On this special segment of The Full Ratchet, the following Investors are featured:
- David Garcia
- Bradley Tusk
- Ted Seides
We asked guests to share the best question they’ve ever been asked by an allocator.
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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Transcribed with AI:
0:02
Nick, welcome to the podcast about venture capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is the full ratchet.
0:18
Welcome back to TFR on today’s special segment, we ask guests to share the best question they’ve ever been asked by an allocator. Here’s the segment called Best LP question.
0:36
On today’s special segment, we have David Garcia of digit, David, what is the best question a VC has asked you?
0:43
Yeah, I don’t know if I can think of, if I can think of a specific one, but I have really enjoyed speaking with VCs that truly understand lending businesses, because in many cases, like fintechs that focus on consumer lending, depend on how, how much hype and there’s around consumer lending businesses. Sometimes VCs love it, sometimes VC VCs hate it, but VCs that actually have a lot of experience with lending truly understand the huge profit pools that can be generated from lending businesses, but at the same time understand all of the potential risks and pitfalls that happen along the way. And so I have found those specific conversations to be pretty challenging and interesting and engaging.
1:36
On today’s special segment we have Bradley tusk of Tusk ventures. Bradley, what is the best question an LP has asked you recently?
1:44
And it wasn’t a strict investing question. I thought was really smart, which was, when was the last time you changed your mind on something? And I enjoyed that question, and my answer actually had nothing to do. Well, a little bit it was on drug legalization. I had always been kind of a libertarian. We should legalize drugs. And ultimately, the war on drugs is fated to fail, and we are better off taxing it, regulating everything else. And then, I don’t know what last time you’ve been in New York, but the state legislature three years ago legalized recreational cannabis, but then took years and years for the agency in charge to roll out your rules around it, and over 5000 illegal weed dispensaries popped up all over New York City that were allowed to stay open and flourish, and we now have an entire generation of teenage weed addicts. And we’re not talking about the weed like when I I’m 50, you know, when I was a teenager smoking weed, it was mainly like a ragged LNC shit. Now it’s pretty scary and potent, and you have a generation of kids that are, you know, they can literally get high in school bathroom, and no one can smell it because it’s a vape or edible. And I really think that, if on paper, drug realization kind of made sense, but when I saw what it looked like in reality, it was an absolute disaster. And so it changed my view on that. It hasn’t changed my you know, I wasn’t into investing in cannabis or psychedelics before this, not out of any ideological reason, but because I felt like a when you look at the market, say, cannabis on the Canadian public market, compared to the valuations that a lot of privately held companies in the US were getting, it was just way out of whack. And B eventually, cannabis right now is being removed from schedule one of the DOJ and Deas list of where cottas fall and the penalties for possessing them. And eventually, Unilever and Kraft and Johnson, and Johnson are going to get in the game. And the question I always ask when I look at a cannabis company is, what is it about this company that would make the Unilever have to buy you for a significant premium, as opposed to just be able to do it themselves. And I almost never have been able to come up with a good answer question, and until I do, I’m not gonna punch out. Now, I passed on duchy. I think I probably regret that, because I saw it pretty early and and maybe that would have worked out well. So, you know, there are some that I that I maybe would take back, but overall, I’m seeing the psychedelics. I’ve done ketamine therapy, and I found it enormously helpful. I would clearly recommend it in the right circumstances, in the right circumstances, to a lot of people, but I’ve never looked at a psychedelic company. I don’t know if you have that isn’t effectively some sort of brick and mortar retail business, right? And like, yeah. And like, Yeah, that might be a great private equity investment, but I’m looking to return the fund in every deal that I do, which means I gotta make $140 million on every deal, knowing that most will fail, and if the math doesn’t show me even a reasonable path that happening, I can’t invest and so my change my mind on that hasn’t really changed my investment thesis, but the way that I look at that entire industry and that entire facet of society has changed a
4:51
lot. On today’s special segment, we have Ted, sides of capital allocators. Ted, you know, you’re an expert in asking questions. You do a lot of this. What I’m doing now, but I’m going to flip it around and ask, you know, what’s the best question you’ve been asked either by, you know, a manager that’s raising capital or or maybe an LP that you have a relationship with, you know, give us a question that you’ve been asked that really is
5:16
memorable. I think the if you’re trying to drive, the one thing that comes up is this, you know, trying to drive, like, what is, where are people’s incentives? So I don’t think it’s like the most instructive question for any one aspect. But I was once asked, I’d take two or three different questions to get to the same thing. One is, you know, would you put your grandmother’s money in your fund. She passed away. So it wasn’t really that instructive, but it’s an interesting frame. One that I always liked was Who else doing the same thing as you would? You give money to and then the last one, which is direct, and a lot of times people won’t give you, the answer is, what do you do with your money that’s not in your fund. And I think each of those have, you know, the second one is more indicative of like, how do you find another potentially interesting investment opportunity? But that last one is really, you can get really interesting answers about understanding people’s own risk tolerance, and you know, how they view the consistency and seriousness, which with with which they go through investing, if sometimes it’s kind of willy nilly on the side. Now that could mean two different things. One is all of their attention is focused on what they’re doing in the fund. And the other is, well, maybe they’re more casual than you think about something that matters. So you know, there are lots of questions about investment process and details of investments that kind of get into it. But when you’re getting to that higher level of like, what’s really driving motivation? Because you never know, as an LP, you will never know what’s going on inside that GPS organization ever. And there’s a humility that comes with that, especially when you’ve been on the side of a GP, and you realize in all those LP meetings, you have those people really, really have no idea what’s going on. They might have gotten a window of what happened that one day, but that’s about it. So trying to understand the motivation, which is a lot more consistent, right? Behavior is more consistent than patterns and execution. So trying to get at understanding behavior and temperament is something that I think you can get at with a couple good questions.
7:24
So again, so again.
7:30
That will conclude this installment of investor stories. If you’re enjoying the program and would like to see it continue, take a moment and leave a five star review in iTunes. Okay, that will wrap things up for today until next time over. Prepare, choose carefully and invest confidently. Thanks for joining me.
