Chris Rizik of Renaissance Venture Capital joins Nick to discuss Inside the LP Playbook with Venture Vanguard, Chris Rizik: What Metrics Actually Matter, How to Fix Venture’s Liquidity Crisis, and Why Co-Invests Are a Trap. In this episode we cover:
- Connectivity and Customer Engagement
- Undemo Day and Its Unique Features
- Venture Capital Liquidity Crisis and Exit Problems
- Co-Investment Rights and Their Challenges
- Capital Constraints and Pro Rata Rights
- Valuation and Exit Strategies
- Capital Efficient Startups and Exit Paths
- Pharma and Biotech Investments
- Company Creation and Emerging Models
- AI and Venture Strategy
- Midwest Venture Ecosystem and Future Potential
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The host of The Full Ratchet is Nick Moran of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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0:17
Chris Rizik joins us today from Ann Arbor, Michigan. He’s the Managing Partner at Renaissance Venture Capital, a first-of-its-kind fund of funds formed by a consortium of Fortune 1000 and major private corporations. Renaissance invests in venture firms across the country that are active in Michigan’s tech ecosystem, while also connecting startups and VCs with large corporations seeking innovation.
A prominent leader and influential figure in venture capital, Chris has earned numerous honors throughout his career, including EY Entrepreneur of the Year in 2017, Crain’s Detroit Business Newsmaker of the Year in 2010, induction into the Smart Business Dealmakers Hall of Fame and the Michigan Venture Capital Hall of Fame, and most recently, being named to the 2025 Venture Vanguard class by the NVCA.
Before Renaissance, Chris was a co-founder of Ardesta and Avalon Technology Ventures, and earlier in his career was a senior partner at Dickinson Wright and a CPA at Coopers & Lybrand.
Chris, welcome to the show!
1:20
Hey, Nick, great to be here. Well, it’s a pleasure, sir. You know, I’ve known you and your firm for many years, and you have an incredible reputation here in the Midwest. I’m looking forward to learning a bit more. Can you tell us a bit about your your background and your path to becoming an LP? Yes, I mean, it
1:29
wasn’t. It’s a pretty abnormal path, I’d say. I mean, you mentioned, my background was both as a CPA and a lawyer, but I got recruited into venture about 25 years ago. Didn’t really know that much at the time, I was more of a deal person, and got to know venture, particularly venture in the middle of the country, which is way different, as you know, than venture on the coast. And we’re sort of sitting in this region, very rich in technology. So I’m in Ann Arbor. University of Michigan is the largest public research university in the country, 2 billion of research a year, and yet, a sort of a third tier state for venture, not a great region for startups. Back when I was doing this in the 2000s so the idea came in partnership with a number of the major companies in the region. How can we address that? And you know, philosophically, the idea was, if you’re in a place that is underserved for venture, but you have all the other elements other than capital. It’s a good place where people can have a lot of impact and also do well financially. So with that, we formed Renaissance, with this idea of being a really unique new type of fund to funds that could be more than simply a financial
2:38
vehicle. And how long have you been in operation now Renaissance. I was started
2:42
in fall of 2008 How is that for timing? Huh? Fall 2008 I can’t imagine raising at that time. It was an interesting time. You know, most people, they raising the dollars go up. I was raising, watching, hoping the dollars wouldn’t go down before I got to closing. Wow. And so it was an interesting time, tough time to raise great, great time, though, to start investing a
3:02
fund. Perfect. And then what fund are you on now? At this point, Chris, we’re on fund five right now, fund five. Okay, and can you give us an overview of kind of your thesis, your investment style, and the profile of that fund? Yeah.
3:13
So the idea behind Renaissance is to be a connector. So again, not just a financial vehicle, if you think of it, we’ve got several groups. We’re working with we’re working with startup companies, we’re working with our institutional and corporate investors, and then we’re working with VC funds. And, you know, we’re really market people, but we see imperfections in the market, and we’re trying to use Renaissance to help sort of remove those sticks in the market. So major corporations, originally and now, major corporations and institutional investors and family offices have invested in us because they want venture type returns, but often also because they want to have a positive impact on our region. So they’ve come in and invested in us. We invest in top tier venture funds around the country. But we are more than simply a check to them. What we promised them is that we’re going to help them find interesting companies in our region that they wouldn’t otherwise find. So we’re going to connect them with deal flow. In addition, we have major Fortune, 1000 and large private companies who’ve not only invested in us, they’ve raised their hand and said, We’re will it to become customers of portfolio companies with the funds in which you invest, regardless of where they’re located. So we’re now coming also to these great funds with customers. So nobody in the fund to funds world had done that, and we could talk about how we do it, but we’ve essentially created a sort of three sided vehicle, lot of moving parts, but we’re an investor, we’re a connector for deal flow, and we’re connector for customers, kind of all in one that was the unique aspect of renaissance that sort of helped us to get the attention that you talked about in some of those awards we’ve received,
4:58
and talk more about. That connectivity on the customer side. You know, I think a lot of folks have planned to do something around customers, but they they haven’t necessarily worked out, like, what’s unique about your model, and how are you getting customers engaged? Yeah,
5:15
I mean, the customers we engage are really our investors, so they’ve got a financial stake in it. This is, interestingly, where being a fund of funds is helpful. If you’ve got a corporate venture fund now you’ve got 15 companies that you’ve invested in, to look at our portfolio is over 1000 companies. So we have something of everything. We may not go as deep in any topic as a corporate venture fund would be. But if any of our corporations, if they have a need in almost any area of their business, we are one degree of separation from that. So we invest in these funds, and we track, we increased drug database, of all the companies that our underlying funds have invested in, and we know them well enough that one of our investors calls and either an investor calls and says, Hey, we’re thinking about this topic. What do we already have a stake in through the fund? And we get them, and then we make introductions more the more likely area is that they say, here are five topics we’re interested in. Can you keep us a prize as to what is happening, particularly in your portfolio, in these areas where we’re an educational piece for them, and it’s not just in their core business, it could be in marketing, it could be in HR tech, it could be in cyber, all these things that are ancillary parts of their business. And with that, we’re constantly making introductions, and we’ve tracked a little over 100 contracts or pilots that have happened so far between our corporate investors and companies in the portfolio.
6:39
And is there, have you found that there’s kind of an optimal stage by which maybe a large corporation or a large potential enterprise customer gets engaged? I think we found in our portfolio, we probably have 60 investments over the past 10 or so years, and sometimes you get them, get them involved, too early or too late, but you have a bigger sample size. What have you found? Chris, yeah,
7:01
I mean too earlier, too early is a much bigger problem than too late, for sure. I mean a lot of bigger corporations, their their purchasing department and their and their systems aren’t built to deal, in many cases, with a company that has no revenue or is under a million in revenue, and so it’s tough to get them to sort of adopt us in sort of mission critical things. Doing the pilot programs is really where a lot of this works, where they can do a pilot, they can learn and basically they’ll be ready to increase their engagement as that company gets to 5 million, 10 million, 20 million in revenue, that’s where they were more more fully engaged. Giving them an early look is great. It’s tough to get full adoption until they get to till the underlying company gets to some kind of
7:43
scale. Amazing. So, Chris, you host the undemo day, and that was designed to connect venture funds with promising companies that might never encounter otherwise. You know, through the traditional source sourcing channels, and I’ve been fortunate to attend an undemo day. It was a great, great experience. And I really enjoyed the walk that we did as well. But there, you know, there are many conferences, there’s many networking functions for LPS, for GPS and founders. What would you say sets on demo day apart? Yeah,
8:12
I think what sets it apart is the amount of information we collect and provide beforehand. So you see Barry Sanders behind me. I analogize it to the to the NFL Draft. And so first we take applications which are sort of the draftees, and we work with all the sources in our region of great startups. So it’s the university, tech transfer offices, accelerators, angel funds, etc. And in a typical on demo day, we’ll get about 250 startups applying to participate. Then we go to the other side, which are sort of the teams, and we talk to our venture funds around the country that we have relationships with, and we’ll typically get 200 to 250 VCs to get it. So now we’ve got this two sided marketplace. How do we make this as effective as possible. We gather so much information about the startups. If you think about you know when, when your favorite NFL team makes a draft choice, they’ve done so much background work that they feel pretty comfortable with this choice. It’s the same thing here. We get well in advance of the event to all the VC funds that are going to participate. We get them information on all 250 companies filtered in every which way they want. So they don’t have to look at 250 they can say, I want early stage cyber, and it’s filterable. They’re getting pitch decks, they’re getting revenue information, they’re getting customer information. All the things they would want to know to simply make the decision, do I want to make that my draft choice? And the by making it a draft, what they’re saying is, I want a 20 minute meeting on the day of, on demo day with this company. And unlike most events where you’ve got a one sentence description and you’re making that call, they’ve got the ability to see pretty deeply and see what they really want. And using that, we get all these choices, and then we fashion up. Have the sort of matrix of meetings. We’ve got an online event. Next week, we’ll have 501 on one meetings, and then, because there were more requests for meetings than we had slots, we’re going to make about another two to 300 introductions outside of that so that they can meet offline. I think it’s that richness of data that makes this more effective, and the track record is, you know, we’ve helped attract about 3 billion of venture capital into 84 Michigan companies.
10:27
Amazing. I want to come back to Michigan a little bit later. Before we do that, maybe we’ll get into some of the inside baseball of LP, VC, or maybe we’ll call it inside football, because we got the draft coming up here and you’re mentioning Barry. But you know, let’s start with a key issue that many people are writing about and complaining about at the moment, which is, venture has a liquidity crisis and we have an exit problem. You’ve been at this longer than many, right? Has this always been the case? Has this always been a problem? Or is this a more recent phenomenon? There’s
11:00
always been a liquidity issue. There hasn’t always been a liquidity problem. We have a liquidity problem right now. And if you look by any measures, the holding period keeps getting longer and longer and longer. Why? Well, we’re in a very unique situation right now, in that so much money was raised by companies at such high valuations. And I’m not saying anything everybody else doesn’t know. You know, in 2020, and 2021, etc, that there’s no way they can be sold now. You know an M A for prices that are going to approach what they were at 2020, and 2021, so folks are holding on longer, trying to grow into those valuations, so they’re not taking such a hit on M A, secondly, interest rates have hurt M and A, especially for anything that was going to be leveraged. Third, we’ve got the IPO market, you know, which is a problem some other more recent issues. And you know, I would say one of them that doesn’t get talked about very much is, how do we incentivize venture capitalists? Back when I first got into venture capital, carried interest wasn’t just on cash. On cash, there was an IRR element to that. You had an IRR hurdle that’s been removed. In addition, now we’re seeing progressive carries. And what a progressive carries you they Well, you get paid more if you get two and a half x and 2x you get paid more for 3x and you do two and a half x, but there’s no time limit. So we are incentivizing longer holds, because that’s how people are getting paid. You know, you can give me a 3x you as the VC, you get paid the same whether that 3x takes five years or 15 years. So our incentives are somewhat twisted. The other element is, I think that’s going to continue. This is the mega fund, and so we’ve got mega funds being formed now, really big checks being written into companies and really pushing what is a successful exit, a successful exit. Now, what that means is getting higher and higher because the amount of money deployed into them, well, that’s just going to naturally stretch out the time to get to exit. So there were every single, every single piece of this sort of confluence of factors is pushing us out longer and longer. The one catch is now in LPs. You know, they’ve been Foy grad, with, with, with venture and they’re all over. They’re all over what their supposed allocation limits going to be, and that’s created a problem for venture funds trying to raise what would you suggest
13:31
for GPS, for fund managers to get better alignment, whether it’s incentive structures or otherwise, you’ve you’ve pointed out some of the problems, but what are some of the prescribed fixes or approaches that you’ve seen that are more modern and progressive when it comes to liquidity?
13:50
Yeah, but the great news is VCs are smart people, and they want to do the right thing. So I don’t think there are VCs that are consciously saying, Man, I want to push this out 15 years. They want, they want to get distributions out, because it’s going to help them to raise their next fund, and certainly now, more than ever, a best practice that we have been a couple of best practices, we’ve been pushing to VCs in which we invest. First of all, as we’re looking at VCs, we’re looking at their distribution track record, but VCs, we’ve raised a generation of VCs that are great at sort of find and catch. They find great companies, they invest in them, and they’re good on boards, building them up. The talent, which has not been emphasized as much is the talent of knowing how to exit a company. And that’s fine, as long as you created that talent somewhere in your organization. So many of the funds that that we’ve invested in as they get to scale, we’ve sort of helped create a vision for what we call the exit partner, or the exit team. And this is just as firms are doing, platforms for helping with go to market strategy. Now there’s other things. It’s creating a platform. Part of your platform for exits, and you may have these great partners who are good at finding and catching and building help them out. Essentially, have an internal investment banker or investment banking team where their thought is all about, how do we exit? And they’re working across the portfolio, helping each partner, like your other platform people do, and it’s even working it into your systems. Some of the best firms we’ve seen that have adopted this model that we’ve been suggesting have actually created really almost like when they evaluate their companies are doing, you know, they’re grading their companies and all that on all these other elements. One of the is exit readiness. And it goes to all the elements of exit readiness. Who’s talking to the PE firms that are the natural buyers, who’s talking to the strategics, all these things we knew, how was our data room, all these things necessary to get to exit, you start doing from the date you invest in it, and so that at any point, you know where you stand on the process toward exiting. And the great thing is, by having these conversations and all this, you’re also strategically positioning your company better, nothing worse than having a portfolio company, and you’ve been driving toward, yeah, this has got to be top line. Revenue is really what we driving for. And then when it comes time to go to the exit market, like the exit market says that’s not what we’re looking for. Last thing, too many firms are relying on their portfolio CEOs to drive this, and not every portfolio CEO is great at that. The firms need to be taken ownership, just
16:33
like the Find and catch folks, right? To use your phrase, they might not be great at the exit it’s just like the founders might not be. Debate that I’ve had with other funder fund managers for years is this debate around platform, which you mentioned. My contention is, we’re a small fund. Our last fund was 42 and a half. Our next one will likely be around 100 but my contention is, when you’re at that size, you cannot be great at all these things, all these platform things, you have to pick. And so we picked one thing and said, that’s going to be a superpower, and we’re going to be great at that, but we can’t do talent and PR and finance and etc, to kind of connect that to your last point. At what size and what scale can a venture firm build out this exit competency and have, you know, maybe a dedicated partner or a banking team, because there is a size where you might be too small to do this. And I’m curious when this makes sense, and kind of what structure you need in place, and what size you need in place to effectively have this competency around exits. Yeah,
17:34
it’s a great question. Nick, and I think it depends on the sort of the intensity you’re going to have. So when you get up to four to 500 million assets under management, you can absolutely have an internal person like that. It may be before that, you know, I know a firm that brought in somebody kind of on the back end of their career, but really smart, wants to work 2030, hours a week, kind of doing that part time for them. And we’ve also had funds earlier that are are using external creating some kind of relationship externally that makes it worth the external person’s time to do it, you know? And maybe it’s going to be, they’re going to get some kind of investment banking gigs later on that will be the payback for them. But they’re doing stuff virtually that they simply can’t afford it. Yeah. I mean, if you’re at even under 200 million, I don’t know how you do it internally. You’re gonna have to find some way to do it, or you do a lot of deals with other firms, your partner, your co investment, other firms that have some of that capability. And you take your superpower and you add it to their superpower, and together, you make it work. We’ve
18:39
had a lot of success with that in the past. The tricky thing is, anytime you outsource something critical, you don’t have control over it. And so, yeah, you know, there’s always, there’s always a balance there, but you can only do so much. Right? Chris co investment rights are often positioned as a must have for LPS in your estimation. What are the unintended consequences of prioritizing co invest this
18:59
happens every 10 years. We have this CO investment becomes the most important thing, because people don’t want to pay fees, right? And and it never, ever, ever, ever works out. And the reason is, we’ve got so much dry powder sitting in venture funds, and venture funds are doing this for a living by the time, and I learned this the hard way, right by the time a co investment opportunity came to me, that’s because the venture funds didn’t fill didn’t filled around, and the venture funds didn’t fill the round because there was some kind of hair on it. So we didn’t necessarily see the worst deals, but there was an adverse selection. The best deals had people fighting for allocations. So we’re seeing the second tier deals, and that’s what happens to family offices and other institutionals in venture. I can’t talk for the other asset classes in venture, there’s plenty of money for the great deals, and so by the time it gets to a family office or a fund of funds, there’s typically a problem. And every 10 years. To learn this lesson. And then people swear off co investing. And then a few years later, as the market gets hot and people don’t want to pay two and a half percent, you know, then they demand co investment rights. Again, we actually in our first fund, we did co investments in our second fund. We sort of modified it to try and address that adverse selection. We said we would only do co investments, where we made the introduction through an undemo day and would come in at the same time as the fund. In any case, we’re still relying on somebody else’s due diligence, and it’s still not core. So we stopped doing it. I sleep so much better at night, and I’ll pay the two and a half percent our returns on venture fund investing, paying the two and a half percent in the carry is way better than our CO investment returns. So is
20:47
that the message just, just suck it up and pay the fees and have the professionals do the picking.
20:51
For sure, for sure. I mean, you’ve got these great people who are, they’re they’re fighting, and they’re going to get the allocations, and the best companies let them do their jobs.
21:00
What about the funds that are capital constrained? This was something that we dealt with early in our life. Our first fund was only 6 million. Our second fund was 42 but when LPS asked, What’s your optimal fund size, it was like, you know, something a little over 100 but we could only raise 42 and so we had constraints which limited our ability to execute any reserves or follow ons. What would you say in a situation like that? Yeah, you’ve
21:23
made up. You made a really good point, and that is the one exception, and that is like this round would get filled whether or not you did your pro rata, but the fact you’ve got available pro rata that you would do if you had the money, that is the one situation where it works. I don’t think it’s fair for LPS to demand of you co investment rights when you know. You don’t know before you start to fund, you know what that needs going to be. The idea, though, of offering, you know it’s like, yes, if we have, if we have availability, our first, first and foremost, we are optimizing our fund. There may be opportunities where we’re already at 10% you know, we allocated 10% of our fund to this company. It’s still a great company. This round is going to get filled whether or not we do it, but we’ve got some pro rata, and we can share it with our LPs. That is sort of that limited one time exception where I think it makes sense. I’ve
22:16
also found that when you’re working with entrepreneurs on your pro rata, they have a big round coming together. And of course, you want to take the full thing, but then you got to turn around and call up all your LPs and see what the demand is. And so it’s part of why we get paid to do what we do. But it’s just a it’s a delicate walk when you don’t have committed capital, and you can’t just move forward with conviction. You’ve got to, you know, pass the hat, right? So you touched on this before, like following the incentives, follow the behavior you talked a little bit about. IRR, I came across this quote recently. A well known LP said, All I care about is, moec, you can’t eat. IRR, I’m gonna guess you disagree with that. Any other things you wanna share about the time? Nature of returns?
22:56
Yeah, I mean, you can’t eat more either, right? You need distributions. And and, interestingly, folks focus focused on moec or TV pi. You know, that doesn’t solve your problem. Distributions solve your problem. IRR, at least factors in distributions. You know, if you’re getting distributions out early, it’s helping your your IRR, in the end, you know, this is about getting money back to people, and we talked about this issue with tvpi, if you’re looking at MOOC or tvpi, and it takes 20 years to get to a number. Doesn’t do anybody any good. I happen to sit on the Investment Committee of some institutional investors, and it’s interesting. How do we measure every single asset class? We measure asset we measure public stocks by IRR. We measure all these other asset classes by IRR. Why does venture get measured by something else? How do you know whether you want to invest in a venture fund or in public stocks? You have to have the common the common element is looking at IRR. It’s not that IRR alone is important, but it’s pretty important, and it’s way more important, important than molecules Agreed,
24:03
agreed. You know, I came across this data from Peter Walker at Carta, and he was sharing about kind of the macro data on a lot of the zerpicorns from 20 and 21 and I think 60 some odd percent of those have done no financing. So it’s been over two years and they’ve done no financing, and then another 25% have either done an up or a flat round or a down round. And so there’s just, like a huge proportion of these that are kind of in this weird position where they’re not raising. I’m curious, in your experience, are the funds writing those down. These companies that ramp quickly and raised at these inflated prices. Are you seeing those funds actively write these down? Or are a lot of them holding them at last round value? It
24:51
really is a fun to fund thing. Certainly a best practice at this point is to write them down. If, if the normal measures you would use, evaluation and if you know coming back to your. If you’ve got a really solid valuation policy, you can’t wait three years, particularly with tech companies. You’ve got to have some kind of objective measurement tool based on some kind of, you know, external report or something in which that you will apply to your companies. If you have a good methodology that’s been approved valuation methodology, it should be happening automatically either a year or a year and a half after the last round. So how folks are able to go, unless they have pre revenue companies, unless how folks can go that long, is kind of a mystery. I can’t think of anything in our portfolio where they haven’t marked it down. But I certainly heard it from other LPs. And especially, as you said, kind of that whole class of unicorns, particularly if they raise big amounts of money, they’ve been fortunate that they haven’t had to raise again. But any kind of best practices means you’ve got to, you’ve got to write those things down. How about the opposite
25:56
case? Like in our portfolio, we have one company where we led the pre seed, they did a seed, and they’ve been so profitable their think their run rate is a little over 30 million. They haven’t had to raise capital. We have another one that last raised money, and they were doing maybe 80 million of ARR, now they’re well over 200 haven’t needed to raise and don’t plan to raise, right? So Are there cases also where, you know, the auditors, or maybe the LPs, are asking funds to write those up.
26:25
Yeah, I don’t want to be too negative, but because I’m going to use the word lazy, sounds like too negative, but there are some firms that aren’t going through the exercise of valuing in those cases, absolutely, if, if you look at the comparable multiples that you would use in that kind in that valuation methodology that I talked about, you just follow what the numbers say, and they move up or they move down. The GP isn’t doing, isn’t doing themselves any favor by not not marking up really good companies, and I’m auditors, I think are getting better about pushing that it all comes down to having a valuation policy where stuff really does get looked at, at least annually, and then marked up or down, certainly for companies that are that are revenue producing companies. So
27:12
Chris, your capital efficient startups that exit for 100 to 300 million often get overlooked in a market obsessed with unicorns and the power law. I remember for years actually talking to Mr. Rin belt, you know, at your firm, about that being an exit path in the Midwest. You know, 10 years ago, that was a really good exit, and maybe still is. So how do exits in this range factor into your underwriting of a fund? Yeah,
27:39
some of the best exits are those I talked with, I talked with a manager, you know, from a mega fund a couple weeks ago. And I won’t name the company, but they, they had just sold one of their portfolio companies for over 20 billion, and they had a 3x that kills me. So the the idea, you know, particularly here in the Midwest, there’s a lot of really good opportunities to get great returns on investment in the 100 to 300 range. And I think it’s going to become more important going forward. You know, just as the cloud made it easier and cheaper to start companies years ago, you know, what’s the effect of AI going to be? We’re going to be able to do vertical IT companies using AI tools that are going to be able to be formed with less people, faster, less money, which allow really successful exits at smaller amounts and and, you know, we don’t even know how it, you know whether there’s going to be a lot of unicorns in these sort of vertical areas that that that whether these companies are applying so I think the world is going to move toward a situation where we will see smaller funds, you know, certainly sub 500 sub 300 maybe funds that are able to get high ownership percentages, early exit on 100 to 300 and do really, really well, and they’re going to be able to do it with a lot more speed. Going back to a conversation we have, they don’t have to wait for a company to maybe become a unicorn to get that kind of exit that they want. Are those
29:16
funds still reliant on the billion dollar plus, you know, in the power law, or are you saying that those 100 to $300 million exits can perform sort of power law, like returns within a fund that is of the right size and sort of entry point ownership? Absolutely,
29:32
the funds that we deal with are right in that sweet spot. They’re not relying on unicorns to to get these kind of outsized returns they’re underwriting to 100 and $50 million exits, $200 million exits. But man, when you can get when you can get enough ownership early in these capital efficient companies, it’s just a really great result. And again, it doesn’t take 12 years to get to exit.
29:58
I love that. I also kind of want to emphasize your point around the way that company building is changing with AI. I mean, it’s shocking to see the data on the number of employees required in this sort of talent monopoly that the Bay Area has had on developers. AI is really breaking that monopoly. And whether it’s the Midwest or just much, much more broadly speaking, the facts suggest that company building is going to be able to be done anywhere and not have to go through Silicon Valley on the talent side. So Chris Renaissance was an early backer of flagship pioneering before moderna became a household name. Talk about the risk reward analysis for pharma and biotech versus your standard tech focus, software or AI investor? Yeah, we’ve,
30:46
we’re pretty we’re overweighted compared to other funds in the pharma, biotech area, in part because it’s such an efficient market. It’s, it’s this market where there are a lot of buyers, and there are more buyers than ever, because there’s been so many rising billion dollar biopharma companies that are acquisitive, and you’ve got a number of great firms that have become company creators. So they’re getting high ownership percentage early, and then they are raising rounds that get companies all the way through that should, you know, these tranche rounds that should get companies all the way through clinical trials, so, and then they’re having regular conversations with the buyers, kind of what we talked about earlier on the exit stuff. They’re really good at this. They talk to the pharma companies. They know. Here’s the areas that are important to us. Here are the solutions we want to find. And if you can do these milestones right through clinicals, here’s what we will pay. It’s super efficient. So you’ve taken out financing risk because you’ve got these companies you lined up to be financed. You know, through through the end, you’ve taken out market risk, because the buyers had told you, here’s what we want to see you get down to, does this thing work? And can we get it through FDA, R and D, super efficient, yeah. And right, yeah. So that’s right, that’s right. And so we really like that, because it’s, it’s easy to understand, and you know, you’re down to, if this thing’s work, this thing works, it’s a buyer, and there’s a buyer who’s going to pay a really good amount for that, so that we don’t necessarily see to that extent in the other sectors. So we really do like that. Quite a bit about the biopharma space. The other thing about flagship in particular, and I talked about the company creators, that is a new and emerging area. Biopharma was one of the first to do that, where they identify white space, they’ve got their own labs, etc. And that has really become a lucrative area of investing. And it’s, again, it’s one that’s working in a sufficient market. Should there be
33:01
more capital in that space? Should there be more funds pursuing that model? Well, there
33:07
are, there’s more money that is moving to the company creation model in all sectors. So did you mean that? Or did you mean in the into the bio farming? I’m
33:13
at the biopharma side, but the Confluence is interesting as well. Yeah,
33:18
the biopharma side is just really interesting exits continue to be good. You know, obviously the public markets, that piece has gone up and down. And there was a, you know, probably a bit of a bubble a few years ago, but the M and A market has continued to be really strong. As a fund of funds, again, we are really big believers in that space, if you’re in the right funds. And
33:41
how about just the tech side, the company creation, you know, funds, or the startup studios, as we call them, have have you made investments in that category? And what’s your general take on on those?
33:52
Yeah, that is an area we are looking at really hard. We’ve certainly done company creators, but they’ve been all in this biopharma space. We’ve got several of those. The other area is emerging, and they’re tending to be specialized, which is what they should be. So it could be one that’s in energy, it could be one that is in general technology, but more likely some sort of vertical, like FinTech or something like that. We are definitely looking at that space. We haven’t found the right other vehicle, but it’s an interesting area, and we’re seeing company creators that are creation, creators that are being formed where they don’t they’re not raising a billion dollars, they’re raising some 50 yep,
34:32
yep. So we, we’ve touched on AI a couple times now. Chris, you know, as AI reshapes both startups and venture itself. How do you differentiate between funds that are genuinely evolving their strategy versus those that are simply kind of layering on the AI buzzwords onto the same old playbook?
34:50
Yeah, certainly, everybody’s throwing that in. Anybody who’s in tech is throwing that in, and it really is just asking more questions. How are they incorporating it into their current portfolio? We’re getting really good examples of that. How are they looking at new companies? And the AI element to the new companies, a really important thing is, if it’s true that AI is going to play a larger and larger role in software development, technology is probably going to be less of a moat than it was before. So then, how do you create value in your future companies? And how do you establish value that gets you to a company that has meaningful revenue, lots of customers, and ultimately gets to an exit? Coming back to your earlier question, this may be where you say, man, it’s tough to get to a billion dollar exit this way. So we got to be positioned to, how do we can? How can we, you know, working backwards, get to a $200 million exit in this space? That is really interesting,
35:49
interesting. So, Chris, I know we talked earlier about renaissance in the Midwest a bit and in your firm has not just been the beneficiary of the rise of startups in Michigan and beyond, but but also an agent of change, you know, encouraging more value creation through the way that you execute your model and connect all the relevant stakeholders. Yet despite that, the Midwest continues to lack from a capital access and a perception standpoint. So what is the real potential of this region, and what do you think has held it back from achieving sort of the volume and the scale of outcomes that we’ve seen both in the east and the west. A
36:25
lot of what’s held the Midwest back in the past is really a cultural thing, sitting where I’m sitting. This was a big company state, and it was tough to the big companies. Took all the oxygen on the talent here and so, and you’ve got people who worked in big companies that is an entirely different culture than going into the startup world. And so, you know, we were behind in that because we had, you know, a couple generations of great success in big companies. So it’s been a slower process in getting the culture to be interested in, in doing startups that held us back, in part. But you know this, what gets me excited is some of the greatest research institutions are within 300 miles of where I’m sitting right now, cutting edge research, and importantly, students who are graduating who aren’t saying, I want to go to a company that has 100,000 employees. Increasingly, they’re saying, I want to do something entrepreneurial, particularly before I have a family and I want to try this out. So you know, Michigan was the fastest growing state for venture capital for five years leading up into COVID. And interestingly, if you look Since 2021 you know, the rest of the country has dropped by about a third. Michigan held steady. So we’re not a top tier state yet, but we’ve gone through this cultural change, and it we’ve we’ve held up nicely, even as it’s gone down other places. And it’s the same thing in Ohio and it’s the same thing in Illinois and Wisconsin, we’re seeing the growth. So I’m very optimistic, but we are definitely, you know, a decade plus behind some other areas in the country. What will ultimately help us, though, is this is where the groundbreaking research is happening, in large part. Chris,
38:17
if we could feature anyone here on the show, who do you think we should interview and what topic would you like to hear them speak about?
38:23
Well, we talked about this emerging area of company creators, and I would recommend Sarah Anderson of the vault fund based in Colorado, leading investor nationally. And company creators runs the big company creator conference. It is a fascinating area. I’m not even sure I’d call it venture. It’s almost pre venture, but it’s, it’s fascinating, and it’s a growing area. The fact is, her conference is over, subscribed every year. Sarah Anderson would be a great person on the show to talk about it amazing.
38:55
It’s been many years. She was at centrifuge when we last spoke, so I can’t, I can’t wait to have her back. Chris, what book, article or video would you recommend to listeners? I
39:05
would say Mahendra RAM Singha. He’s the business of venture capital. And, I mean, he’s a friend, and I’m actually in it, but that’s not for that reason. It is just so complete, and he’s a great writer. We actually gave that as a gift to a lot of other people in our network at our annual meeting, because we felt it was such a good explanation for those who want to learn venture capital.
39:29
It’s my personal favorite. When people ask, we’ve interviewed many people, many authors, and when people ask for one book that they should start with, I always recommend mahendras. Chris. Do you have any habits, tactics or behaviors that are a force multiplier? Yeah, we’re
39:44
an interesting situation. You know, we’re not, we’re not the aristocracy at Renaissance, because not only are we LPs, we’re GPS so we have to fundraise just like the funds underneath us. I think that gives us a different. Perspective, and the first rule we created at Renaissance was we would never ghost anybody. So we tell people no and we don’t just stop. The most frustrating thing, Rick in your fundraising, is all the people who just stop responding and just send the second and third and fourth email. And steam is coming out of your ears at some point because you thought you had a good meet. Had a good meeting. We don’t let that happen. We will tell people no as soon as we feel it’s no, and most cases, we will say no, here’s why, and it could be here’s why. It’ll never work because of what what we do, or here’s what you have to accomplish for us to look more seriously at the future. And the vast majority of VCs will be really appreciative because they don’t get feedback enough to be asked when I’m fundraising, somebody who gives me feedback, a fast, known feedback is the next best thing to a yes. The worst thing is the long, drawn out two year thing, where they answer every fifth email and just keep you hanging on. So I think that is something that we are particularly good at, is being completely candid with people like this isn’t going to work. You shouldn’t waste your time with us or come back next time you raise your fund. Here’s the three things would hope we’ll see by then, not to mean, not to say we’re going to say yes, but those are what we see as gaps right now. Well,
41:27
speaking from personal experience, when I was raising my first fund in 17 I got very direct feedback from your partner, Jeff, and I still read his feedback, because it was actually very valuable and it was right on point. So thank you for that. And then finally, here, Chris, what is the best way for listeners to connect, to connect with you and follow along with Renaissance.
41:45
So contact me always. LinkedIn is is it one way, or my email? My email is Chris, and then the letter R, and the Renaissance URL is R, E, N, V, as in venture, C, as in capital F, as in fund.com either way to reach me. Happy to talk to folks. This has been an awesome interview. Your questions are great, and it’s just great seeing you, Nick, it’s
42:08
great seeing you too, Chris. You know, congrats on the venture Vanguard class. You’re the last of the three to have on the show. It’s been long overdue to have you on here. So thank you so much for coming on for all you, you’ve done for Michigan and the Midwest, and you know, looking forward to running it back here in the future.
42:25
That sounds great. Thanks.
42:32
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 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.
