What is the density of your founder NPS? | El Pack w/ Charlotte Zhang

Speaker A: Superclusters is where we demystify the secrets, stories and tactics behind the money that moves the venture capital world. Welcome back to the Mother freaking elpac where we bring on previous guests on the podcast. Answer your questions on how to build your venture fund, if you're a fund manager and need advice, and you can submit your questions to me across all platforms and maybe we'll have you on the podcast next. Today we've got the legend who shared the four Ps of LP investing herself, Charlotte Zhang at Initai Partners. We unpack her story in her episode in season four, from Piano to Swimming to being one of the most recognizable names in LP land. But for the purpose of today, we're going to borrow her brilliant insights on all the exceptions to the VC rule. So. Drumroll. Charlotte Zhang, As I mentioned, I joked about this when we were still in the green room, but it's been a very very, very long time since we last saw each other. Um, wink wink. If uh, people couldn't tell the sarcasm in my voice. And the last time we recorded um, you talked before P.S. and we had raving reviews on like oh my God, this has changed the way I've thought about venture and from GPS and LPs and it's great. And I'm curious for you and because you're constantly learning, constantly building, what else has changed and what is exciting for you since the last time we recorded?

Speaker B: Sure.

Speaker C: Um, well, so I guess on the personal side of things, I did relocate from the Bay Area. Um, we're heading.

Speaker D: You left me, you know, for 16

Speaker C: years and so very much miss it a lot. But uh, and am now calling New York my home and so building out that complementarity of ecosystems on both coasts. I quite like it. Um, but I suppose if it comes to frameworks, I am trying to step up my game as I know many folks are in terms of incorporating technology and more specifically AI into my workflows to get a little bit more productivity out of the hours. And so um, I don't have the finalized product to show just yet. Um, but let's say uh, by the end of the year I actually will have a um, demo available of essentially like an end to end um, LP enabled AI enabled workflow, um, that uh,

Speaker D: other LPs will be able to test

Speaker C: out and provide uh, feedback on and my co founder and I will um, seek to probably make that a uh, production available.

Speaker A: Oh, that's amazing. And I've heard whispers of this obviously based on our conversations that we have when we haven't monetized the audio of this. And so when, when this comes out later this year, uh, where is the best place for people to find out about this when this does come out? Because I imagine it's something that multiple people listening would love to have access to whether LP or gp.

Speaker C: That's true. So in my catch ups actually with fellow LPs I've probably mentioned it and asked for um, little pieces of customer discovery if you will like I'll ask, you know, are there specific frameworks that uh, you require to be sort of incorporated in your standard due diligence process, um, or you know, amongst like the current solutions that you're using, what are some of the greatest strengths as well as weaknesses and what they're providing you? Um, so I imagine I'll continue with this very organic way of um, when the product is available, um, I'll probably just show it one on one to um, other LPs in my network. But of course um, yeah you can reach out to me on LinkedIn if it sounds like something that you'd want to either test out or um, would be uh, interested in as a, as a potential power user.

Speaker A: You may have opened Pandora's box here. Um, do understand when you say this on a public platform, your inbox, LinkedIn inbox or otherwise will be filled.

Speaker C: Um, you know well and customer feedback is what makes products great. So I welcome it.

Speaker A: Are, is there just because, let's say this is an open casting call here. Are there types of LPs that you would prefer to see your inbox from for customer discovery reasons?

Speaker C: Uh, yes. So um, I think with solutions like this the issue is I prefer to work with folks who are um, not only going to actually be using the product day to day but also have the ability to champion uh, and select for vendors. Um, because I do find that sometimes that is very bifurcated. Um, and so the most uh, I suppose high leverage feedback that we can get is from people who actually would occupy both roles being both the internal champion and person, uh, who would actually be able to sign a contract as well as um, the person who would most seek uh, to utilize the product day to day to make their processes more efficient.

Speaker A: Part of me wonders now that you've announced it as it is, um, if we just come out with this episode like much later in this year and time it to when you actually, it actually goes out. But I feel like it'd be a disservice to the world to hide the wisdom in which you will share in Just a bit. Speaking of wisdom in which you will share, our first caller is in. So we can have the first one. We can learn everything, uh, that uh, I've been able to grasp, um, privately, but now the world gets to hear more of that as well. Lisa, what's up?

Speaker E: Hi.

Speaker D: Thanks for having me today.

Speaker A: Absolutely. Thanks for joining us. Um, Lisa. Every time I catch up with Lisa, it gets so much energy and like, you know, uh, dopamine coming out of those conversations. So this is my excuse to, you know, just be like Lisa, let's catch up more. Um, but this time you get to catch up with me and Charlotte and obviously you're coming largely here for, for Charlotte. So before we go any further, before we talk about the question you have for Charlotte, could you tell us a little bit more about 99 and yourself?

Speaker B: Of course. So 99 BC is a physical AI fund, um, that I launched last year and we're investing at the intersection of AI and the physical world. My background is, started my career at Microsoft in software security, data privacy. Also worked at Microsoft Research where my role was cherry picking all of the best technology and connecting them with the product teams. Then I worked in hardware for six years. Most notably, um, launched award winning consumer electronics at Jawbone where we launched headsets, speakers, wearable devices and um, yeah, it was really uh, an incredible time, a wild ride. Um, launching physical products to 50 countries, um, 250 SKUs in total. And after that worked in automotive tech. So have a lot of experience um, with enterprise SaaS and data platforms. Uh, and we were very early adopters of databricks, um, been using databricks for over a decade. M. So being very data driven in some of my previous roles and fast forward, um, after working in automotive tech, worked in real estate tech, I uh, started a company called Office Book, the Airbnb for offices where, where we helped high growth startups find workspace. And so we would look at market signals of growth and when a startup got to a moment of inflection, that's when we reached out to them, which has actually been very advantageous and helpful. Now as a VC, um, at the time many VCs were asking me for hey, can you also share that data set with us when startups are reaching this inflection point of growth and because of course they want to see signals as well. Um, so as an investor I've definitely married some of the things I've learned from being data driven in the operational roles and kind of looking at different signals. Right. Obviously we invest in early Stage, you know pre seed and seed. So sometimes there's not that much information. Um, but it's a combination of of course looking at um, the founder's background, what they've. I like founders who have a track record of shipping product like delivering um and how can we now surround them with our team to help accelerate their go to market and operations. So that's kind of me in a nutshell and my background, I'm super passionate about helping founders really kind of hit their stride and sometimes founders get blocked for various reasons and I love being the unblocker of things. So um, so yeah so that, that's us at 99 VC. I have a CO, GP, um, who has been a GP before and has um, operated in the kind of echelons of Silicon Valley. Uh, most notably was an executive at Tesla and also you know on the kind of EVP level of, of of um, of tech companies. And then uh, we have a team of analysts as well as incredible venture

Speaker C: partners who are advisors.

Speaker B: So yeah, we've really, really spent you know a ah, good chunk of last year just building out the team.

Speaker A: I love it, I love it. Um, I think there are a million more questions that we could probably talk about. Um, but you brought a very special one for Charlotte today. So what is the question? Which you have?

Speaker C: Yes.

Speaker B: So um, one trend that I'm seeing of course a lot of sources quote that emerging funds tend to outperform established funds but they don't have a full track record yet. So my question for you is what qualities do you look for in a first time fund manager beyond the previous track record?

Speaker D: Mhm.

Speaker C: Um, and I guess I should clarify a little bit. So um, in venture capital, although the top quartile of emerging managers definitely outperforms the established funds, um, on average you would actually be better off investing in an established fund than an emerging manager because the dispersion of returns is so much wider in emerging managers. Um, and typically the definition that I go by for emerging managers it's um, you know, before your fund three, um, and then establish being kind of fund three and later. Uh, but I did want to insert that uh, that delineation if you will. Um, and I would say that when you think about venture capital as an asset class because incumbent brands create uh, access flywheels, uh, the most important thing for an emerging manager is having a clearly differentiated strategy. Um, otherwise it's like fighting an unwinnable war. Um, so if I were to draw an analogy that investment strategies are simply financial products serving the market of what founders and management teams of businesses, um, need. So as a gp, you should be asking yourself, um, what unmet customer need am I trying to serve? Um, how can I build a team and design processes to create the context and capabilities that give me the obvious right to win in serving this unmet need? Um, it requires actually a ton of time, effort and experience I think to develop that thoughtful investment philosophy. Um, because I'll tell you personally, from all of the emerging managers that I've spent time with, um, I'd argue that I don't know, 98% of them, um, think that they have a differentiated strategy, but they don't. And uh, so I think that especially if you're able to articulate a nuanced and differentiated understanding of the market dynamics that create the opportunity you want to pursue, um, that that will allow you to shine through. Um, uh, so hopefully that's helpful.

Speaker B: Yeah, that's super helpful. I love your comment about the right to win. Um, especially when all the top founders have their cherry picking of which LPs and VCs they want to be on board. Um, you want to be differentiated in both your thesis and the way you structure your portfolio and your, in your exit cycle. And so I think one of the best lessons I've learned from, from actually uh, a hedge fund manager is that you know, VCs of course job is to make sure that you know, you are getting healthy returns to your investor. And I think um, those kind of, they've lost the sight of that if they're just chasing these overpriced deals and like there's no exit, it's just get stuck in a safe forever. And so it's really important to really be thoughtful about the founders that we invest in and helping them accelerate revenue. That's kind of, our kind of vertical is in uh, physical AI. And uh, we've been investing in physical AI for, for about a year now and our operational experience matches the thesis. It's not just we're just rolling the dice and trying to tackle a thesis. It's like oh well, we ourselves have done it. Therefore if we invest we want to give the founders the playbook for um, you know, for physical uh, products and uh, whether it's digital or physical robotics. And then on the ex's cycle, um, we are, our product is a little more differentiated so we're, our terms are a little bit more accelerated compared to the average VC fund because we want

Speaker C: it to stand out.

Speaker B: So I definitely agree with all of your points and I think that's really good advice that you've shared.

Speaker C: Um, and I think to your point too, you highlighted another factor which is um, a lot of the times what you're looking for in your founders is translatable, um, domain expertise, translatable, uh, networks, translatable, uh, um, insights that give you um, a deeper contextual understanding. And so in many respects if you don't have a track record that may be fine. But um, you hopefully have some of those translatable um, domain expertise as well as networks uh, that are directly applicable to the strategy you're pursuing.

Speaker B: Yeah, yeah.

Speaker A: I have a follow up question which was to what Charlotte, you talked about earlier which is about differentiated and like most VCs don't have differentiated deal flow or differentiated strategies. If you're a gp, how does one go about finding out if you have a differentiated strategy? Because obviously when you first come up with it, when you're in your little like box of a room, you're like, oh, of course this is different. I don't think I've heard it in market before. But then when you talk like in your shoes, like shar thousands of managers, you eventually start pattern matching. Sky, I've seen this before. I haven't seen this before. I've seen this before. I've seen this before. But if you're a gp, which you're not listening to a bunch of other GP pitches, how do you find out if you actually have something that's different?

Speaker C: Um, so this is what I mean by like the upfront legwork, right, is significant. So um, you should have taken the time to landscape every single investor playing in your field to understand like what are the league tables, who are you up against, how do they compete and how are you going to essentially create like a different edge? Right. Um, my pet peeve actually when I take meetings is when I ask you so who do you compete most frequently against? Who do you admire the most? Um, who else plays in your corner of the universe? And you tell me. Oh, um, you know, everyone is over here. Oh, I love this slide. Everyone is over here and I'm the only one in that Gartner Magic Cordras. Soon as they see that slide, I know one of two things about you is true. Either one, um, you're actually just that unaware, um, which is not a good place to be because it means that you definitely can't defend competitive ah, differentiation, um, and create durable edge because you don't even know who you're competing against. Um, or two, you actually have a pretty good idea of who's going to win against you and you're scared to point them out because you're worried that that'll lead me to them instead. Um, either of those things. Right. Doesn't um, doesn't correlate well to uh, you becoming a best in class gp. So I would say that that upfront legwork in terms of figuring out everyone else that plays in your sandbox because I assure you there are other players in your sandbox. The US venture ecosystem is one of the most sophisticated, um, highly populated, densely populated arenas for competition. And so um, it's very unlikely that no one has ever come up with your idea, um, how you choose to execute it. Now that's where the details matter and you can definitely be different. But um, yeah, definitely figure out who else is playing there. And to be honest, it's like um, it's a very like bottoms up exercise too, right? Because you essentially just start with like the best founders that you know in your space and like you ask them. Okay, so like for you, like who are the top three, uh, best investors that you've ever met with that specialize in investing in your area and you just keep mapping it that way, right? And then eventually you'll, you'll get to them because the best founders will know

Speaker D: who the best VCs are.

Speaker B: Oh yeah, the founder network, the whisper network is very, very strong.

Speaker C: Mhm.

Speaker A: And then when you start like building out the map for that, are you mainly looking at like repeated hit rates of like the same investor gets mentioned multiple times? You're like, okay, I really got to figure out what makes them really special, um, versus the person who's mentioned like maybe once out of like I don't know, 30 you talk to, um, that may have a similar strategy but like only one founder out of many like them.

Speaker C: M. I think that the, I, um, think the repeatability of how often they're mentioned does become signal. Um, because you're looking for consistency of execution.

Speaker E: Right.

Speaker C: Um, so it's perhaps it's easy to service, you know, one exceptional founder really well. Um, but if you're not able to do it again and again and again, that means inherently in your process there's probably not um, very systematic aspects um, of it put in place. Um, and then two, if you think about it, it's all about the density of the NPS you have amongst the best talent.

Speaker E: Right?

Speaker C: So because uh, of course if they have a good experience with you, they are more likely to refer others that they think highly of to you and that's the reason why that becomes like a leading indicator and therefore a self fulfilling prophecy as to who will rise to the um. At least that's the way I think of it.

Speaker B: Yeah, we've been really lucky that some of our top founders, uh, it's almost funny like our top two founders are referring us to more founders and we're like yes, because we're getting really incredible deal flow um, from both our own sourcing. But the founders themselves are also kind of feeding some of the creme de la creme to us. So we're very excited to continue that flywheel.

Speaker A: And I think like maybe to Charlotte's earlier point as well, I think it's not only like your top founders, like that you have invested, but also like other top founders in the respective space as well. Even if you haven't invested, even if you weren't an investor during the time that they became a top founder.

Speaker C: Mhm. It's actually m. A higher signal to me if it's someone referring you that didn't even take money from you.

Speaker B: Oh yeah. Do you see that often they're not, they're not just singing your praises because you gave them money, but it's maybe they interacted with you or your brand or your team members and they want to recognize.

Speaker C: And it would have to be that magnitude of um, an extra magnitude of um, making an impression on them because. Right. You wouldn't have that natural cadence of like interacting with them on a board level or whatever it might be. Um, so that's the reason why it would be a higher signal to me. Um, and uh, no, it doesn't happen that often for obvious reasons. But I always say that when we're conducting diligence as an lp, you should be looking under the rocks where you are more likely to find disproving um, evidence. And so of course asking for founders outside of your portfolio to refer to you. That is a highly improbable.

Speaker D: Um.

Speaker C: Yeah, that is a highly improbable endeavor. And so when it does hit, that's a real signal.

Speaker A: I love that. Well Lisa, thank you for jumping on and asking your question to Charlotte. Hopefully we answered your question and thank you so much for doing what you do with 99 and also everything you do for the ecosystem.

Speaker B: Yes, thank you.

Speaker C: And it was such great validation too

Speaker B: because we're investing a lot in the community and the brand. You know, putting together founder workshops. Uh, I do office hours for free oftentimes and the hope is to really just have people know and put us on our map. And so when they. It does come time for them to fundraise that we're one of the first funds that they. They think about. So, yeah, thank you for that, that piece of advice, I love.

Speaker C: So nice to meet you, Lisa. Yeah, you as well.

Speaker B: Yes, I look forward to meeting you in person someday. And thank you, David, for bringing us all together. And I can't wait to hear the podcast when it goes live.

Speaker A: I love it. You'll be the first to know.

Speaker D: Great.

Speaker B: Okay, Stay awesome.

Speaker C: All right, you too.

Speaker D: See you guys soon.

Speaker B: Bye.

Speaker A: Keith or Boy has this methodology that I really like. One way door decisions and two way door decisions. One way door decisions are things you must think deeply about because you can't go back. Two way door decisions are easily reversible and you can go back to the original state upon failure. Subscribing is a two way door decision, and to be fair, it costs you very little, in fact, free. And you can reverse that decision whenever and however you feel like. But your vote for attention would mean the world to us here at Superclusters. And so if you choose to do so or have done so already, Bottom of my heart, thank you. Mahesh M. Thanks for calling in.

Speaker F: Thanks for having me, man. It's a, uh, big fan of the podcast and excited, um, to ask my question here.

Speaker A: I mean, you were too kind, I will say. Like, when Mahesh and I met a, uh, few months ago at this point, like, Mahesh was seriously the life of the party at the event we were at, I was like, dude, I gotta, I gotta hang out with this guy a lot more. Um, also, he is. He claims that he's not good at bowling, but little. No, no, I remember this very clearly. Mahesh, I know you're giving me the face here, but, like, I.

Speaker F: We're both terrible at bowling.

Speaker A: I don't know where you're going with this. I. I am absolutely terrible. I think my head surprised us in the back half of just like, you had got some spares and strikes left and right. I'm like, okay, you know what? Like, you were sandbagging us in the first half.

Speaker F: They went from like a kindergarten level of bowling to like sixth grade. I. Comparatively, there were people that were actually really good. And so, you know, his 50 and my 70, you know, ended up lagging pretty meaningfully. But sure, I mean, compared to, like, not even being able to get it into the lane, it was probably a good improvement.

Speaker D: Well, I bowl with bumpers on, so

Speaker C: I'm gonna say that you guys must be very advanced no, it was just

Speaker A: we had a bunch of gutter balls, unfortunately.

Speaker F: Yeah, I would have saved David and I probably 80 points each.

Speaker A: Yeah, probably. But Mahesh is still better than I am, so I, ah, can't claim any expertise over this.

Speaker F: Um, but again, it's, it's a very low standard.

Speaker A: Well, everything above me is like, you know, I, I aspire to be more like when I'm sitting at 50 points for a full game of bowling. But enough about bowling, Mahesh. Like, I know I have some context on Escape Velocity. Everything you're building. But for those that are unfamiliar with what you're building, what is your story and what, what are you working out of right now?

Speaker F: Yeah, for sure. Um, I'm, ah, the founder of a fund called EV3. Stands for Escape Velocity. Um, we're a pre seed venture fund focused on the frontiers of the Internet. Um, you know, we got started almost four years ago. One of those funds where you just cobble together the money you can. And uh, we managed to get it from a group of LPs that were largely venture founders and GPs that, you know, we, uh, really respected. And on the back of that, we're thankful to raise our last fund, which, you know, put us in the league where we're now leading rounds and writing two to three million dollars checks.

Speaker A: I love it. So, question for you, and I think it's an elephant in the room in full transparency, at least for me. Your fund's called Escape velocity, but your EV3, where's the three come from?

Speaker F: Um, it's the three founding partners for EV3. Uh, me, Sal and Brandon have been doing this for a pretty long time. At the beginning, it was just me and Sal. Uh, but Brandon was our lawyer in helping us get the fund set up and formed. And so when we under threat of lawsuit from Escape Velocity to changing it to something, you know, a little shorter and less legally threatening, we chose the three because, you know, it was a number that meant a lot to us. And also my business partner can't remember things unless they're in threes.

Speaker A: It's hilarious.

Speaker F: You tell them four things, just no memory of what's going on. Four things. Uh, five things, same thing. But, uh, three he'll always remember.

Speaker A: I mean, who was it who said this? Was it Charlie Munger? Or maybe it was Steve Jobs? One of them, who are like, in a given day, in a given week, or I forget what the timeframe was it either day or week where the most important thing you have to do is just the top three. Things like everything else doesn't matter. And so you only need to remember the top three. You technically don't have to remember the top 15 priorities.

Speaker F: Yeah, he used to be an investor at Ribbit, and I think that's actually how they think about doing their summarizing work and, um, you know, weekly recaps and everything.

Speaker A: So, yeah, the three stock, it was

Speaker F: a number that meant a lot to us. And, um, now there was a moment where it might have also stood for Web3, but feels like that whole, like, term and movement may not make it, uh, to the next decade.

Speaker A: Well, we'll see. Never say never. So, Mahesh, I also know as much as I love you, I don't know if you like me, but you didn't come for me. You came for Charlotte today. And so you have a question for Charlotte. What is that question for sure?

Speaker F: Uh, first of all, Charlotte, it's great to meet you. I, um, have a purely hypothetical question, um, that, you know, I think a lot of GPs are thinking about, just given the fast moving times that we're in right now, which is, you know, if I have an early winner in my fund and I'm two to three years in, and that's maybe, you know, let's say 30% of the fund, but it doesn't return the fund on paper, how should I be thinking about using that capital? Do you expect me to return it to you as soon as possible, or do you want me to reinvest it and recycle it? And, you know, what are the considerations under maybe how the answer might differ for different people?

Speaker D: Of course.

Speaker C: Um, and I suppose also in terms

Speaker D: of taking this early win, uh, there would be a nuance as to whether, you know, um, is this kind of like an inevitability, like you need to exit at this point, or would you potentially actually be able to roll the dice and continue holding it and potentially get an even larger outcome for the fund?

Speaker C: But, um, for simplicity's sake, right, let's,

Speaker D: uh, I'll address the question if, um, this is an inevitable and you're taking this 30, ah, percent returner for the fund. So, uh, I think that it critically matters at what time period within your overall fund life it occurs. So for example, if it is still during the early years of the investment period, so let's say years, right, one through four, um, I'd probably prefer that you reinvest it. But then if it's in, let's say year seven to later, then that is typically when your LPs would expect to start seeing some distributions. And so um, the answer there would probably differ. Um, but overall, right I think it has to be taken into consideration of compared to like the remainder of your portfolio. Um, can you make the fund math work where you are delivering on the target fund return that you had outlined to your LPs? Um so of the remaining sort of positions that are left, can you map it? Right, I'm going to make up and say that your target return is like a 5x net. Um, so of your remaining positions can you comfortably get to that um, without needing to reinvest this capital? If the answer is yes, then perhaps it makes total sense then to de risk um and to be able to give this back to your LPs as a distribution. Um however, if you are not able to make the fund math work in a feasible ah, sort of like base case scenario, um, then I think it would make sense to reinvest the capital into an additional opportunity that perhaps would get you closer to um, what you had outlined to your investors. Does that make sense?

Speaker F: It makes total sense and people always roll our eyes. But our uh, our Target is a 10x. We're go big or go home people. So um, yeah, I think it's an interesting scenario especially when you do crypto or when you're in some of these weirder markets. They get liquidity early because I just think it's something that a lot of people deal with. Um, I guess maybe one last follow up question, you know, in the life cycle of this happening in the earlier years, um, would you have different expectations for managers that are maybe on fund one or fund two versus maybe managers that are you know, on their sixth or seventh fund in terms of giving you that capital back or is it really just a function of underwriting every time?

Speaker C: M so I'll give you I suppose like the, the human behavior answer versus

Speaker D: like the first principles answer. The first principle's answer is you should always be optimizing for your long term outcome. Right. Um, and so uh, that would indicate

Speaker C: that you should always be reinvesting the capital that you receive during your investment period.

Speaker D: Um however, right when it comes to managing the expectations of your LPs um, and they are subject to uh, biases right of feeling like um, their investment is de risked if you've given them back distributions. I think from a business management perspective, um, it's impossible to say that you aren't taking on more risk by not giving them distributions if you're a fund one and two versus if you're you know, Fund five and beyond, let's say,

Speaker F: makes total sense.

Speaker A: And also to add um, on to like what Charlotte mentioned. And I think there was a second half to your initial question, Mahesh, which was does it matter per. Kind of like LP archetype, like does do different LP archetypes care different things. And I can imagine a world where say there's a family office who cares a little bit more about qsbs. Um, would prefer like let's say you're uh, you have a 30% of your fund return back, um, in the first three years, they have to either reinvest that capital, uh, or they'll have to take a hit on capital gains. And so they may be. Their preference is if you have let's say a larger proportion of family offices and say some of them are like some of your larger checks or a deeper proportion, they might be like you should just reinvest that because maybe uh, you'll get another quick exit later on, especially in the industries in which you play in Mahesh M. That they might prefer that versus if you have say a larger institution where QSPS matters a little bit less. Um, then they were like, you know what, like our uh, our whole thing is like, do we have good realized irr? And DPI helps them get good realized irr? Maybe that's a preference towards that as well.

Speaker F: Makes total sense.

Speaker A: Yeah. Um, but I think it's a really great question, at least on the topic of recycling. And as I've obviously like Charlotte clearly explained, like there's no one right answer and it's highly dependent on like multiple situations.

Speaker F: Yeah, it's a fortunate situation to be in as well. Um, just again, when things are changing so quickly, I feel like this is going to come up over and over again. Hopefully. Um, there's so many funds and it feels like there's not a lot of concentration of winners at the earlier stages. So um, I think people are going to start seeing this especially as strategics continue like going on a crazy acquiring

Speaker A: pace, which it feels like they are right now.

Speaker D: Yeah.

Speaker A: Question for, I guess like as a follow up to what Mahesh said earlier about recycling, let's say you have semi meaningful um, kind of DPI, um, in the first three to four years, let's say it's north of 25%, less than 50% of the fund size. What are. Charlotte, what are your thoughts on say the fund doesn't have reserves beforehand, but there are other winners that are clearly like the value drivers of the fund. Is there a preference or do you prefer like let's say I, I, I'm putting Mahesh on the spot because he, we're talking to him right now. But is there a preference of like Mahesh you should just like I know you're pre seed, seed investor but you should probably just do the Series A because you have some compounding growth in your portfolio already and end up uh building a reserve strategy.

Speaker D: I think that um, a lot of

Speaker C: what you're trying to do especially as

Speaker D: an emerging manager is to build Trust with your LPs right that you're going to execute on what you say it

Speaker C: is that you will do.

Speaker D: Um so I wouldn't necessarily guide towards um incidences that would point to strategy drift. Um instead I think if again the end goal is to compound trust with your capital partners so that they stay with you for the long term, um, I would actually offer them the option opportunity to perhaps co invest with you and take your pro rata rights in the later rounds. Um it should not be the same

Speaker C: uh underwritten return as what you were

Speaker D: able to achieve in your ah initial entry check. Um but hopefully if it continues to be a compelling return um, it might still meet their mandates with respect to what they would hope to achieve with their venture programs. Um and then this would uh provide an additional opportunity for you to actually work very closely with them right in terms of um showing them how you have underwritten the relative traction versus what you um had set out to uh see them achieve with regards to key milestones um and also show them that kind of the access to the founders you have um does earn you a right to continue commanding um a meaningful allocation. So I think those things would actually work um in your favor in terms of earning you um bonus points with your LP base without um possibly signaling strategy drift which is um, yeah the thing that we hate most when we back emerging managers. I also think that whereas before it might have felt a bit taboo to seek liquidity through secondaries. Um, you know, feeling as though the founder might think of you as like not truly like a long term partner or this being a potential um you know a negative signal to now that's very much expected right in this market. And so um, I would say that it should be a proactive sort of um exercise that you're doing when you're monitoring your portfolio is thinking through okay well um, I should be revisiting that idea of um, should I actually be holding this or should I be um selling at least a portion um as subsequent tranches are Raised because the reality is companies are staying private for much longer. Um, and so you do need to be a bit more, uh, proactive when it comes to a liquidity management strategy.

Speaker A: I love it. All right, Mahesh, I appreciate you so much. Thanks for jumping on such a great question. Um, and we'll see you soon.

Speaker D: Really nice to meet you.

Speaker F: Great to meet you too. Thank you so much. And I'll, uh, see you guys soon.

Speaker D: I think.

Speaker A: Like, I don't know if you get this a lot, Charlotte, but Mahesh's M question has been. I've seen it a lot more in the last few months, or I've heard of it. Lost a lot more among GPS in the last few months than I have previously. I wonder why. It might be just purely anecdotal, but to your point, it might also be a sign of, you know, um, dpi. A sign of dpi?

Speaker D: Oh, you might not feel this, but

Speaker C: I was in Talking to other ENF's,

Speaker D: I'm like, you know, venture as an asset class is under siege for not producing any dpi. And so, um, they are simply responding

Speaker C: to the pressures that we are responding

Speaker D: to, which is, uh, you know, if it does not produce any, uh, realized returns, how will it be self funding and how can you continue pacing, right, um, sustainably into this asset class? So I think, I mean at this point it's a, um, it's a survival question, um, of whether or not, yeah, you're, you're able to continue raising capital from LPs.

Speaker A: The question for you, would you rather have. This is hypothetical, but let's say a, uh, forex in 10 years or I don't know, let's say a 7 um X in 15 years,

Speaker D: A 4x in 10 years, or a 7x in 15 years? M. Well, I mean, I'd rather have a 7x in 15 years.

Speaker C: Right, because if it was the same

Speaker D: rate, then it would be a 6x in 15 years. Um, but you chose to give me 7x, so of course I would choose to optimize for the long run.

Speaker C: But the reality is that a lot

Speaker D: of LPs or investors say that they're long term. But can they really hold onto that conviction or will there be pressures on their own, um, careers and roles that prevent them from executing on that?

Speaker A: That's fair. I was having a conversation with, um, a large ENF actually yesterday, um, and they were talking about, unfortunately, because of our check size, um, it is better to get a predictable 2x in 10 years than to even go for anything More than that, because to your point earlier when um, Lisa was on, the dispersion among emerging managers is just so wide that you don't know if it's going to compound at the same rate if you reinvest that capital.

Speaker E: Mm, mhm.

Speaker D: Which is fair, which is fair. But I do actually think that we're going into a world where, um, uh, there will be an increasing inequality in terms of the haves versus the have nots. And so if you are invested in some of the haves, I, um, would actually bet on their acceleration of value aggregation, um, in the later stages of scaling. Um, which is why personally I think the winning strategy is you want to hold on to them for as long as possible. Um, and so having that patience is pretty key. Um, but again, yes, it has to do with organizational structure, sort of like your time horizons as well as, uh, incentive alignment. Right.

Speaker A: All right, we have our third caller in. Third and final caller. And so I'm going to let her in. Helena, uh, how are you doing?

Speaker G: Hi David, So good to see you and nice to meet you. Charlotte.

Speaker D: Hi, Helena, very nice to meet you.

Speaker A: I think today's theme so far is like, I've seen so many of you fairly recently and I've enjoyed hanging out with all of you and just so happens that um, today is also the day we also record. So I have some context on what you're building with Founder Embassy. But for those uninitiated from Founder Embassy and everything you're doing, Helena, like, what are you working on?

Speaker G: Yeah, um, well, thanks first of all for having me here. It's great to be here and, and I'm curious, Charlotte, to get your take on a few things in a second. Um, but to keep it really briefly. Um, so I'm Helena. I co founded something called Founder Embassy and it's a landing pad for the best European founders the moment they arrive in SF. Um, and also a small fund where $50 million fund where we basically invest first, check into the best companies coming through. It's not an incubator. So the way you can envision it is like a beautiful big house in the middle of Parca that is almost run like a, uh, you know, Salon in the 18th century of Paris where great discussions are happening. We have five double bedrooms. Sometimes people stay here. A lot of those people staying, you know, are potential founders. And when we really like something, we invest. And because we get to look at people so deeply and get to look at them also so early in their journey, oftentimes, um, when we invest, we're the actually like very first check in, price that round and then really help those founders land in San Francisco, open all of doors to the, to the network to them. So it's a bit of a hybrid model between a couple of different things. Um, and we started 12 months ago and since then we've had a couple of companies go from, you know, zero to $650 million in valuation in four months and a few more things like that. And we worked across everything from biotech to consumer to more neo lab type firms, um, and everything in between.

Speaker D: Amazing. There must be something in the water.

Speaker C: I feel like between HF0's mansion and

Speaker D: pebble beds warehouse, this whole concept of, um, having enclosed spaces where communities can really, um, live and thrive and be observed is definitely taking hold in sf.

Speaker G: Totally. I think it's basically, if you think about it, like I always frame us as a platform fund, um, without a platform team, like the most capital efficient platform fund we've you've ever seen because we're only $15 million.

Speaker D: Because if you think about it, what

Speaker G: does a platform fund do? It's like all these problems are human problems and like, you know, how to hire, like how to go to market, um, who should your first customers be? The best advice and help you're always going to get from other founders. And so by creating this physical container and space for founders to help each other, we're actually creating all of these synergies between them. And so I think that's why this model of like, let's do something physical is so powerful because you get founders in the same room and um, you get them to kind of in the end help each other build these companies as well.

Speaker A: And despite all that, and this is what we were chatting about right before we, we brought on our callers, Charlotte decided to move to New York and not stay in sf.

Speaker F: Oh, no.

Speaker D: Expanding coverage,

Speaker A: but you're missing the aura of San Francisco and Silicon Valley.

Speaker D: Oh, I know, I know. Um, you know, I, I feel like home is still very much, uh, the Bay Area in California. So I wouldn't be surprised if I ultimately end up back there.

Speaker C: Um, but at the same time, right,

Speaker D: um, you lose perspective if all you have is just one region from which

Speaker C: you look at, look outwards, right into

Speaker D: the rest of the world. And so I think the stint in New York is good.

Speaker A: Okay, I stand corrected. I rest my case. But Helena, you have a question, a great question for Charlotte here. What is that question?

Speaker G: Yeah, Charlotte, I, uh, have a question for you that's probably Pretty timely for like any manager that's in SF right now in the market, um, where things are quite crazy at the moment. And to come back to it, we are a first Czech investor and we also want to stay that way. But because things are so crazy at the moment, there's a big discrepancy between companies founded by some 17 year old first time founder and on the other hand a new for Neolab, um, you know, getting started and where they're raising at. And so my question to you is, what are your thoughts when you see one of your managers with a reasonably small fund invest in, let's say like a $400 million post, even if this is the very first round or perhaps even like a friends and family round of a, of a given startup.

Speaker D: Yeah.

Speaker C: And I guess because the reality of today is the first round, right, what

Speaker D: maybe used to be called a seed check, um, it no longer means one thing, uh, because for different categories of companies, uh, you basically you fundamentally have different theses, you have different types of founders and then the math required to generate compelling venture returns is very different. So um, for example, I'd say with AI applications, I would probably expect to see that that first round should be in the 15 to $50 million RA.

Speaker C: Then you go over to AI infrastructure

Speaker D: and it's maybe 50 to $150 million.

Speaker C: Right.

Speaker D: And then you get to the Frontier Labs and that can span from I don't know, 100 million to maybe 12 billion. Um, I think if I see someone investing a first check and it's at $400 million post without knowing anything else,

Speaker C: my baseline assumption would be okay, it better be a Frontier Lab company where

Speaker D: uh, the founders are probably inventing some new AI capabilities that the current Transformers can't solve right now. Um, and hopefully they can go deep on explaining where there is a commercial market. Um, I'd say though that in general that category, right, the Frontier Lab companies are where you are seeing the most instances of VCs that are paying for unproven outcomes that are already factored into the price. So um, uh, it's definitely something to keep in mind.

Speaker G: Thank you, that's super helpful. Yeah, I think I've seen so many different things happen here in sf and as you're saying, uh, all these labels don't really mean that much anymore. And normally we invested like honestly we've done. The last deal we did was at 3 million posts and then we do one at 7 or 10. Um, but then sometimes you come across something like that and so it's helpful to hear your framing in terms of how to think about that.

Speaker A: And I think at the end of the day, I think most GPs should have some leniency of like let's say 10% of their bets can be off thesis and like off immediate thesis of ownership, target and check size and all those kind of things. Because part of your job is just simply to spot outliers and sometimes you feel like a 400 mil post for our Frontier Labs. It just makes sense for an outlier that you should be involved in. But as long as that's communicated up front and address the elephant in the room when you're having a conversation with an lp, I imagine that's okay. But Charlotte, you let me know if I'm right or wrong on that.

Speaker E: Mhm.

Speaker D: Yeah. As long as it's right, it's, it

Speaker C: continues to actually be the exception and doesn't creep into becoming the rule.

Speaker G: We actually to that point, I, I can't remember David, if it was maybe even you who gave me this advice last year. Um, to carve out an explicit 10% bracket. We've called it the exceptionalism bucket of the fund because um, we actually don't have reserves since we're that small. But we do have this 10% exceptionalism bucket which is for these types of beds for like deploying a, like a tiny bit more capital into one company than a usual core check would be to start getting into the territory of, of taking more ownership but also be like a dealer, like that would fall into that. And we thought framing it up front with lps, uh, would be a good idea. And I think David, it was you who, who mentioned that and gave me this advice in the first place.

Speaker A: I remember a conversation like that, but I, I don't remember if I was the first one to bring that up with you.

Speaker G: Yeah, I remember we talked about it.

Speaker A: We did talk about it. But I will say like maybe I was just lucky to be at the right time, at the right place kind of thing. Like had you had the same conversation with Charlotte or someone else, um, they probably would have given you something very similar.

Speaker G: Yeah. Yeah. How do you feel? I mean, on this topic of communicating, when you're doing out of the order things, uh, or you spot an opportunity that you think is really good for whatever reason, but it's not what you usually do. What do you see the best manager do in terms of communicating that with their LPs?

Speaker D: Um, I think for example, when you say that uh, there is in existence, right, this exceptionalism bucket, I, um, would try and provide some guidance as to like what you think could be possible things. Right. That fit into this bucket. And so then at least um, they have some inklings as to what to expect. Um, and uh, therefore.

Speaker C: Right.

Speaker D: When an opportunity actually does arrive, um, it's not completely foreign to them the concepts you had already kind of of outlined and therefore um, easier for them to understand.

Speaker G: Totally. Yeah. That's a, that's a good piece of advice to even go into more depth explaining what this is going to be.

Speaker D: Right.

Speaker C: Because it's, it's a very meta exercise because it's not that you're trying to describe the exact companies. Right. Because they're exceptional. They're. They're going to be um, things that you can't exactly anticipate but like the

Speaker D: types of characteristics that you think would make something um, m. Compelling enough are more so I think what you could guide on.

Speaker G: Yeah. What percentage of managers you work with would you say like on the smaller end of managers have um, and call it exceptionalism bucket or opportunity check. Something that is not a core check for them in their strategy versus they don't have that and they just have like this is the core check we do and, and we're always going to drive that strategy forward.

Speaker D: Mhm.

Speaker C: Um, I would say that the vast majority definitely.

Speaker D: I don't know that they call it

Speaker C: an exceptionalism bucket but um, they'll just have a long tail of exploratory checks.

Speaker D: Right, Right. And that's essentially what it is.

Speaker E: Right.

Speaker D: They're trying to gather information about something

Speaker C: that they think like there's clearly something

Speaker D: that has some form of convexity here. Um, but maybe they can't quite get full complex conviction that it's exactly the strike zone of what they typically invest in. Um, which is why it's, it's sized the way that it is. Um, but it's in uh.

Speaker C: Some of them treat it as like

Speaker D: you know, information gathering in the early days to then hopefully turn it into a core check. But uh, I'd say the vast majority of VCs have this implemented in how they do portfolio construction. Um, they might not carve it out and say that it's the exceptional bucket, but um, that's the way that it ends up showing up usually.

Speaker G: Interesting.

Speaker A: I.

Speaker G: Sorry David, go for it.

Speaker A: I heard about this from a former guest on the podcast as well. I forget if it's public or not, so I won't mention this individual's name. But for uh, their vehicle they actually have um, the equivalent of an exceptional Bucket. But the way they frame it is these are either like 100x,000x investments or these founders all go to jail. And that's how they framed it. And so that's what exceptionalism. I, uh, didn't call it necessarily that, but that's effectively what it meant for them as opposed to kind of, I think what Charlotte was alluding to. There was a lot of fund managers out there that say like, I'm investing these checks because hopefully it'll give us enough information so by the time they get to our core stage at seed or Series A, then we'll invest in that. But it's more like an information gathering exercise, uh, or like let's say, uh, an option call for the next round. Um, as opposed to the exceptionalism bucket, at least it sounds like for you. Helena at uh, Founder Embassy is really like these are, these are the Hail Marys. They're like off thesis, but they're going to be like multiple fund returns if they do well.

Speaker G: Yeah, totally. Um, I think for us it's less of a scout check of just like let's, let's be in this with a small, smaller uh, than core check and gather more information. And it's more like let's take a big swing at something that might be huge. And you know, it's also a bit risky.

Speaker A: There's a fund manager out there, um, who will go nameless, but they had a smaller than $5 million vehicle and their whole vehicle was purely like we're going to go Hail Mary. And they ended up investing a hundred K check, um, when they did invest out of this sub 5 million vehicle. And that check happened to be the Series A of Coinbase, um, which I believe that has. And don't quote me on the numbers here, but I guess I'm not mentioning names so I guess no one can really quote me on this anyways. Um, but uh, that became like 150 mil for the fund.

Speaker G: Insane. Yeah. Sometimes you just need to go for it.

Speaker A: Yeah. So there's always chance for outsized return. Um, well, Helena, thank you so much for that question. It's such a great question as well, in terms of like how everyone's thinking about things, especially in the ether of San Francisco and Silicon Valley. Um, so thank you so much for being on. Thank you so much for sharing more about Founder Embassy as well.

Speaker D: Yes, it's so nice. Thank you guys for having me.

Speaker G: Great to meet you, Charlotte. Bye guys. Bye. Thanks for having.

Speaker A: I think it's like the common theme out of. I don't get me wrong. Uh, but I think the common theme of everything that was asked today, whether it's through Lisa or Mahesh or um, Helena, was is this idea of exceptions to the rule. Um, like with Lisa's question, a lot of it was like, outside of track record, which obviously is the rule for a lot of LPs out there. Like, what else do you look for that might stand out? Like, what can you still be have that is exceptional as, as a fund manager? With Mahesh, it was like in case you, in case you have like an early exit, an exception to the rule. And maybe should you recycle, should you not recycle? And then with Helena it's like the true definition of exceptions. Like when do you take a wild swing on an exception? How do you communicate that as well? Um, and it reminds me so much of Venture being a game of outliers, and there are so many even outlier situations among what we do. And so I guess question to you, Charlotte. When we live in a game of outliers and when true fund outperformance is the outliers, how much do you spend time underwriting fund managers to the discipline of what they initially pitch you versus just sometimes you have to break the rules?

Speaker C: Well, so I'd say that adaptability, right,

Speaker D: is probably one of the most important things to remain like a top ah, tier player in Venture. So I would never want my VC to be dogmatic in any way. Um, however, again, if you go back to my original answer to Lisa's question, did you build a differentiated strategy, um, because it was supposed to be predicated on understanding a market dynamic that would create, um, sort of a market inefficiency that you can solve. You should have picked it based off

Speaker C: of that market dynamic having legs to

Speaker D: extend and be true for a long period of time.

Speaker E: Right.

Speaker D: You should not have picked something that was only going to be a relevancy window of like a year or two.

Speaker C: And so I think if you had

Speaker D: done that, that exercise correctly, you would not find yourself needing to like, pivot and change quite as frequently. Um, and that upfront work is ultimately what makes your um, I think your process more systematic. It's what makes your edge more durable. It's what allows you to compound, um, uh, in a, uh, more sustainable way because you're actually running in one direction versus needing to like pivot constantly. Right?

Speaker C: It's hard to get, it's hard to get escape velocity if you're constantly pivoting.

Speaker A: There we go. There's our dad joke. For the day. Escape Velocity

Speaker G: Question.

Speaker C: I also believe to your point about

Speaker D: outliers, um, ventures at the end of the day is all about talent, right?

Speaker C: Um, it's all about access to the best talent.

Speaker D: Um, best talent in terms of me trying to find the best VCs, the best VCs, trying to find the best founders. Um, and I have this core belief that the A's are pretty damn obvious.

Speaker C: You can edit out the cuss word

Speaker D: that I just threw out there, but, um, that.

Speaker C: That's the way that I feel about

Speaker D: it though, is that it? Is that emphatically obvious? A's are obvious.

Speaker A: So I have a couple thoughts on that. One. Um, it's okay. This is not a kid friendly show, so we can, we can include the cuss words. Um, we haven't put on the. It's not really a mature, like, kind of podcast, but like, might as well be one. Um, two. I do think the A players are obvious, but I think. And they're like, like, I dare even say they're painfully obvious to recognize. Like, I think the, I wouldn't say the average person can recognize it, but like most people in our world being smart identifiers of talent should be able to recognize these folks. I think my caveat to that is not all A players bring their A game. And that's fair sometimes. I had a conversation with the GP recently that, um, he was in the back half of his career, um, had a couple great wins early in his career. You kind of look at it, you're like, this guy knows, like, he knows how to identify talent, he knows how to start businesses. He just knows. And he was at a point in his career, at least to me, and I may be completely wrong in this, where it just did feel like he had the same motivation to like, do well that he once needed to when he didn't have money.

Speaker D: Of course.

Speaker A: And I think about, uh, this a lot. And this is also true of like spin outs or some other like, like legendary investors. Like, is, are your best days in front of you or are they behind you?

Speaker D: Yes.

Speaker G: And.

Speaker D: Well, I suppose that circles back to the reason why I focus on emerging managers.

Speaker C: Right. Is because the first three funds are when you haven't received your carry check yet.

Speaker A: Yeah, that's true. And hopefully you make more out of the carry than you do out of the fees. That's a whole separate conversation altogether. All right, Charlotte, one last question for you. Um, obviously people tuning in, if they've gotten this far, they've, uh, probably gotten a lot of the Advice that you've had for very specific situations based on our three guests that called in.

Speaker G: If.

Speaker A: Let's do it in two separate ways. Um, one, for the lp, the first time lp listening to this, and then two, let's do it for the GP that's listening to this episode. What is one last piece of advice you would give each of them as more of an overarching statement to think about investing and, or fundraising.

Speaker D: M. For the lp, I would say, um, the. The best sort of thing that you can do for yourself to make an informed decision is to make sure you see as much of the landscape as possible and so do not operate from a place of FOMO ever. Um, always take your time to do that landscaping exercise. There have been many times where the

Speaker C: first GP that I met in a

Speaker D: given category actually did end up being the best one.

Speaker C: Um, and I kind of, to my point, right, when I say that A's are obvious, I kind of was almost

Speaker D: like, oh, well, like, I feel like this one's probably it, but I still had to have the discipline to go meet with the 30 other ones. Um, because you need to know these partnerships are long, right?

Speaker C: They're decade long marriages, um, on the

Speaker D: short end and then. Exactly.

Speaker C: They get, you know, fun life extensions and whatnot.

Speaker D: Um, and unless you're going to broker

Speaker C: a secondary, uh, you truly are, um,

Speaker D: stuck together for better or for worse. And so it does not matter if you need to miss this fundraising cycle to do your landscaping work and come back to them the next time, um, you will feel so much more conviction and steadiness in your decision by knowing that you took the time to truly, to truly know that this is the pick and not just, well, this is

Speaker C: the pick that I had enough time to actually meet.

Speaker A: That's so true. Uh, so true. I think there's like, there's two outcomes that, right? Like let's say you take the time to step back and do the landscaping exercise. One, you realize, oh my God, the first one I met was actually the most impressive one. And you're like, well, careers are long, relationships are long. I'll just do the next one, right? Like if assuming they still have the same motivation, they still have the same discipline, let's just do the next one. And hopefully they just increase the surface area for luck to stick. Um, that's one. And like, you know, um, Wendy, who is on this podcast, or I think you know as well, Wendy Lee, um, also, uh, said like, hey, there's always another train leaving the station. That's why the second of which is you do landscaping exercise and you realize, oh my God, the first one was not the best one that I had come across and actually come across a better one. You'll feel a lot better. You'll, you'll sleep a lot better by knowing that you did.

Speaker D: You will, you really will. And just the amount that you learn about the space right from your first meeting that you take to like your 20th to your 50th, um, it's, it's just so much incremental context that um, yeah, it, it will put your selection abilities at the end of the exercise

Speaker C: as like leagues above what you were

Speaker D: capable of, um, when you first started. And so that's why you never. My advice would be never just, just

Speaker C: select a fund based off of taking,

Speaker D: you know, a few meetings.

Speaker A: I, I'm in accordance. So what is your advice for GPS then?

Speaker D: For gps? Um, my advice for GPS would be, uh, to, I think to get really clear and aligning their natural talents and capabilities with their edge. Right. There are actually many ways to make money.

Speaker C: Uh, but

Speaker D: you, given your background of lived experiences, the people that you know, um, the dots that you've been able to uniquely connect throughout your career, um, you are positioned only to do very specific things given that context.

Speaker C: Right.

Speaker D: And so I think the magic happens when you don't force yourself to do something that, um, maybe you think the market wants but isn't true to you, but more so authentically match what it is that you are exceptional at with your strategy. Um, and to me that's the only way that you can create true, ah, differentiation. Um, and if you haven't quite figured out what you're truly world class at yet, I would do that first.

Speaker A: Yeah. And sometimes it's, it's a permutation of things and just take some time. Like we had J.D. montgomery on um, the podcast not too long ago and he has these like six every six months he does these exercises where he does this reflective full day exercise of like, what have I done? What can I do? What do I want to do someday? And I think potentially it's an important thing for GPS to also do themselves.

Speaker D: Hm. Oh, and then the other thing is, um, to, ah, as much as you, uh, I think like, Venture does a really great job of like celebrating wins.

Speaker C: Right.

Speaker D: You go on the LinkedIn feed and

Speaker C: all it is is like, who's raised

Speaker D: what round and you know what.

Speaker A: Excited to be part of this journey.

Speaker D: Exactly. Um, very congratulatory on all the wins. I, um, think, uh, but we sharpen our understanding of things through the mistakes that we make and not being able to um, confront them.

Speaker C: And so uh, in terms of allocating

Speaker D: your time, um, I would not shy away from trying to um, really do

Speaker C: in depth postmortems as to the deals

Speaker D: that you've missed, um, uh, the founders that give you negative feedback, um, and try to simply incorporate them into learnings that can make you better, um, the next time around. And I think actually having the intellectual honesty and humility to share Those um, with LPs, uh, makes you feel that much more grounded in reality and someone who has the grit and resilience to pick themselves back up. Not someone who's done everything perfectly all the time, which is what the LinkedIn announcements would like you to think. But this is venture. The vast majority of your capital may well go to zero.

Speaker C: Um, so it's better that you embrace

Speaker D: the reality of the asset class.

Speaker A: Oh, what do people say again, we are wrong more often than we are right in this asset class. And actually um, I don't know, we can erase this if this hits a dead end. But we're in a group chat and I asked you for feedback on something fairly recently and uh, one of the things you said was it's important for people to talk about their anti portfolio. And I thought it was such an astute point because having an anti portfolio is a privilege that one has if they only have good deal flow.

Speaker E: It's that.

Speaker D: And then it's also the fact that you naturally have actually obsessed over what did you miss?

Speaker E: Right?

Speaker D: You tracked it, you stayed on top of it and uh, hopefully you know what drove you to pass on those decisions and maybe you fine tune your process, maybe you don't, um, but you also have the confidence to admit

Speaker F: that

Speaker C: these are the ones that you mistakenly um, passed on.

Speaker A: 100.

Speaker D: Yeah.

Speaker A: All right. Charlotte, I always enjoy every single conversation I have with you, which is why I just. We jump on conversations all the time with each other. I'm probably bugging you more than you're bugging me. But like, you know, let me know if I ever am annoying. All that to say thank you so much for being on. And this is just a clear piece of evidence why your wisdom is something I continuously bother, uh, and borrow again and again and again.

Speaker D: No, you are too kind.

Speaker C: I feel like I always learn so

Speaker D: much from you and you um, press on such good follow up questions to um, things that like I start to think on and then uh, the dialogue that we have is really what makes me try um, and flush it out more, uh, into additional theses. So, um, yeah, always, always excited to be a part of the Supercluster community and can't wait till our next discussion.

Speaker A: I know, um, I am always a steward for conversation. I don't know if I bring anything to it, but I'm here to ask questions.

Speaker B: All right.

Speaker C: Okay.

Speaker A: Until the next time. We'll see you soon. Hope you enjoyed today's episode with with the one and only Charlotte. And I highly recommend you to check out our earlier episode on Superclusters. In fact, here's one of my favorite moments from her episode in season four.

Speaker C: It uh, is consistent and applies across, um, emerging as well as very established managers.

Speaker E: So, okay, so again the four P's So people, philosophy, process and performance. And we like to explain that performance, the last P, right? Even though it is the easiest for you to evaluate, um, it is a lagging indicator. Right? Um, and actually you need to be able to evaluate if the first three Ps, if there's cogency there and if there's sustainability, then that is actually what

Speaker D: will create the performance over the longer run.

Speaker E: Um, so if I start with people, right, we think about it as, um, do you have a stable, um, experienced team of very high integrity people with the right background of skills, expertise and relationships to execute on your chosen strategy? Right. Um, you're looking for a culture that actually values having dissenting opinions because this

Speaker D: helps you avoid groupthink.

Speaker E: Um, and one that embraces humility, especially when it pertains to admitting to and learning from your past mistakes. Um, when you think about philosophy, um, this should be focused and demonstrate some sort of nuanced or differentiated understanding of the market dynamics that actually create the opportunities that they presume. Um, and also very clear cut as to the characteristics that qualify for a down the fairway deal. Right? They are not operating based off of fomo. They know exactly the type of investments

Speaker D: that they are best suited to execute upon.

Speaker E: Um, and then when it comes to performance, think of it as um, so it needs to be like a very consistently applied process for um, how they source, um, what they'll dig into during due diligence, um, how IC decisions are actually made and then who or what resources they are able to bring on and approach their post investment value add creation. Um, and then finally, right, you need to have discipline in doing the buy hold, sell analyses to actually determine the appropriate time that you should be seeking an exit for an investment as well as making sure that your fund size is right sized for the strategy that you're seeking to pursue.

Speaker A: Let me know down in the comments or on socials if we should do more of these. So until the next See you soon, Superclusters fans. Hey Super Clusters fans. You made it past the snap and you didn't disappear yet. So I have a mini message for you if you enjoyed today's episode. If I might be so bold, I have two favors to ask of you. One, there's a big red subscribe button if you're on YouTube, and if you want more of what you heard today, that's the magic button.

Speaker E: 2.

Speaker A: I know every single one of you knows something that I don't know has a question I've never thought to ever ask, so I'd love to hear your thoughts and curiosities down in the comments so the next time you tune in, you hear the answers to the questions that you would like to know. I promised myself I'd record a hundred episodes of Supercluster, so every comment, question and review you helps me make this experience more meaningful and helpful to you and makes Investing adventure a little less scary and a lot more friendly. And lastly, I want to share a quick disclaimer. The views here and expressed in this podcast are for informational and educational purposes only and are solely the views of myself and the guest alone. They are not representative of any organization that we are a part of. None of the views expressed here in constitute legal, investment, business or tax advice. Any illusions or references to funds or companies are for illustration administrative purposes only and should not be relied upon as investment recommendations. So consult a professional investment advisor prior to making any investment decisions. That's it for me. But if you want more, this left video is what we think you'll also like, and this right one is our latest one. If you haven't seen it yet.