How I Invest with David Weisburd - E293: Inside GEM: How a $12.5 Billion Platform Selects Outlier Funds

Episode Date: January 29, 2026

How do experienced LPs evaluate venture managers in an increasingly crowded and bifurcated market? David Weisburd speaks with Kate Simpson about her career as a venture allocator, her move to GEM to lead venture investing, and how institutional LPs assess sourcing, portfolio construction, and power-law dynamics. Kate explains how reference calls, fund sizing, access, and long-term relationships shape conviction in venture manager selection.

So, Kate, you recently joined Gem, which is a $12.5 billion AUM platform to lead the venture effort. For those not familiar with Gem, tell me about the platform. Jem was founded in 2007, initially with the name Global Endowment Management, and its initial business, and really still the core business today is as a leading, fully discretionary outsource chief investment officer, OCIO. Today, on that side of the business, we work with about 40 endowments and foundations and other small nonprofits. In more recent years, we've been partnering with a wider variety of LPs who want to leverage our research and our manager's selection in more targeted ways across alternatives. And by that, I mean in fund or fund to fund formats. I want to get into some of your venture thesis in a bit.

But first, you joined the UNC endowment immediately after undergrad. What did you learn at the UNC endowment? How does that translate to how you invest today as a venture manager? At first job, opened up a career path that I didn't know existed. but came to really enjoy. I certainly didn't set out to become a career LP, not sure if anyone really does. The truth is,

I did not know what I wanted to do professionally after college. I had a lot of interests. I enjoyed a wide variety of subjects. I did well in all of them. I really took advantage of a true kind of liberal arts education, and I loved it. I was a generalist, if you will. So the investment office at UNC took a chance on hiring me.

I was a history major. I was a clean slate when it came to finance in investing. So I did have a steep and long learning curve, and I was lucky to have a supportive mentor. I learned a lot about allocating capital, taking kind of that 30,000 foot view of the world, but I did work primarily on a team that was managing the endowment's private investment. A couple of things stuck with me throughout my career that I initially learned there. One was the importance of asking good questions, both of the managers we met and frankly with my own mentor for learning purposes. This is a job that requires continuous learning. I

I also learned the importance of professional relationships and network, right? They build over time. They build off of each other and last a long time. It's really hard to place a value on that in the beginning, but it absolutely becomes an asset over time. After the endowment, I worked for two different fund of funds. And I think it was at those firms that I really learned what a good institutional due diligence process looks like, particularly the art of conducting reference calls. And I learned importantly how important and hard it can be to raise capital before. you even go on to invest that capital. I think a lot of people will be surprised to hear. UNC is arguably one of the most underrated endowments. I think they achieved a 12.6% return in 2024. Being at the UNC endowment, you mentioned asking the right questions. What's the one or two best questions that you asked today from managers that helps you really focus your time on managers that could end up being interesting?

I'm going to use the word that's probably one of the overused words in the industry, and that is differentiation. but it really does come down to figuring out why, in land of venture, why a particular founder wants to partner with a venture investor. But founders have a lot of choice in today's market. There's no shortage of capital. There's no shortage of venture capitalists. And founders are very, very savvy, probably much more savvy today than they were a couple

of decades ago. So they have a lot of choice. So it's incumbent upon the VC to, sell themselves on why they should be the right partner for a venture investor. And then it's incumbent on the LPs to understand that dynamic and understand who the best founders are gravitating towards as their capital partners. So it does come down to differentiation and that can take a lot of different forms. It comes down to that value add capability and what venture investors can bring to the table to help founders build their business.

mentioned references. I'm sure you end up doing multiple dozen references or GP, but at which point do you get a really good sense? Let's say you have an 80 or 90% confidence on that manager. Is this reference 3,

reference 8, reference 12? Give me a sense for how quickly you ascertain whether this is a manager that you really want to double click into. I don't know if it necessarily boils down to the number of references. What really moves us from a maybe to a high conviction,

yes, is the quality of the references. I think the reality is most of the references that LPs do are good, right? If you're going down the list of listed references that a manager has provided a potential LP, all of those references are going to be good. The craft of doing references comes down to the types of questions you're asking, of course, but also some pattern recognition such that you can differentiate between what's a good reference and what's a glowing reference. Obviously, references that we do that are off lists, right, where we're leveraging people

in our own network, people that we trust, people that we think we will get a very candid, truthful answer to our questions. Those references carry probably more weight than do others, but founder references are important. But again, it comes down to, I think, asking the right questions and being able to recognize through doing so many of these over the years, which ones are good and which ones are outstanding. And that's a bit of a nuance and a bit of something that's hard to kind of describe and put into words. But you can recognize what a glowing reference is, and not just a What is that tell tell sign?

What are you looking for to know that something's a glowing reference versus a good reference? Because there's a game theory to this where no founder wants to speak poorly on the VC. Double click on how you really assess whether it's a glowing reference. Yeah, I mean, asking for anecdotes

and very specific examples, understanding the dynamics of financings and the types of decisions founders make at various points in their capital raising journey to decide which partners to partner with. Seeing that a reference has made multiple introductions and referrals to whatever VC

we're referencing, I think carries a lot of weight. The detail with which they can speak about the relationship, can speak about how VC has helped them, can speak about their personality and work style. I think it comes down to both the quality of the reference and the words use, but also the detail behind the reference. You can tell if a reference is positive at a very high level, but a reference that is very positive at a granular detailed level, I think, pops out in our estimation.

Avedant, some of the metadata is how long the person being interviewed actually speaks on the reference party, how long they talk about it, how glowing they, how much more they volunteer versus saying good or he was excellent or using these kind of generic words. I think the best references are often those that, where I don't ask many questions and the person that I'm speaking to, they can't help but just go on and on and on about how wonderful the investor is. I do think it's important to ask very targeted and inappropriately timed questions in that conversation, but sometimes you don't have to ask much at all.

You just get the full story. They just can't wait to tell you about the person you're referencing and sometimes you've going to have to stop them so that you can get your questions in. They're a lot of fun. It's like it's one of the most fun part of parts of the job. I would argue it's, it's really one of the main aspects that an LP could add alpha. References are kind of ground truth. Everything else kind of looks very, very undifferentiated to use your term.

But references are one of those things where the truth really shines. You went early in your career from being an inch deep and a mile wide to today being an inch wide and a mile deep. How's that transition been? And what are the biggest tradeoffs between those. those two ways of investing. As you said, at the UNC Endowment, I covered all private asset classes. So that's what I meant when I referenced an inch deep and a mile wide. I moved to a fund of funds focused on buyout and venture after that, where size was really

the first screen. So I narrowed my investable universe based on size. And then most recently, prior to joining Jam, I was with a fund of funds focused on venture. And honestly, you know, those doors, as I reflect in my career, those doors kind of open for me in the right place at the right time. I've appreciated that opportunity to specialize over time to be kind of an inch wide and a mile deep. So now at Jem, I've in essence returned to my endowment's roots in a sense, but I'm still specializing in ventures. It's a bit of a nice

full circle moment for me. I've reflected along the way why I like my job as an LP, especially one focused on venture. You know, getting back to that liberal arts education, Maybe it's kind of my well-rounded nature, but I am drawn to both the qualitative and the quantitative aspects of the job. Picking good partners, investing in venture funds is definitely part art and part science. There are a lot of human elements, right, developing relationships and networks, evaluating the soft skills of investors, conducting reference calls, as we've talked about. If you're a people person, this is a great job for you.

But there are also many measurable elements, right? evaluating track records, building models, dissecting strategies, researching markets and companies. If you're a person who loves data, who loves information and math, this is also the job for you. If you're intellectually curious, this is a great job. We get to talk to really smart, ambitious people every day. It's really a privilege. We're talking to founders, investors, other allocators. There's always another question to ask, always more to learn, always a new person to meet, another rock to turn over. Every day is different, but engaging in different ways. And then on the venture side, we have this front row seat innovation, which is kind of a whole other topic, but it makes the job a lot of fun.

Double click on this fun math. It's one of these things everyone repeats as if it's this, as if it's an agreed principle, but many people have different philosophies. What's your philosophy when it comes to fun math? So, yes, we are obsessed with fun math. We, you know, when we reach a certain stage of diligence with a manager, we're excited about. We build our own model, which we call the,

what you need to believe model. So essentially, we've developed some internal metrics and a framework to evaluate a fund's size relative to the number of positions in the fund relative to the ownership targets and then importantly, the reserve strategy. So how much capital is going in at that first check versus later stages at, of course, higher, or what we hope to be higher evaluations. we want to see assuming a realistic range of outcomes, a path to 5X. And this is, you know, particularly when we're evaluating small early stage funds, object times seed stage funds. We want to see how many single deal outcomes are needed to return the fund.

We want to see how much market cap creation is needed to return multiples of the fund. This is so we don't have to have heroic assumptions. and that's what I meant when I said, we don't have to squint to see a realistic path to a 5X fund. It helps us compare small funds that have different strategies and maybe different portfolio constructions of their own. It helps us compare apples to oranges, so to speak, in the industry. And it's important because we assess hundreds of manders every year. Many of them have similar portfolio construction and philosophies, but there's always nuances and differences. So this gives us a framework to compare.

different funds against a similar set of metrics. One of the hardest things of investing is seeing what's shifting before everyone else does. For decades, only the largest hedge funds could afford extensive channel research programs to spot inflection points before earnings and to stay ahead of consensus. Meanwhile, smaller funds have been forced to cobble together ad hoc channel intelligence or rely on stale reports from sell-side shops. But channel checks are no longer a luxury. They're becoming table stakes for the industry.

The challenges has always been scale, speed, and consistency. That's where Alpha Sense comes in. Alpha Sense is redefining channel research instead of static point-in-time reports. Alpha-Sense channel checks delivers a continuously refreshed view of demand, pricing, and competitive dynamics, powered by interviews with real operators, suppliers, distributors, and channel partners across the value chain. Thousands of consistent channel conversations every month deliver clean, comparable signals, helping investors spot inflection points weeks before they show up in. in earnings or consensus estimates.

The best part, these proprietary channel checks integrate directly into AlphaSense's research platform trusted by 75% of the world's top hedge funds with access to over 500 million premium sources, from company filings and brokerage research to news, trade journals and more than 240,000 expert call transcripts. That context turns raw signal into conviction. The first to see wins, the rest follow. Check it out for yourself at Alpha-sense.com slash how I know. invest. And one of the things that's perplex to me since for three years is this idea that you have to have a

certain amount of the company versus having a certain amount of shots on goal. It seems like they should equal out. So five investments of 10 million should equal 10 investments of 5 million. Does not just come down to evaluation and entry point? Is that what people are solving around? And why is there this idea that each single check has to return the fund? Where does this theory come from? If you think of venture, right, you're investing in, very young companies and startups, not all of them are going to become winners, right? Like venture is an asset class of many losses and fewer wins. So we expect a relative high loss ratio in venture funds. We, you know, we track graduation rates as an interim predictor

performance. But at the end of the day, we care less about the loss ratios and more about portfolio exposure to the outside, those outsized winners. V.C. is, is obviously, obviously driven by power laws, right? Only a few companies each year drive returns in the industry and in our portfolio. So it's our job to pick the managers that we think can identify and lean into those outliers. To capture those outliers is a non-negotiable for larger funds in order to produce strong returns. But the reality is not every VC is going to have a power law company in its portfolio. That's just a reality given the relatively small number of power law companies there are relative to the number of venture funds and capital being deployed in venture.

So if your fund is not sized appropriately, if your ownership targets are not appropriate for that size, you run the risk of underperforming. And that's why venture funds have this really broad skew of returns. And then there's always this luck factor, right? There's always a little bit of good luck that accompanies the best portfolio of construction and the good scale of any manager. Can a fund get to a 5x without a power law outcome? And is that what you're looking for, which is if this fund manager is not lucky, can he or she get to a 5x? I think a 5x is achievable without one of these power law companies in your portfolio, if you're a small fund.

It's much harder. It's much harder to do that with a multi-billion dollar fund. And that, you know, maybe that is leading us into a discussion about this bi-procation we've seen in the industry. I'm happy to talk more about that. Yeah, let's talk about that. You look at Venture almost has two different asset classes, which is these small funds and these multi-stage funds.

One is when did you start looking at Venture in that manner? And how do you see it today? In our last conversation, I think we talked about this idea that there's two games on the field today. There's the access game in Venture. There's the Discovery game in Venture. I think there's been an element of that dichotomy all along. But it was really in sort of the 2018, 19, 2021 period when we saw fund sizes escalate. when we saw this distinction in the market between sort of the haves and the haves not.

So the market in more recent years has clearly bifurcated with more established, multi-stage brands at one end and a seemingly endless number of smaller, newer, early-stage managers of the other. Our view is there will continue to be firms in that first group that will have a structural and competitive advantage going forward. Those advantages, I think, are in place because of their, the firm's reputation, their platforms and really their scale. It's not rocket science, though, to know who these firms are.

The challenge is access. GEM is privileged to work with and we include a number of these firms in our portfolio. But these funds are larger. They are multi-stage. And they may not have the right-tail skew that LPs want to see in their venture portfolios. Maybe they will if this idea that we're having, you know, trillion-dollar private companies, if that is a new norm, Like, you know, maybe those larger multi-stage funds will have that potential for right-tailed skew.

But if LPs want smaller, early-stage funds in the portfolio, that opportunity is large, right? They're, that part of the market is really hard to navigate, given the sheer number of managers, many of them new and still emerging. It's crowded. It's hard to separate the signal from the noise. As I said, like, our team alone has reviewed hundreds of venture funds this year alone. Our framework at JAMM is rather simple. We evaluate a venture investor's ability to source, to pick, and to win. I think it's much harder in practice to unpack those questions.

Jam is uniquely positioned to execute well and try to answer those questions given a few things. We've got a lot of good resources for a high functioning team that includes a dedicated sourcing team. Yeah, tell me about that. So you guys, and it seems like it would be obvious that most LPs would have this, but you guys are quite different that you have a sourcing team that's separate from the investment team. Tell me about the function of that and what should somebody that wants to build a sourcing team?

What's some best practices? So today we have a three-person sourcing team, which we think is absolutely differentiated and a competitive advantage. I've referenced that the market is crowded and it does feel that way. So good information helps us to cut through the noise quickly. So the sourcing team, I mean,

their mandate is to know about which funds are raising when, which VC is spinning out or leaving to set up their own firm, which firms other LPs think highly of. And look, we at Jam, we like to back managers early. That's kind of been part of our DNA and part of our track record across asset classes since the beginning. We like, you know, those emerging type of managers because earlier in their life cycle because they're hungry, they're motivated. they're aligned with LPs, they're managing small or pools of capital.

We are eager and comfortable discovering those managers before other LPs maybe realize their potential and before it's maybe obvious to the broader market. But that takes a lot of hunting. It takes a lot of screening. And in order to have a good picture of the market opportunity, we like to know and see everything in the market. But that takes time. It takes resources. It takes people.

And we have invested in those people. in order to make sure that we are seeing anything and everything and to help us make the best decisions. You evaluate your GPs on sourcing, pick, and winning. As an LP, what is the one part of sourcing picking and winning that is most important to being an elite investor? It's hard to boil it down, but I will say, you know, before you can pick, before you can win,

you need to see the opportunities. You need to source. So one enables the other two. Sourcing, again, it's one of these easy questions. to ask and easy questions to answer, but really unpacking how ABC is meeting founders. What are their network nodes? How are those network nodes different from other investors? Why are founders coming to them first or early? Like it's, you know, you develop this, this picture, this narrative around sourcing. And I think it truly is something that can set apart.

a good investor from a great investor. Again, just to play devil's advocate. I would argue that GPs have to win hyper-competitive deals. Oftentimes they're the lead or the second position. There's only so many investors in a round. In LP, it seems like there's room for multiple winners. Support for today's episode comes from Square. The all-in-one way for business owners to take payments, book appointments, man-of-staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground.

I was actually thinking about this other day when I stopped by a local cafe here. They use Square and everything just works. Check out is fast, receipts are instant, and sometimes I even get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are in store, online, on your phone, or even at pop-ups, and everything stay synced in real time.

You could track sales, manage inventory, book appointments, and see reports instantly whether you're in the new shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also have built-in tools like loyalty and marketing, so your best customers keep coming back. And right now, you could get up to $200 off Square hardware when you sign up at Square.com slash go slash how I invest.

So does that change the dynamic of what it takes to be an elite LP and that you're not always, you don't have to have as sharp elbows. And there's a different game to it, right, than being a great GP. Both have an access component that's, I think, important. I think being an elite LP, yeah, you have to be good at the access, but you have to be good at the discovery piece to you. And look, it's hard, I think, to be. like a value-added LP, right, to our GPs. Like, one, your relationships and your portfolio and your performance kind of can speak for itself.

But those are very long feedback loops. Like we've talked about before that how, you know, venture is a very patient asset class. It takes a long time to know whether your decision to back a manager, your conviction in a manager is actually a great decision, right? I question this. There's this meme that you don't know until year 10 if you're a good at GP. and it's something everyone repeats. And there's a lot of wisdom to that frame of thinking,

like you have to play the long game. But I actually question that where to me it could, it could end up being absurd if taken to the extreme. You invest in a seed company at $10 million. It's now $10 billion Series F. Yes, technically you haven't sold any shares. And technically it's only on paper, a thousand X or whatever. Isn't that a, especially if you have multiple companies like that,

isn't that as clearly you're skillful in picking, even if you haven't had liquidity? So I think there's almost this, this dogmatic view that unless you have literally returned cash, it's impossible to know whether somebody's good. Isn't there a little bit of an over correction on that theory? Yes, yes. Yes.

There are obviously other signs and signals along the way, along the past of a company to try to determine if an investor is a good picker. You're invested and you're now two years in. What's a sign? I hit it out of the park. This is going to be a home run manager versus maybe the opposite, which is I made a mistake. Yeah, I think an early signal could be one graduation rates, right?

That you can, you can, there's good information and data in the market about sort of average graduation rates. So you can track your underlying portfolios progress in terms of graduation rates from C to A, from A to B. So that's one signal. I think the more important signal for us is who are the follow-on investors? What are the best seed managers that Series A investors are tracking and investing in their portfolios, right?

But the quality of the follow-on investors by firm but also by partner, I think, is a great signal. If a follow-on round is led by, you know, a firm that nobody has heard of and that maybe doesn't bring any strategic value to the table, you know, that maybe makes us question the progress of that VC and the importance of that company in a portfolio. So I think there are signals related to follow-on capital that you can monitor and assess along. the way. But look, over the last couple of years, DPI has been this kind of elusive metric for LPs. As a patient long-duration asset class, we are signing up for an instrument that, you know, returns capital on the back end of an investment. With a lackluster IPO environment in the last couple of years, you know, LPs have, have struggled and have, have been lacking meaningful distributions from their portfolios, especially relative to 2021. 2021 was such an outlier. It sort of set people's

expectations at probably too high of a level. In the absence of distributions, which have certainly been more absent in the past couple of years, there are good signals in terms of, like we said, follow-on capital, graduation rates. Where things are trading in the secondary market, I think that's a meaningful and good representative of progress of a company, demand for a company in the secondary market. And the secondary market is here to stay. It's been, it has served a good purpose in this environment where the IPO market has been a little bit lackluster.

And I think VCs have become smarter about utilizing the secondary market as a liquidity tool along the way where they can take some trips off the table, but still, you know, play the long ball and ride their winners for future liquidity. Kind of going back to what you said before about LP values. ad. That's paradoxically what I see as one of the most value out thing, which is patient capital, which is it's very easy to raise in 2021. It's very difficult to build a franchise today. Therefore, it's LPs like Jem that have that long-term view, which is actually really LP value ad, which is I'm not going to force you to make short-term decisions in your portfolio just because I have

DPI anxiety. I'm betting on you as a manager and I want to see you be successful over long-term. Is that not kind of the greatest part of value ad? And if not, what are some other LP value ads that I think, that you think are underrated. So at Jem, it's interesting, we serve two constituents, right? We serve our clients and our LPs. We serve our GPs. So when we say we want to be a best in class venture investor, we say that with both our LPs and our GPs in mind.

Maybe I'll take the LPs part first. You know, for our clients, for our LPs, it's absolutely more than delivering strong performance. It's often a thought partnership, a research partnership. We think a good partnership is one that works in both directions where we can learn from each other and hopefully make each other better at our job. At Gem, I feel like we take that a step beyond just kind of common moot sharing and offering introductions. As an OCIO, it's really in our DNA. To be a hands-on partner and our firm is set up

and resourced really well to deliver that kind of value to our people. Can you double click on that? If it's not note sharing, what is it that you're delivering to LPs and what are LPs really hungry for in this market? So I think a lot of LPs. are hungry for they're building their own pipeline, right? Like if venture is a discovery game but also an access game, I think they can use partners like Jem to build a future pipeline

that they may want to invest in directly over time. So we are, I think, positioned to offer insights along the way, offer introductions along the way. But, you know, we have teams chats set up with some of our investors so that they can ask us questions real time. That's just one small example of how I think we approach that research partnership. And I think we can do that because we have a large team that is sort of client-facing and savvy, so to speak, relative to a smaller number of investors. So I think we can operate at that

sort of close partnership level, perhaps in ways that other firms cannot. But to get back to your question about being a value-added LP to our DPs, it is hard. Like the, I, Our capital is just as green as others. And I think at Gem, maybe our capital is more flexible than others, meaning we are investing at a scale that is both meaningful to our GPs, but still allows us to be nimble to flex up and flex down without kind of throwing off our portfolio construction. I mentioned earlier, we have a long track record of investing in newer emerging GP.

So I do think there's guidance and advice that we can offer to that cohort of venture investors. And, you know, other things that I guess you can say are table stakes, but I wouldn't underestimate them. Right. We start to be thoughtful, transparent, supportive, helpful when we can, hands off when it's appropriate. And importantly, we're not afraid to ask the hard questions or deliver the hard messages. But we also, you know, always try to do so in a way that respects and hopefully preserves the relationships. I think those are, again, easy, easy things to say harder things to do in practice. institutionally over a long period of time.

And I think one of the most underrated aspects is being actively involved in the space. GPs just like LPs have to pick their funnels. They also have hundreds and they need to pick their couple dozen and where do you spend time and upstream of that is who's actually investing, who's deploying capital. So being an active participant in a space is I think one of the most underestimated forms of value at even though it's, I guess, before the investment even comes. That's a great point. We are long-term investors.

We understand the asset class. We understand the nuances, we understand the challenges. It is, I think, harder to be a good LP with a shorter experience being an LP, and also one that may have been coming in and out of markets. Again, venture is an industry where continuous learning is warranted and needed. If you're coming in and out of markets, you know, I think that can inhibit your ability to build a successful portfolio and venture program, but it also does impact your reputation. as an LP. You just use that word hard. Last time we chatted, you said today's one of the most difficult markets to invest in

as a venture LP, which is quite a statement given you've been an LP for 20 years. What makes today uniquely difficult from so many of the market cycles that we've seen over the last two decades? Let's start at a high level with some truths. Venture is not an asset class that lends itself to indexing. Right? So I'm sure you've seen some data. average returns over any time period, short or long, will disappoint. So you really need to be

in those top quartile, if not top-dissile funds in order for your venture portfolio, reduce returns in excess of the public markets and in excess of other private asset classes. Yet, as we know, the dispersion of returns, that skew or that range between top quartile and bottom quartile in venture is wider than in any other asset class. So that makes the manager selection piece paramount. It always has been and I think it will continue to be. And look, we talked about, you know, before why manager selection is sort of uniquely important in this, in this asset class.

And it comes down to picking those managers that have the ability to identify and lean into those power law companies. What's the narrative or the thesis that multi-stage managers are pitching in the market to why a $5, $10 billion fund could still return venture like returns? I think it boils down to this new normal that we're in that we have been in for a number of years where companies are staying private longer. They're continuing to grow, scale, compound, and value as private companies, whereas a couple decades ago they would have gone public. And that value creation would have accrued to public market investors. But today,

a lot of that value in the next generation tech companies is a good. accruing to private market investors because those companies are staying private longer. So those funds that are set up based on their their size and scale to lean into those companies, those true disruptors, those true kind of iconic generational companies, I think that is how returns at scale can continue to be generated if those companies, you know, and we know which ones they are if they continue to, you know, grow and scale and raise capital in the private markets. Just to give a back of the envelope example, you invest out a billion dollars, it exits out a trillion dollars,

that's a thousand X. That's the same as investing at $10 million and exiting at $10 billion. It's the exact same math. In fact, some of these hyperscalers in the AI space actually being diluted less and less in future rounds. So you're not necessarily taking 25, 30% dilution. You might be taking 5% dilution in the case of an open AI or anthropic. So actually,

dilution paradoxically goes down at higher valuation sometimes. So we talk about these. two different aspects, the discovery aspect and the scaling aspect of discovery and the allocators. There's also this weird unicorn of these solo GPs that are scaling. There's Oranzov. I'm getting ready for my interview with Elad Gill. Where do these solo GPs that have raised billions of dollars, where do they fit into this ecosystem? That's so interesting.

I'm glad you, I'm glad you raised that. It's interesting because I reflect on the types of firms I've backed as part of kind of the institutions I've been affiliated with over time. You know, one of the, one of the elements that has changed in venture is this notion of solar TPs. So one of the, one of the learnings, I think, that me and other LPs along the way have grown accustomed to is not to be afraid of key man risk. Many of the great venture firms were founded and led by a single person.

I think we can, we can think a lot of examples of firms that even today, like even at a large scale. There is a single decision maker. Elod is a great kind of example of that. Single decision makers can make decisions quickly. They can lean into their conviction. They can avoid group sync. They can avoid internal politics. I think these are some of the ingredients that can make a great firm. The rise of the solo DEP, which today is quite common. And again, institutional investors have gotten comfortable with that model, but that was not always the case. It's been an interesting evolution, both in the industry and as LPs have come along to, sort of understand and appreciate the rest versus returns in that model.

Yesterday I was at a dinner and LPs were talking about some of their solo GPs were taking full-time jobs and really during their deployment period, mostly because they couldn't raise and it's not necessarily sustainable at some of the fund sizes. What happens in that case? So that is key man risk. So what happens when you have a situation like that and how do you minimize the damage? So there's two situations maybe to unpack there. There's a full-time VC who goes back to an operating role or an interim chairman or CEO role.

And that is certainly a different situation to navigate than what has become fairly more common. And again, I think embraced by the LP community is an operator, founder who has scaled a company to a certain size and maturity where they're now able to spend time investing. So they're going from operator to investor. And I think that model, again, has been, I think, better understood and embraced by LPs. And I think, you know, going back to the sourcing, the importance of sourcing, right? Founders today, especially young founders who aspire to be a founder that has grown and scaled a successful company, they want those people on their cat table. They want somebody who is still in their seat, if not very recently, in their seat as a young founder.

So that operator-founder profile or archetype for an investor is super compelling, I think, for both younger generation of founders, but also LPs. The other situation that you led with a full-time investor taking other jobs, whether it's inside or outside the portfolio, I think is a different question. And it is a different maybe risk, if you will, to evaluate. But I think it has to be situational. You have to understand why they're taking this new role, what the value is strategically to the portfolio, what the rest of the team is doing in their absence. So I think it's very situational and probably a bit more. It's less common, I think, today. But certainly we have faced situations where we've had to understand the dynamics and those decisions.

Yeah, I had episode 101. I had a former Stanford endowment in Texas endowment, Mark Schoberg. And we talked about this whole thing, which was my naive understanding was, well, okay, they don't do another fund. So who cares? But obviously there's portfolio management that comes into play, which is making sure that your startups have the next round done and have the right exit. And there's empirical data that shows that if you don't manage your portfolio and in the cases where there's breakoffs or partnership risk, the returns of that specific fund go down. So you really have to balance this potential like partnership risk with the asymmetry that sometimes in those cases, some of those funds. You know, my joke is always the best venture portfolio was actually the angel portfolio of Mark Andreessen and David Sachs, which is they were operators.

They had finite capital and they were investing to their friends, people that they had either been working with months before or sometimes a couple of years before. Yeah, so I think anytime we make a commitment as an LP, we do so thinking that this is going to be a multiple fund. sort of relationship and in a very long-term partnership. But things happen, right? Life happens. Opportunities happen. So, yes, when a GP decides for whatever reason not to raise a new fund, sometimes it's because they don't aspire to build a generational firm.

Sometimes it's maybe it's because of performance, but maybe it's because of a different opportunity going forward. Those opportunities can be, those situations can be tricky for LPs. I know LPs, you know, are pulled into that situation. and are sort of asked and forced to be more hands-on in that situation because of the ongoing portfolio. And those can be tricky, very time-consuming types of puzzles to figure out. But again, as an LP who's been investing for decades, you see all sorts of situations

over time, none of which are exactly the same, but there are learnings from wind-downs, if you will, over the years. It could be theoretically very bad until you see it in real life. and then you see the nuance of what happens. Sometimes some of those portfolios are actually really good, and it's surprising. What's one piece of advice that you wish you knew going back to when you started at UNC Endowment? That would have either accelerated your career or helped you avoid costly mistakes. I'd like to think I haven't made too many costly mistakes in my career.

I think this is more of an answer on a personal level than anything from an institutional level. But I do think I would encourage my younger self to be a better advocate for myself with those on a working for and with. Really being, yeah, being your number one fan to use a sports analogy. Yeah, yeah. And I think, look, as not to turn this conversation on its head, but as a younger woman in this field, I think the importance of showing up, of being in the room, of making sure your voices heard.

I think those are important things that, you know, I think to my younger self, I I would make sure I understood the importance of my voice and, again, advocating for myself. You have to be explicit about it. Don't assume that people are just going to, your body of work won't necessarily stand for itself. You have to be explicit about, you know, vocalizing your value at. On that note, thanks so much for jumping on the podcast and looking forward to continue this conversation live. Yeah, thanks, Darren. It was a pleasure.

That's it for today's episode of How I Invest. If this conversation gave you new insights or ideas, do me a quick favor. Share with one person your network who'd find a valuable or leave a short review wherever you listen. This helps more investors discover the show and keeps us bringing you these conversations week after week. Thank you for your continued support.