How I Invest with David Weisburd - E38: Carrie Thome & Grady Buchanan of NVNG on How to Raise Capital from Corporate LPs

Episode Date: February 1, 2024

Carrie Thome and Grady Buchanan of NVNG sit down with David capital to talk about the importance of startups, and portfolio construction. They discuss the competitive landscape for talent, their transition to venture capital, and strategies at Wharf. The conversation also covers strategic investment, liquidity management, and the inception and building of NVNG Investment Partners. The episode wraps up with insights on raising a fund during COVID, network building, assessing emerging manager quality, and the value of fund of funds.

We're very close to $50 million raised. And we're very close to having a lot of that could be in co-investments into Wisconsin-only based companies, which is great. The rest will go into funds, as we know. The funds that we've targeted and what we've told our LPs, and it has stayed the same since day one, is 20 to 30 different venture capital managers. Those that are focused on the future of Wisconsin, which I know sounds about as blanket as can be. But we do not actually construct the portfolio based on taking heavier bets in the managers in which we like more, right? We, that is not how we've built fund one. We are managing the portfolio almost equally weighted where we can, regardless of fund size. Our larger funds have slightly larger checks, but they're not far and away

different. You could do the math on what 40 million looks like to invest in 20 to 25 managers. But really, we're trying to get our toehold into managers that have the same passion we do that really want to work inside of Wisconsin. Well, well, Carrie and Grady, I've been really looking forward to this episode. I get a two for one special today. So I'm really excited to talk to both of you guys. Welcome to limited partner podcast. Thank you. Thanks, David. It's a pleasure. So before we get into portfolio construction, other very sexy topics, maybe we could take a minute, Carrie and Grady, to talk about your bio. Thank you, David. Grady, I'll go first unless you want to. The simplest one-minute version is that I spent a career doing institutional investing, selecting managers, and doing all portfolio allocation and thought that I'd like to make a change and actually delve into

one single asset class and move to the other side of the table and become an investor myself. And my background, David, I mean, I joined Carrie's team, which I know she'll talk about, but Madison graduate, worked in Milwaukee, Chicago, back in Milwaukee, but spent time in Madison with Carrie at her endowment that she was running. Excellent. Well, Carrie, you spent 18 years at WARF, which stands for Wisconsin Alumni Research Foundation, as a very unique endowment style model with a tech transfer hybrid. What exactly is WARF and what does WARF do? I think, David, WARF, actually, the way I like to describe it is WARF is one of the University of Wisconsin-Madison's strongest partners in

technology commercialization and the supportive groundbreaking research that happens there. It was founded 90 years plus ago. I don't even, I lost track of what it was. But it's made to paint this partnership with the university while also maintaining independence from the university, which has always sort of been part of the secret sauce. So the independence that they have is what has allowed it to build this large

and impactful endowment that is safe from, I don't know how you do, you know, I don't want to say safe from government, but it's safe from, you know, governments, the state governments, which have budget constraints and when they look for money. And so had that money been part of the state and had work been founded and part of the university,

it is unlikely they would have ever been able to build the endowment that they have. What are some political considerations that you guys were able to avoid? Well, if it's state money, then when they have a budget shortfall and they're looking for how do we fill this budget, they will go and they will take capital from wherever they can kind of find it. And I think over history, you would not have had the ability to keep this money segregated and use it in the way they did, which was very decidedly to support additional research and the commercialization of technology from campus. It always seems like those budget cuts come inversely proportional

to when they should come. You have bull markets and you're overspending and nobody's cutting budget then. Then you have bear markets, you have critical research, and it's always underfunded. So you spend 18 years at Wharf. What do you wish you knew in the first year that you learned over 18 years? I loved this question. I was thinking about it last night while flying back to Madison. And after thinking through all my careful answers, David, my initial answer was, God, everything. impactful something like a Wharf can be. And if you knew it, you could be impactful right away. It's pretty interesting. So to give a more specific answer there for you, and given where we ended up, I'd say I really wish what I understood at the time was the importance of startups and fostering the startup culture at a faster pace than we did at

Wharf. We should have known that on day one, that building out the networks, developing our muscles in that particular area, probably we could have done a lot more. So we basically had these $10 million allocations we used to just keep re-upping to put into startups from campus. It probably would have been better to put a really big allocation of 50 million to maybe not run it as a co-investment program, but to have gone out on our own and help these companies. Because if they had to get to a co-investor, some of them basically never honestly ever made it there to build the relationships with the venture funds that were relevant to campus

tech faster. So that's one of the things I would have done. I wish I'd understood. You talked a little bit in the question, the complexity of how hard it is to actually get technology off of campus. That's as large and quite honestly as bureaucratic as these big land grant Midwestern universities are. And then the last thing I really would have been great to have

had the grasp of was everything I ultimately learned about portfolio management, manager selection, portfolio construction, team building, as I started with everything. I really wish I just had had everything when I started with such a wonderful asset to work with. When you come in and you mentor the next generation, what is it that you teach people about portfolio constructions, about manager selection? What are some of those nuggets that you bring to the next generation? Grady maybe could be a great person to ask because I think of having mentored him when he came in, he had really done manager selection, but it's probably taking a holistic view about everything you're doing.

What is the organization you're working for? What is their objective? What are you trying to do with a particular asset allocation? And then, and Grady hears me say this all the time, but it's so simple yet so true. Does the whole story hang together? So if a group is investing in,

whether it be a hedge fund or a real estate fund, is the group of people that are investing in that particular asset, are they the appropriate people to do it? Have they really found something that can generate a return that's outsized more than just sort of getting a market return and kind of getting it passively? And does everything hang together? And if that full story is complete and it's consistent with what you're trying to do at your organization, then you've probably found a manager that you can build a long term relationship with. smart people that can kind of work with Carrie and understand the big picture. But the best thing that she did, at least for me, was that holistic approach. Like here's the portfolio, here's where it is, here's a venture, it's one piece of the portfolio. Here's how the rest of it kind of hangs together based on what Morph wants, based on who the one investor that we support is interested in. And then how the team comes together, how to integrate with the team, whether it be on the hedge fund side, venture side, the accounting side we had.

Because you're living at the CIO level with her, making sure that she kind of teaches everybody, like, here's how the reporting works. Here's how the investment committee works. Here's why the portfolio looks the way it does. And then giving us the autonomy to kind of work through the construction under those limits. What are the limitations at the CIO role, right? So you always have to, as any manager of any organization, you have to balance getting the right things done with letting talent develop.

How are you able to effectuate change on the CIO seat? I'd say sometimes you have limitations of your organization and then just sort of the structures you have to go through, investment treaties and things that will be approved. So sometimes you can find yourself with really nice products that you know you probably can't get through your process. So those are some of the limitations. On the flip side, I guess with the team, some of the limitations are, frankly, you have a small team, so you can't always do everything you want, wish, like maybe I wanted you go here and do, we talked a little bit about the startups. And what I, we didn't have a venture, you know, sort of team built up.

So you'd have to build that venture team and you would have had to convince a group of people that we needed to build out a venture capital muscle. And I don't know that we could have done that at the time. I don't know if we could have recruited someone into a nonprofit to do venture. I think that was always one of the things that we struggled with that so much of venture capital and investing is based on financial rewards and that you want everyone aligned with here's what we're trying to do. And if you're inside a nonprofit, it's very hard to do carried interest. So you can't do that there's so many great gp roles out there and the lp role historically has not been the highest rewarding one have you been

able to compete in this hyper competitive market and compete for talent did you mean at wharf david or and then today again yeah today and nvng both uh it's well today at nvng we're we're navigating that finally right now so we're actually in the march to bring associate on uh you know whether you there there's two different mindsets so when we were raising this fund a lot of folks asked like why wasn't i i investing um why was it weren't we raising a direct fund? But that's not where my skill set and talent line. It's honestly not where my passion lies. I love building portfolios. I love the manager selection piece. I'm not going to help be, you know, I'm not going to be as effective building a company. And that's not where I grew up. I have degrees in finance and portfolio construction.

So what you look for is someone who also has that same passion. If someone really wants to be a venture capitalist, it will not be a fit because they'll be frustrated because they won't want to deal with the different higher level aspects of reporting to investors. I love sitting in this place and delivering capital to people who can really make things happen. In VC, you have the same thing. You have operators turned VCs that get really frustrated. And a lot of it is about self-awareness. Grady, what makes you attracted to being an LP versus being a GP? What are the pros and cons of the two positions? Yeah. So I mean, I got my first foray into what LPs, what GPs were when I was at Northern Trust

in Chicago. Worf happened to be one of my clients because they're like, oh, Grady, you went to Madison. That is the story. And so I was very fortunate to be kind of thrown into that role, knew enough about the portfolio to get the analyst job there. And so I came into a very well-built team at Wharf when I was in the venture portfolio. I tried to start a company. I went through an accelerator program. The startup founder part of this is not in me, really, despite the fact we started NBNG and that was its own process. But I think it's because we've been through this. Like Carrie said, at the allocation level, right, working with the committees, understanding the portfolios and constructing it appropriately. Me sitting in the LPC, just kind of picking venture managers,

understanding which GPs make sense. It's a lot more qualitative having started on hedge funds where you're working in the zero sum game. Venture capital, what I was attracted to is really how do these managers differentiate themselves? You talk to 800 of them, they all kind of sound great, right? Or they all sound the same. And so where are the outliers? So for me personally, I don't think I'm built for the zero to one. So I don't think the idea is going to come from me, but I think what Kerry and I are very good at, and even having built it at Wharf is how do we use the strategic aspects of what GPs can do, what the founders that we have in our market, and how do we connect all of this together. So speaking of picking GPs, so you started at Wharf, you initially started

on the hedge fund side, and then you went over to venture side and you heralded a book of 50 managers, roughly three to 350 million. Tell me about that transition. Yes, started on the hedge fund side. So I was hired as the analyst at Wharf to help with performance, run the reports that carried needs for the investment committee and kind of support the team holistically. So she had it well broken out by asset class, certain portfolios had different managers and our hedge fund piece was rather large, right? So we needed some help on that. We had a really talented PM running that strategy and just having an analyst kind of work into

a portfolio hedge funds was where the need was at the time. I'm much more attracted to venture. I'm much more attracted to the startup founders that are building cool things, the future of innovation. I understand the algorithm side of things and how we're hiring and firing hedge funds, but venture, long-term buy and hold kind of strategy here, what's going to change the world. And I got, again, pretty lucky. Carrie hired a very good team. They're very marketable. Two of the PMs on the private equity and venture portfolio ended up leaving, going to bigger and badder places. And so there was an opening. And so how can I kind of fit in? We brought in another individual to help with that portfolio as well.

And so that just seemed like a natural fit to what I wanted to do. And luckily, I was on the team that said, Yep, just go do it. So it's a combination of being at the right place, right time and being self aware and really chasing your passion. You had 30, 30 of your 50 fund relationships for VCs. Tell me about that book when you inherited it. And what was your first kind of learnings from that legacy book? I learned and Carrie knows this, obviously, Wharf's been in venture capital since the 1970s, right? It's been rooted in that DNA of this entity having been around for what you say 90 100 years. So they've always had this kind of mindset around how do we get venture capital within the portfolio long-term

hold strategy. But then when I started looking at the portfolio and even right before me is we have a lot of biotech funds. We have a lot of heavy hitters when it comes to who's hunting in certain smaller markets. But what does Madison really need is we need the ties to the venture firms, not just the returns that they're giving to the endowment. So biggest learning for me inheriting that portfolio is how do we use it strategically? Like how do we actually get these funds to Madison? How do we start investing in funds that have kind of come up the ranks that weren't really ready for us on the institutional side, but now they are, now there's flights to Madison, the world's opening back up. Like how do we, how do we get some of these strategic use cases

funneling through campus? The strategic imperative of bringing companies to bringing venture funds to Madison, that sounds great. But it obviously in some way, in some level conflicts with the pure alpha, you know, profit seeking. How did you balance those? And were there ever cases where strategy won over profit maximization? I don't think we ever gave up or sacrificed return for what we were doing. What we had realized was that venture was really, you know, so if you look at like a flagship, for instance, there had been someone who joined flagship that had gotten a PhD at Madison. And they were on campus trying to locate some technology. And then this is my understanding of the story, because it was actually one of Green's predecessors.

As he said, people tended to kind of come in, hit there like we didn't have another position for them. They'd go to something better. The person had ultimately, through our licensing operation, made it over to Craig. And from there, what they realized was that at Flagship, if they wanted to navigate Madison, it was probably great to do it through someone like Warwick, which was the tech transfer office and had all these relationships. And so I think that might've been one of our first really tangible, we can use this venture portfolio for more than just the returns we can use it to build relationships and see people that had portfolios and it wasn't that we could get into flagship now just because of that but it opened a door and it differentiated us and we

were no longer we of course we had this portfolio that would make nice allocations and continue to be there you're in and you're out if you if you did what you said but also we offered a different like peek into a university in a place that was largely under sort of ventured if you will there weren't a lot of people looking and you could find maybe unique opportunities there when you talk about how the book changed for grady over time before it really had been just purely financial and And then it moved to financial plus, how do we marry it up to the strengths of campus? And let's bring these two things together. Absolutely. I think strategic investment could go both ways. We interviewed the CIO of University

of Miami, and he's really leveraging the fact that he's in Miami and so many of the top managers have moved to Miami. So it splits both ways. But going back to Wharf, Grady, in terms of your investment criteria, how did you build out your book after you took it over? Sure. Well, again, it's a pretty well-built book. I won't go through the names that are in that portfolio, and it's still managed over at Wharf by an individual. So still managing these relationships is obviously very important to that entity and always has been well before I was there. And like I said, we didn't we wouldn't churn through managers so, so much. I mean, we had a well built portfolio. And again, this is an asset class, as you know, David, we're not, we're not letting go of one of these funds and trying to

sneak our way back in, it just wouldn't really happen that way. So some of our legacy kind of managers would be in the portfolio, the newer ones that I did right before we left, even before we knew we were going to leave as smaller managers, I did a Minnesota-based manager, and then we did one in Chicago that were what I would deem emerging-ish, probably in the eyes of our investment committee. Roman numerals were a little bit higher, but still emerging-ish, Midwest managers. And so to your question, David, on foregoing returns is we never expected probably in the eyes of our investment committee, Roman numerals were a little bit higher, but still emerging-ish, right? Midwest managers. And so to your question, David, on foregoing returns is we never expected to forego returns and never really thought that we would.

I'd add in, David, as well, there was a predecessor to Grady who, John McCauley, went off to the Cleveland Clinic and he's over at the Mott Foundation now. For a while, John had had the effort to, and he got us into True Ventures and he was really all about trying to get to top tier. I'd say we actually stepped a little bit away from that and kind of became more about how do we develop our ecosystem, the Midwest. And so then we moved away from trying to chase allocations from name brand funds and sort of embraced more of a concept that really was for us developing the local ecosystem was good for the local communities because you needed a healthy startup you need healthy startups around where you are you definitely need that if you're trying to move technology from a campus and again going back to wharf the whole purpose of war was to

advance the research to benefit humankind that's's in its mission. And so when we're talking about what we're doing, there's a reason why we want to see the local ecosystem in venture capital be getting stronger and better. And maybe you're not gonna start with what VC is in Madison. We did actually work with the state pension funding and Chris Pasachocomo to create a venture fund in Madison, but it was all about how do we turn

our attention to helping everything that's around us, help us do our job better. So Grady, in terms of managing your book, we had Joshua Berkowitz came in, he talked about kind of deploying over many years and really decades. How did you manage the liquidity nature of harvesting and deploying into the venture asset class? Yeah, well, I think having listened to the podcast, David, I think he's absolutely right. Like we're not parachuters into this asset class like that, that we are long term buy and hold investors, even with NBNG, we're investing in firms, not just one fund, right? Pretty simply. I mean, we use a model, Wharf has a model, we have API plugins that would tell us when our funds are doing certain things. You mentioned API. Are these outside sources?

We would have plugins to Burgess or Private Eye is what it's called, which is just basically maintaining a portfolio, kind of an additional check for what we were doing internally. We also had me there running performance holistically on the portfolio. So understanding what the venture asset class was doing. We also worked with Northern Trust, obviously, as the custodian. And so having all of these kind of different checks and balances, whereas venture, as you know,

it takes like 10 years to actually get accurate numbers. I have to ask, how accurate were your models? And what was your biggest error rate? And anything else you could tell us in terms of trying to prognosticate the future? We didn't really model this stuff out. It wasn't that we had the numbers,

but it didn't need to be that detailed actually, David. So if you step back to what Worf is, we ran a very complex portfolio. We used an alpha overlay, we used leverage, but it was highly liquid. So the catch, having the ability to find something is as Grady said earlier, it was a long-term portfolio. So it was mature.

There was always distribution. That wasn't really a problem that we had. And the other part find something is as great as you said earlier it was a long-term portfolio so it was mature there was always distribution that wasn't really a problem that we had and the other part to remember is work was an operating entity so we had a business we were getting royalty revenues and for a lot of the early years that i was there there was a lot of cash flow flowing into our portfolios so as far as liquidity when we ran the portfolio the way we ran it, we wanted an equity beta exposure and private equity and venture capital was part of that. So that would just flex up and down. And as we got too high in the equity exposure, we would cut had the gift, if you will, of the ability of not really having to worry about it. So you're getting me really excited. These are very exciting topics. So essentially what you're doing is you are basically you had a range, let's say 10 to 15 percent venture.

And if the market had less equity than expected, you would go back to that target. Is that a fair explanation? Yeah, we used to manage the portfolio based on risk. We budgeted by risk. We used a risk budget and there was certain risk premiums that we had. And so the idea was to keep that balance

and that's how we would flex it as we needed to. Would you always have to sell or were you able to borrow against that? We used a lot of derivatives, so it was super easy. So the most part, we would just sell some futures contracts if we needed to. And the active management piece on that side was largely via a hedge fund overlay. So the trick was balancing the beta exposures against the alpha portfolio to make sure those two didn't get out of whack. And you mentioned this derivative, you have one of the most fascinating, you have an all weather approach that you used at Wharf. Tell me what that's about. Sure. That I inherited, if you will, give that kudos to Tom Weaver when he came in and joined us as the chief investment

officer. And I was a deputy to learn how to learn how to hit his elbow. Bridgewater's all-weather approach is pretty simply about achieving true diversification in an investment portfolio. And the concept was built on understanding why assets move together. So everybody will calculate what are the correlations. Well, sometimes things are correlated very highly and sometimes they're not correlated at all. And so what you really want to try to understand is why is that happening? So then if you take this a step further, you want to use this technique for all of the products available to our, you can use them to build these really highly efficient portfolios. So you could take a low risk asset like government bonds, apply some leverage and make it more comparable because if you base your asset allocation on just capital,

you could never get enough bonds in your portfolio to get the return. You had a return trade-off that you had to make. So by using judiciously using some leverage, and we did that via swaps or futures, you were able to make a government bond, maybe have, I think we had involved like 9% on it versus a three. And now it's a little more comparable to an equity and get the same return with less downside risk.

And so now if you're a fund that has a hundred year history, over time, that means that you don't trade off any of your return, but with less downside risk, you compound at a higher rate of return over time. And that was the beauty of the all weather. Is a simple way to explain that, that you basically turned a bond into another type of equity with the same volatility, but non-correlated to the equity? It is a great way to put it. And sometimes it will be non-correlated and sometimes it'll be

correlated. So sometimes you'll get hammered. That can happen when they both move together in the downward, but the idea is you're a little more diversified than if you're just holding pure equity exposure. It goes back to my own personal portfolio. Little did I know that stocks in biotech and venture and crypto and every risky asset was at such a high correlation. So lesson learned. So we finally go on to NVNG, your new what I would call startup, but your new fund. So after Wharf, you started NVNG. So Carrie, why did you why did you start NVNG? I'm going to pump this one over to Grady because I'd say why did I start this NVNG is because Grady convinced me to do it. And so I'll let him explain how he convinced me to do this. Yeah, I'm good at sales, David.

So next question. No, but we, I mean, where we came, like you made us tell the story nicely here as to why we are passionate about venture, why we're using the portfolio, the strategic needs of it. We had one investor, right? That's the university. That's campus. That was what we were responsible for. And that was how we allocated and how we constructed that portfolio. We looked around,

I mean, post the exits from Wharf, it's like, well, what should we do? Like, that was like the legitimate answer. Kerry, obviously CIO of 15 years, whatever, like could do anything. Do you want to go work through investment committees again? Are we going to do the same reporting or should we do our own thing? And the reason why I think we're built for this is because you look at neighboring states that have had similar programs, friends, Chris and Jeff over at Renaissance in Michigan, Centrifuse has a nice program. HX is down in Houston. These are fund to funds backed by local investors and large corporations that care about changing a little bit about place, but they care about

the venture capital asset class, the exposure to it, what it can do for them as corporations in their community. And I mean, what better kind of segue for us than to start the asset management firm with the first product being a venture capital fund of funds and just trying to build almost the exact same chair that exists in other markets. Those groups have been very friendly with us, helped us like talking through kind of their pros and cons of what they're doing. And so we've been able to learn a lot through them. From my perspective, David, saw a need and I saw the challenge and what the hell, why not? Let's give this a try.

Speaking of a challenge, you had to raise a fund one during COVID. But how did you go about raising a fund one virtually? As you noted, David, we pulled together, you know, incorporated the fund and not the fund for November of 2019. Our plan was to go live and start fundraising in March of 2020. As the world shut down, that obviously put us on pause. But then, you know, this incredible thing called Zoom showed up. So around June 2020, we decided to go ahead with the fund and try to launch. So when we looked at this and we're doing our planning, we were trying to come at this again,

as we've said a few times from the strategic angle. So for having relationships in the community, I'd say we had about 25% of our network was built out, but we knew we needed to build about 75% of it because my world was institutional investing and it was largely outside of Wisconsin. So we had a nice core of 25% of maybe the people we needed to know and talk to. And we frankly just started there. And I've learned a lot from Grady, honestly, about just networking and reaching out and calling people. And that is what we did. So we just kind of kept telling the story about, you should be involved in venture.

There's this group over in Michigan Renaissance. Look what they're doing for their community. They're growing their local innovation ecosystems. So we got a couple investors to agree. That got us more investors and we slowly just sort of built out the fund piece by piece by piece. Because we'd had 20 years of venture capital fund manager selection experience. And if you're trying to raise money from people who aren't institutional

investors, if you will, and say you have to have three funds, they gave us credit for being good investors. And really, we're only worried about could we build the office. Some LPs will say we invest in fund ones, but we won't invest in first time investors, which is a big, big differentiation. A lot of people don't don't grasp. So in terms of you, you had a very, I think, astute strategy, which is look for investors that didn't care that you were a fund one. And how did you go about building that coalition of investors early on? We were able to build a coalition because we were looking for people that also wanted to build a community. We talked about Wharf being, you know, close to 100 years old.

There's a lot of 100-year-old companies in Wisconsin. And so they've been here a long time. How do they continue to remain relevant and attract talent to them when there might be the more sexy company coming along? So we were able to just go to them and talk to them about venture capital and what that could bring to them. Uniquely, David, I would say, obviously, you know, we're backed by corporations, right? And we're backed by many of ours in the local community that haven't really played in venture and they haven't dabbled solid M&A departments working with larger companies, but haven't really seen the startup market.

And so I think we did everything correctly in order to get the corporations to feel comfortable with us as investors as a fund one. But we were after a unique group like Keri said, a group that needs to start moving venture faster here, no matter what the time or the market looked like. And I think we were fortunate to find the right corporations that took a stance on us. How did you build that urgency? Corporations are by nature almost conservative. How did you keep them from saying, well, that's cool, hit us back from fund two, fund three. Our partners, honestly, David, helped us build into it. So when we got people like

Exact Sciences to sign on and the state pensions on and then Baird looked at it, they helped us create this sense of we need to do this and we need to do this now. And I think the world sort of helps too. So what is your portfolio construction? How many funds and what is your typical check size? So right now, David, we're very close to $50 million raised. And we're very close to having a lot of that could be in co-investments into Wisconsin only based companies, which is great. The rest will go into funds. As we know, the funds that we've targeted and what we've told our LPs, and it has stayed the same since day one, is 20 to 30 different venture capital managers. those that are focused on the future of Wisconsin,

which I know sounds about as blanket as can be, but we do not actually construct the portfolio based on taking heavier bets in the managers in which we like more, right? That is not how we've built fund one. We are managing the portfolio almost equally weighted where we can, regardless of fund size. Our larger funds have slightly larger checks, but they're not far and away different. You could do the math on what 40 million looks like to invest in 20 to 25 managers. But really, we're trying to get our toehold into managers that have the same passion we do, that really want to work inside of Wisconsin. They see it as an untapped market, or they have portfolio companies that can align with, just like Kerry said, not just the wharfs of the world, but all of our other hundred-year institutions that are here trying to focus on new and emerging

technologies. I know you have a pocket for emerging managers. How do you look at emerging managers and how do you assess emerging manager quality? So we talked about this right before we hopped on actually, and I think our response is when we look at emerging managers, which boxes aren't they checking today that we are okay with them not having checked. Like it's, it's, it's, it's as simple as that. And it gets very nuanced, but we know where they're going to not look like the sequoias of the world, right? Like they're not all going to look like that. And so which, which boxes, like I said, is a team sole GP? Is it things that we'd like to see? Which ones aren't they checking today that we're okay with based on their strategy or where these GPs came from or where the portfolio that they've already invested into is looking. But we have about

20% reserve, David, for emerging managers. I think we've done three or four out of that 13 so far already. Well, Kerry and Grady, this has been one of my most enjoyable interviews. And thank you for sharing so much. What would you like our audience to know about you, about NVNG, and anything else you'd like to shine a light on? I'd like to do a plug for a post, a blog post I wrote on our web, because I think it's sort of the unspoken, the hedge fund, like why do people dislike a hedge fund, the fund of funds? Why do people dislike the fund of funds? And what I'd love people to understand is that going back to my, when you're a chief investment officer, your goal is to build a portfolio that

hits your objectives. And you look at asset classes and there are different ways you can access asset classes. And honestly, sometimes a fund of funds is the appropriate vehicle to use because your other choice is truly to either do it very badly and pay a very bad, big premium for doing it badly. You're paying a big price or not have the exposure. So what I encourage people to do is think about a fund of funds, not so much as just something that's all about different layers of fees, but it's an access vehicle to get you exposure to something you need, because we can all go out and pick any manager and fire money into it.

The trick in some of these asset classes and venture in particular is that you want to find sort of, you know, you have to sit through 6,000 managers. And sometimes if you don't have a team for it, sort of maybe, I don't want to say it's ego, but set aside like the need to do everything yourself and seek help from others and partner where partnering makes sense. And that's how we look at it. We think of ourselves as a partner to our investors. And I would just encourage and wanted to talk about that. Funded funds, not necessarily bad, not for everyone, not for every asset class, but we think it's an ideal one for venture because we think nothing but NVNG is nothing venture, nothing gain. Our whole premise is that venture should be in everyone's portfolio. And we're trying to make that possible. I think venture

capital in terms of it's a hit driven business. So you need a big enough portfolio in order to capture the power law. If you're not investing in these 50 underlying companies, there's a very big chance that you're not going to have any outperformers. And once you get to 500 companies, which is about, you know, 1520 funds, which a lot of people with minimums can't access, then you start to get those really, you know, the next Uber, the next Facebook, and then that's where it really gets really interesting. So I think fund of funds is a great way to invest and access that asset class, unless you have billions of dollars to deploy into the asset class. So Carrie and Grady, this has been really enjoyable, really appreciate it. I look forward to meeting in Madison or New York, or wherever we might be across the globe. By popular demand, the 10x Capital podcast has officially launched our newsletter powered by Carrier Labs, a full-service content marketing firm that's partnering with us on the newsletter. In our weekly newsletter, we will keep you updated on all things emerging managers and limited partners, including industry trends that are critical to know as an LP, VC, or

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