouldn’t want to surprise them. When it comes time to raise their next fund. I should have been managing their expectations along the way. I think, in most cases, that’s possible. And upfront, before you make an investment initially, I think you do your best to be transparent about that.
28:00
But I typically can’t commit to multiple funds, we’re going to do the work on every success and fund. But but that is my intention.
28:09
I’d like to get your opinion a bit on fundraising market. You know, I’m hearing from a lot of friends that it’s really tough market to be fundraising for VCs out there. Lots of fundraisers seem to be languishing and GPs are kind of revising their target sizes down is that what you’re seeing, and you know, how to you advise the VCs that you’re working with? Yeah, I mean, I think like, to some extent, it’s always true with emerging managers. It’s hard to raise a limited but yeah, like these last year or so has been really tough. And I’ve seen, yeah, sort of a few different approaches to fundraising. And what I have not seen, generate much urgency is fundraisers that don’t have structure, like, unless someone has a bit of a track record. And they’re like, very clearly a consensus fund at this point. And they know they’re gonna have no trouble raising and being oversubscribed, then typically folks who build structure around their process seem to do the best in fundraising, where they give real deadlines, they stick to the deadlines. And they start with like, their minimum viable font size, they might target something bigger, but like they acknowledge that there is a minimum viable font size that they can, that will work for their strategy. And if that’s where they get like they should, they might want to stop and just deploy it. And and sort of live to fight another day in terms of fundraising, do your best on that fund, and move on. Because the challenge is that if fundraisers take too long, you start investing out of a fund that you don’t know when you when you don’t know the size of it. And so it can be hard to get your check size and portfolio construction generally, right. So it’s like, you have to choose like, should I err on the side of going more conservative, in which case I’m going to write smaller checks before I’ve raised my full fund, but if I end up raising the fund I’m targeting these checks will be too small and these companies may not
30:00
it’d be meaningful to fund off a return. So that’s not great. And then if I write checks that are too big, and the font size I ultimately raise is not my target font size, it’s less than my target font size, then the risk is like I’m too concentrated, I don’t get enough shots on goal. And so it’s becomes very hard to it’s hard to invest out of a fund of an uncertain size. So like, what advice do you have on that? Because I’ve been in that scenario, I did small checks on fun one, because I hadn’t raised as much, you know, at first close and then clung to we got it right. We just went with full check size from the start. But yeah, so a few things to finish on the other question. And let me come back to that. I think that if you start early enough, so let’s say you start six to 12 months before you’re ready to start deploying, hopefully, and you build structure into this process, you’re like, we are doing a closing at this time, we are going to start investing at this time, if we reach a certain font size, by then we are done fundraising, like that’s the time to fundraise. Technically, our legal docs allow us to fundraise for longer, but that is not our intention. And you can kind of get some momentum towards the closing, of course, the risk is you don’t get to your minimum viable font size, and you need to keep fundraising, but that I have seen work starting early enough, and having real deadlines, not like fake or deadlines to create urgency, and doing if you’re going to do multiple closings, making sure that they’re big enough closings, like sometimes you’ll get an email, it’s like, Hey, we’re closing on 14% of our fund. And it’s like, That, to me makes it sound like I have a lot of time. That doesn’t create urgency for me. I mean, that’s great. Sometimes, as a practical necessity, you need to get in business, you see a deal you want to do, you should do it, you should do a closing, but I might not celebrate it in the same way publicly. Sometimes it just makes me feel like I’ll have a lot of time. And so I do wonder whether things like that can backfire in fundraising. But But getting back to your question. Yeah, there’s not one answer. Like, you have to decide what risks you’re comfortable taking. And yeah, the risk of one being like this investments not meaningful and fun on the other, like, you’re gonna have fewer shots on goal. And you kind of have to project out like, what’s your likelihood of getting to your target font size? And you have to figure out, like, what’s your minimum viable font size. And I personally think, like, if you and this is like, all sort of, in my own humble opinion, like, you know, this is how I think about it, if you start writing checks, that would make sense, or getting a target ownership, or getting a certain ownership that would make sense for a certain font size, then you strap your target font size to that, like, that’s one way to solve this problem. But yeah, I like tend to be drawn to folks who kind of lean in and they go high conviction, and they risk being a little more concentrated. And they say, look like I think I’m going to raise this fund. And if I don’t, I’m very high conviction on this investment, like the level of conviction, I have to be to make that investment, that’s a scary investment, when it’s like kind of too big for the fund you’ve currently raised, like, my hope is that people are at that level of conviction, when they’re in that place. And they may maybe write the check size for the fund, they want to raise and they think they can raise, I was talking to my team about this, like a year and a half ago, you know, you make a choice to raise the funds or not. And like we made a choice. And we can control. Like, you have a product, you have an ICP, you have a target customer, and then you have top of funnel. And so, you know, we know we have a good product, we know who we should target in the LP community that’s going to like this. It’s all about top of funnel. And so we just, you know, we built that muscle, and we kept filling top of funnel until we filled the fund. Yeah, like not everyone can get there for one reason or another. And but like, I mean, major kudos to you like of course, like you’ve been very successful in a variety of ways. And so, so I, my experience is that some people can do it, and some people just don’t get there. What are the tactics that you’ve seen that kind of backfire or missteps that you could kind of give as a warning to folks? Yeah, I mean, actually, like what I just mentioned, like doing a closing on like less than, I don’t know, 20 25% of the fund. I don’t know that’s it’s a little harsh because like, sometimes it makes sense to do the closing. I guess like when I see someone like really celebrating that like it’s obviously a milestone, do your first closing and the first one, let’s say that’s the hardest thing you’ll ever do. Like that’s a big deal. But on the other hand, like it’s it shows real momentum and progress when you’re closer like 50% On the first closing, but if you have to get in business, like do the closing start investing, how you talk about it with folks, I think is what impacts how whether it could backfire. And I sometimes just sometimes folks are just like very pushy or aggressive or like we’re doing our next closing like, Are you in or out and it’s like, you know, but this isn’t your final closing. So like, I feel like I have every reason in the world to be in your first closing. I want to do that that’s best for my relationship with you. It goes to the LPS you love like the ones who believe in you early. You want to do that.
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And sometimes I can’t like I don’t have time or for any number of reasons. But people who are like really pushy about an upcoming closing, that is not the final closing sometimes sort of strikes me as maybe missing it a little, like it’s not going to move LPS who are in the market? Is there a good pitch that you’ve heard about getting in on the first closed that made you speed up your process and get in on a first closed? Because I mean, I have some LPs, one in particular, a really large LP, and he will always wait until the last minute, whether it’s an SPV, or a fund or anything, it’s got to be the last day in the last hour. Yes. Curious. There’s no I mean, look, I don’t see people using this, but I would think USPS would be one reason. Sure. So but I don’t like I don’t push that. I’m not like hey, now’s the time, don’t miss out on USPS. But you know, that I would think is on LTS minds who no venture I think, no, I it’s very hard to get people to do a first closing. For me, it’s just the relationship. And it’s showing conviction and believing in people. And sometimes if they really want to do a deal, and they need us in to do a deal that’s meaningful to me, I want to support them in that like the bar needs to be very high for them to be doing that deal, because they know they’re going to be judged. If they’re still fundraising, they’re going to be judged on the deals they’ve done in the Fund for which they’re fundraising. So the bar should be really high for that. And if they want to do something, they want to support them in that but for me, it’s mostly the relationship and wanting to show early conviction and be supportive. And if you’re listening and you’re not familiar with the Q, SBS point, for LPS that commit prior to that fund managers investment in a startup that LP will get the Q SBS treatment, the deals done after their commitment. So if an LP waits till final close, and there was five deals done before final close, they won’t get the favourable tax treatment for the early ones. Is that accurate? Alex? Yes. My understanding? Yeah. This is not tax advice, I should say.
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A disclaimer. And, Alex, I’m curious how you diligence of fund managers decision making, like you need to understand I tried to understand the round dynamics for the rounds they invested in like, how did you get there? who got there first? Who got to conviction first, did the lead bring you in? Did they share their diligence? Did you bring in a lead? Did you lead this round? Were you there before anyone else I want understand, like whether it was competitive. I want to talk to the founders. And I want to talk to the other VCs. I want to understand like from the founders, like Did you Did these folks show? Like do they really get it? Did you have the experience as a founder, I was like, these are one of the few VCs who like really got it like we were in next stage conversations like on our first call, right? Like you want to hear. I like hearing things like that. That’s not a prerequisite for me. But like, but that’s great. That’s people who are coming in with prepared minds who are really thoughtful about the company, and who are high conviction, like do were they the first ones to give you a term sheet. That’s interesting. And then sometimes like the the route dynamics are, like 200 people passed on us, this was the only one that believed in us, that’s kind of that was very interesting data points to of course, like, you need the courage of your conviction in that case. So you want to understand like how rounds come together. And I also just generally want to understand how folks think about their investments, I want to understand what stood out to them at the time, and what they’re looking for now, most of my ability to get to conviction on someone’s investment judgement comes from talking to the founders, and the other VCs who are in that round. And then obviously, some from the VC too. How many reference calls are you doing? On a fun before commitment? Yeah, I guess that’s like, kind of how do you define a reference? So when I’m just talking, so I’ll do initial outreach to like mutual connections, like mutual friends, I guess that’s technically a reference. And I can do a bunch of those. Those are just like my friends. And if it’s so so like, let’s put that in sort of a light reference. Those are like references, those are mutual connections, that I’m trying to get a sense of, like, Is this serious person? Are these people like, Should I dig in here? What’s so special? Like, what’s the high level story on these folks? Then? Yeah, then there are references with like founders, I may not know. And other VCs I may not know like, later stage VCs, often I know that sometimes I don’t. And yeah, it really depends. Like, there have been times when I’ve done a lot. And there have been times when I’ve built a relationship over many years. I have a very good sense for this. You know, they’re finally raising, but it’s in to you. We’ve been building a relationship for two years or longer. Let’s say I don’t need to do that many references board. I should caveat this with like, this needs to be calibrated to like my cheque size relative to their fund size where they are in their fundraising process. Like, for example, if there’s some heavily oversubscribed fund, you’re not like doing 20 founder reference, that doesn’t make any sense. It’s not respectful to the GP, that’s not so nice to the founders, right. Like, you kind of have to calibrate this. So I would say typically, like at least a few founder references, sometimes like a lot, but I will be I have to be open with the GP about what I’m doing and
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I want to make sure it’s comfortable for them. And so there’s some collaboration there. Have you ever had a late game reference that came back as a surprise and caused you to hold off on the investment? Oh, that’s such a good question. I can’t think of one where I had one. Yeah, at the end that was different, significantly different from like a representative sample early. Like, basically, I stop when I feel like I’m not learning new things. And, like, of course, calibrated for, like I said before, like, calibrated to what’s going on with the fundraise. But no, I don’t that I can’t think of a time when that happened. Got it. Yeah, that is funny. You make that point about casual references, because I feel like constantly, you’re always picking up data points. And I remember, we were catching up at a event some time ago. And I think I asked you, you know, who do you like, and there was a bunch of VCs around. I was like, Who do you like in the room? And you asked me the same thing. And we were kind of trade notes. And, you know, everyone’s constantly sharing data points on who they know and who they don’t. There’s Yeah, yeah, it’s funny, because that is kind of the nature of VC, right? It’s like VCs are doing that with founders. They’re doing that about other VCs, LPs are doing that about VCs, VCs are doing that about LPS trying to figure out who they want to work with. So it’s funny, because this is an asset class where like, we all have to mutually piggy, we all pick each other. Yeah, the founder picks the VCs pick the LPS. I mean, of course, the VCs have to pick the founders and the LTF big VCs too, but it’s mutual. So talk about reserves, right? There’s no one size fits all. But what’s your stance on reserves? What’s the right, you know, percentage allocation and a fund? In when should those be deployed? Like due diligence, kind of the mindset and the strategy around reserves? And what’s your preference? Yeah, so that’s a big part of someone’s portfolio construction is their reserves. And so I mean, yeah, I can talk about this in a few different ways. But you’re right, like the big answer is like, there’s no answer. So it’s got a dishrag. The whole strategy to portfolio construction is built around whatever is so special about the GP. And so this is part of that that should be tailored to whatever so special here, I would say like, if I were just to give you like a back of the envelope answer here, typically funds that are like 20 million and smaller, writing relatively small checks into like pre seed and seed rounds, like preference for limited or no reserves, that’s like, you know, funds that are like 20 to 30, maybe $40 million funds, like, kind of a grey area, like they probably have some reserves, they probably don’t have one to one reserves, they have less than 50% reserves, and then funds that are like 50 million or more funds that are like primarily leading rounds, which could be smaller than 50. To be clear, you know, more reserves could be up to one and you do sometimes see funds, where the reserves, even in the small fund world, where reserves, there’s more reserves than except for is used for initial checks. So what about so like those, that’s kind of typically what I’m comfortable with and seeing, but yeah, like to be more granular about it. Like, in a purely hypothetical world, the best outcome is like get as much ownership as you can, at the earliest stage, like, put as much money in as early as possible. So yeah, that’s the dream, like low central valuation, highest ownership. And like, get more shots on Golden, like, don’t have all these reserves, just like get your ownership upfront, or raise a smaller font, which is easier to generate great returns. So like in a purely hypothetical world, like I can make an argument like no reserves is probably better, zero reserves, regardless of fund strategy and size. Yes, like, get it all upfront. But like, there are certainly times when like reserves are very meaningful to find level returns reserved, like follow on checks and return entire funds. I’ve seen that. And so you can’t be like so naive, right? To say like, oh, just get it all upfront, don’t follow on. Like, then the question is like, how do you use reserves? defensively? Yeah, that’s as usually the most exciting use of reserves, like this company needs capital, they are not currently able to raise other capital, it doesn’t make sense for one reason or another. But like, sometimes that’s the right move. And those companies can go on to be great companies and generate meaningful returns. And that can help you buy for ownership in a company that may not be obvious yet. But like, I don’t mean to say you shouldn’t use them defensively, you should we had examples of QED, I can think of off the top my head, they’re like great use of reserves defensively. But as a general matter, you’d want to like be putting these into the companies you think are your likely winners. And not to say that when you use them defensively, it wouldn’t be in some of the things like the winner. But but it may not be clear yet that that is and so people using their reserves offensively, that can be cool. So like protecting or building ownership quickly, like in your best companies, like buying up ownership in between rounds, not always possible. But if you have very high conviction that can work really well. Trying to buy up ownership in the next round if you’re really high conviction, or just preserve ownership and companies do you think are likely to be in sort of the top subset of your portfolio? I think that’s really good.
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Telling but then like, the hard question is like when do you know you have a winner? When do you know that is likely to be one of the better companies in your fund, because if you could know with certainty, then it totally makes sense to follow on the challenges, you may be presented with decisions to follow on or like opportunities to follow on like a company is raising the next round, before you’ve even finished investing, making making all the initial investments out of your fund. Or, like shortly after you have, like maybe your first few, one of your first few investments is raising its next round. It’s hard to know whether your later investments in the fund, it’s too early to know whether they’re going to be great. And so then you’re like faced with the decision about like, do I follow on heavily when I’m not really sure yet? Who, which are the best companies in the fund? And when I asked folks like, Well, how long do you know? And like, Are you right? Plenty of people would say like, Oh, I know, really quickly. And like within six months of investing, you can tell but like the most consistent answer I hear is like it’s hard to know, in less than like two years, which are the best fund companies in a given fund. And so we’re all so people are making fallen decisions, you know, without often without knowing like they have some information. But that makes it trickier right to make follow on decisions. And so when people have less than one to one reserves, and their argument is we’re going to use these reserves just to follow on to like our very few best companies like, that’s nice. If you could do it. I just find it’s very hard. Not many people do that. Some do though. And if you can, then that strategy is great, but it’s really hard. I’d contend it’s reasonable to pick out the ones that will not be your fun returners within 1218 months. The rest though the other basket, maybe the other 50%? You just I mean, you know which ones you’re really excited about? But you don’t know. Yeah, I mean, I guess like I write, I, let’s keep the, let’s keep the spotlight on you, like, in your experience, have your biggest winners been the fastest out of the gates? Now you write that I that is common feedback. And so it’s, it can be a little hard to figure it out. So So I totally understand having some reserves to follow on into the companies you think are best. But I just want to have like an honest conversation with folks about like, you know, how’s this gonna play out? Well, there’s a tricky thing. I’m sure you see this. But there’s a tricky thing, in that we look at a lot of deals. And we know which deals we can sell up to series A and the big logos. Like on paper, these founders doing this thing, whether they have traction or not, if they build a product, we can get this fallen in this graduation, within 12 months. And so but it’s not always the right thing to invest in. And so it’s a balancing act, sometimes you get both, and those are great, like, oh, I can sell this up. And it’s the perfect I love working with this team. You know, they’ve got the it factor their force of nature founders. But it’s, again, that point earlier about short and long term, there’s a lot of short term incentives, just to get the upper hands and show the progress. But those aren’t always the best companies. They’re just the most fundable. No, yeah, that resonates. And one thing I should have added was like, there are some practical considerations. With reserves, like if you’re leading rounds, especially like, founders would probably get some comfort from knowing that you can float, you know, you can put more capital into the company, if they need it, you might need to do that for relationship purposes. So so it might be important to winning a deal. It might be important for your relationship with Bounders, and your reputation in the community to be supportive of them. Like there are a lot of reasons to have reserves, like I’m sort of coming down a little hard on reserves, and I don’t want to ignore the practical realities, because reserves have value that are purely like dollars and cents from that particular invest 100%. So in addition, like, the one constraint that none of us can control completely is time. Right? And if you’ve got a winning logo in your portfolio, I mean, it’s one thing to just say, hey, go out and do more deals, or slow down your pace or whatever. But if you’ve got a winner, like best leverage for your dollar, and your time, is getting more ownership in it. Yeah, that’s right. I mean, but like there are trade offs, like it’s like, at what price? Are you getting that ownership at the RIT? At the cost of how many shots on goal, like what’s your opportunity cost here? Like how many shots are you missing out on? But yes, like when you have an amazing winner, and you’re have really high conviction, when that works out? I mean, it is amazing. So are you measuring like average entry post money, average effective post money across your entire portfolio? Like the look through all the way down? Yeah, I think about Yeah, I think about entry valuation a lot. That’s important to me. And are you looking at that effective post money, which is the valuation adjusted dilution factor? Yeah. So what I want to understand Yeah, the most important thing
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numbers to me are the, I guess cheque size? Right? Like how big of a check? Did it take? You know, your initial ownership and your entry valuation like post money? Those are obviously all related. But yeah, that’s really important to me, I am drawn to funds that are getting in at very low entry valuations right now. Like, if you’re playing in the I don’t know, I’m just gonna throw out a number 25 to 30 million plus post money entry valuation like that is that’s competitive. That is there are a lot of funds doing that. It’s harder to get the ownership. I am looking for folks who are earlier, can you give us a ballpark of like, yeah, green for the dream for me is like sub 10 to $12 million post money valuations like that’s, I love that that’s I will invest in funds that don’t do that exclusively. But that is at the top of my list in terms of preferences. Sorry, in terms of priorities, like those funds that can get in that early are really feeling well, Alex, you’ve come to the right place where sub eight over here at Noosa. That’s amazing. That’s great. So have you invested in funds that don’t lead like primarily lead deals? Oh, yeah. Yeah. I invest in both you do. So how can you invest in a fund that doesn’t do a lot of lead checks, and still has, you know, sufficient ownership, but some of the other factors that clearly you’re looking for it slipstream? Yeah, so like we did, we did $25 million fund that’s getting mostly four to 5% ownership, which is great on a $25 million fund. I mean, that’s the equivalent of $100 million dollar fund getting 16 to 20%. Ownership. So, so we’re just hard to do if without the risk of adverse selection, especially. And so you can get very favourable fund math, that they may not come in the smaller funds that aren’t leading rounds. So if you’re in a $15 million dollar fund getting two to 4% ownership, that’s great. And that can be you can get more compelling fun math on smaller funds that aren’t leaving rounds than on, you know, small ones that are leading rounds. Yeah, it’s like check size percentage relative to your fund size, as opposed to just ownership in the company. Yeah, well, I think about it in terms of ownership relative to your fund size. But check size is important. And you know, that’s why entry valuation is important. And solo GPS versus multiple any thoughts there? Yeah, I mean, we do both, you know, someone said this to me a while back, actually another GP, but I thought they were right on, which is like, what do you think is more likely that like, over the long course, of funds existent, like two GPUs are gonna break up? Or like, one of them’s getting hit by a bus, like, or a solar GPS is like, yeah, like, if you’re worried about just that, right? The consequences are significant if GPS break up, and if a solo GP has some issue that prevents them from, you know, continuing to invest out of the fund or getting liquidity, those are both risky, but I’m more typically more comfortable taking the risk of someone getting hit by a bus, there’s GPS break up all the time. And so it’s just such a long term game, it’s your relationship has to work for a long period of time. So GPS, if I’m investing in a team with an affirm of multiple GPS, yeah, I need to get comfortable that they know each other really well, and that they’re going to work well together for a long time. And unfortunately, sometimes there are funds that I love, that I can’t quite get there on, because they just haven’t worked together enough for me to get comfortable with the team risk. And so it’s got to be more of a like next fund for me, once they’ve deployed a fund together. If they’re going back to do it again, then I feel better about it. But look like there are other considerations, right? Like having a bigger team can put pressure on fun sites like solo GPS can have smaller funds, just because it’s easier to support fewer people on smaller fun. And or I should say, it’s harder to support more people on a small fund. And so you need the need enough economics and to justify having multiple people there. So often those funds get those funds can get bigger. And then, you know, when it’s a solo GP, you’re like, how do you manage it all you want to talk about how they allocate their time, there’s lots to do. And there’s multiple GPS, you understand their roles and responsibilities and how they deal with disagreement. And you’re just kind of your diligence in slightly different things. Right, right. So Alex, you know, founders pitch to VCs pitch to LPS VCs pitch to founders to win deals. Do you as an LP ever feel like you have to pitch yourself to a GP? And if so, how do you do it? Yeah, I mean, I think I do in every case, like, even if, certainly, if like there’s capacity, constrained funds, like overdriving give you the picture they want to work with. But even if even if it’s not, that’s not the case, like they are picking you. Like they might feel like they don’t have many great options. So like, maybe they’re not happy to pick you, but they still have to pick you. And it’s important that we all want to work together. And so yeah, and I feel that my, my on my own to like I’m also raising capital from LPs. I want LPS who I want to work with, who can be helpful or otherwise like high integrity, good partners for me, and so so yeah, it’s really important.
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I try not to be I’m not like salesy about it, but like, I want there to be a real relationship. I want them to be convinced that I’m someone that they should want to partner with. So yeah, I mean, how do I think about it? I think about it in a few ways, like, one way is I started this after being at on the other side of the table, like, I have strong feelings about like, what’s a good LP? What’s a great LP? What’s the not great lp? And how do great LPS interact? How can they be helpful? How do you interact with folks in a deferential interesting way, but also be constructive and challenge them and help them improve? And so being on the other end, like seeing that, I think helps me kind of be the GP I wanted to work with. And actually, it’s funny, because VCs, often who have operating experience will make a similar pitch that like, I’m the VC founders, I just want to be the VC founders, I would have wanted to work with when I was a founder, right? It’s like, I’m kind of the same way. Like, I just want to be the LP that I would have wanted to work with when I was on the up side. But there are other things like, yeah, I find that like, I’m pretty direct and open. And I challenge people on portfolio construction, on their strategy on a number of things. And so we ended up getting into real conversations. And my hope is that like, you know, they value that, and maybe it’s helpful, to some extent, and, and I’ve often found that like I spend time talking to people about portfolio construction, or fundraising or investor relations or information to track after they make investments that might be actionable down the road road and can be weaponized. Somehow, with founders or in fundraising or something. It’s like, because of the experience of QED, I think that gave me perspective that might be helpful. I don’t like assume people need my help, to be clear, and I invest, like, assuming they don’t need my help. But But I find that like, I end up having those conversations with folks. And I do think that helps us get allocations, I do think it helps persuade people to work with Slipstream, I think I’d like to think we’re adding value that’s unique as part of the thesis for starting slipstream that other LPs aren’t adding just because of the experience. And but, but that’s how I think about it. So yeah, like I am. And there are other ways like I can help bring in other LP sometimes it’s sort of that simple. Sometimes our LPS want to invest in the funds we invest in, and so we can help with fundraising. But yeah, it boils down to like, this is personal. And like, you just want to work with people you like. And so my hope is that like we all like each other, that the best sales is like we have fun talking together, we talking to each other, we trust each other, we want to spend time together, that there’s nothing better than that. So I don’t know, to some extent is just natural, like you want there to be chemistry and you hope there is you know, sometimes I go to these VC pitch events, and they, you know, some fund managers just treat it so formally, and they’re like walking through their pitch deck, page by page. And like, everything that they don’t like seeing in a startup pitch. They’re guilty of doing when they’re pitching LPs, I’m like, This is not how to raise money, like you’re really selling yourself, and you’re really building like a relationship. Yeah, that’s right. I mean, reminds me of two things. One is, sometimes I wonder if GPs are thinking when they’re doing something, like interacting with me, if they would like it, if a founder interacted with them in a fundraising context, you’re usually in this setting. It’s just like, you’re in a different seat. And I do wonder, you know, like, is this what you would this resonate with you if it were founder. And the second thing is just like, look, fundraising is hard. Some people are not naturally, like, gifted at that. And it comes with practice, and they improve it. And it gets easier when you get returns. But that is another thing that I think it’s funny, I this is not something I like intentionally convey. But I have gotten feedback on this. And I think it is a reason it does help to build relationships with GPS is I think they feel a lot of empathy for me, probably because like I was on that side, and like I have a sense for how hard it is and like what they’re going through. And so I do think that is also helpful, just like a high degree of empathy for falling. You’re not just a money manager, you’re an entrepreneur, and you have to go out and raise money too. So like, yeah, you know, you can relate directly, whereas No offence to like larger institutions. But you know, if you’re pitching somebody there, it’s just a totally different dynamic. Yeah, I do think that impacts how I think about it, too. It’s like it one call on the LP, and literally the next call. I’m the GP. And I’m talking to a potential LP, and I do think that that helps me in both directions. Yeah. Yeah. Alex, how do you think the next generation of VC firm winners will look different and or how will they differ from the last generation of VC winners? Oh, man, it’s such a good question. I try to think about it all the time. Like what
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As the future VC is constantly changing, I wish I had like one answer I, the way I think about it is, like, there are more events, there’s so many venture firms now there’s so much capital in this asset class, you need a real clear competitive advantage. And there needs to be some reason like, the best founders will find you or you will find them and they will want to work with you. And like, I think 1520 years ago, you could kind of see all the good deals, there weren’t that many. Like, when you talk to people who are investing back then, and even acuity, like when God started, they would have said, like, we saw pretty much every deal. And like 1015 years later, like, it’s not possible to see every deal. And so you need to have, there needs to be some clear reason why you will win in a very crowded competitive market. And it’s like, the way I think about is like, how will you find the best founders? And why do they want to work with you? And it often has to do with, yes, some unique edge, getting in a couple good companies, having founders who love you. And that creates a flywheel of seeing positive select deal flow, and continuing to make great investments. Do you think we’re gonna see more of the big legacy firms die? I mean, yeah, probably. It’s hard to know, it’s hard to know. But that would be my guess. I mean, there’s so many capital, there’s so much capital tied up there. And there’s so many relationships and so much career risk and inertia, that it feels like it’ll take some time. But I can’t imagine some of the older legacy firms sustaining. I mean, just seeing the way that they operate on deals and stuff. It’s just, it’s gonna be tough. That makes sense that resonates with me. And I think it’s what is the essence of a venture firm and I sometimes people say things like, I want to build a venture firm that outlives me, I want to build the next you name it Marquis venture firm. And that’s cool. I totally get it. But like I’m investing in you. So like, whenever we get to that point, I’ll have to think about that. But I’m really drawn to is like, what’s the special like you I’m not necessarily drawn to like, who’s gonna be the next big marquee firm? Like, my hope is just that like, you’re amazing. And this is a great friend, this is a great Fund, and the funds that we invest in are great funds. It’s funny, because for Yeah, I think about this all the time, because people do talk like that. And I think some LPS that really resonates with and with me, it’s more like I think about this on a farm by fund basis. Alex, if we can feature one person here on the show, who do you think we should interview and what topic would you like to hear them speak about? I mean, I always loved listening to Mike Maples and Roger Ehrenburg. I think they’re great. So thoughtful, amazing perspective across, you know, across many changes in the asset class. And so I always love hearing their perspectives on how things have changed, where they’re going, who’s winning what was easier than it’s hard now? What do you think’s going to be hard over the next few years? What do you think separates like good from great funds? You know, I love hearing from them. Alex, what book article or video would you recommend the listeners something in recent memory that you’ve found informative or inspiring? I haven’t read this book recently. I was recently asked a similar question. So not to be broken record here. But like the book that I still the most impactful for me is Victor Frankel’s meaning of life. Like I think about it often, despite not having read it. Probably 15 years. No kidding. Wow. Yeah. All right, fund managers out there, meaning of life. Alex, do you have any habits, tactics or techniques that are a secret weapon? I’m very open. And I’m very transparent. And I will talk to people about what’s working and what’s not. And like, for example, why investing in slipstream makes sense, and why it doesn’t. And I think that when you’re even handed like that, it builds a lot of credibility. And I find that some people just like want to convince you of a thing. And I find that I don’t typically want to convince people of a thing. I want to tell a story. And I want to share my thoughts if they’re interested in like, pros and cons or what’s working what’s not, but like, to me, there’s sort of an enterprise sales component, right? Or there’s like a sales component to this, but like, I don’t think of myself as selling. I think of myself as like telling the story. And if this resonates, and if this is a fifth, that’s great, but like, I’m going to tell you both sides, and I think that helps me build credibility with people. Amazing. And then finally here, Alex, what’s the best way for listeners to connect with you and follow along with slipstream? I’d say like through mutual connections Great. That may get like a quicker response like I will respond to all cold inbound on LinkedIn or through our website or so no wrong. He is Alex Adelson. The firm is slipstream. Alex, thank you so much for the time today. It’s always a pleasure. Yeah, thanks again. All right.
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All right. That’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot them an email, let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to
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Take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening