How I Invest with David Weisburd - E58: Claude Grunitzky on Democratizing Access to Venture Capital

Episode Date: April 11, 2024

Claude Grunitzky sits down with David Weisburd to discuss Claude's journey as a venture-backed founder, securing an investment from Goldman Sachs, the importance of mentorship in venture capital, and Claude’s approach to spotting potential. They also delve into the creation of The Equity Alliance, the firm’s investment process, and their involvement with Serena Ventures.

The Ford Foundation came in with a big anchor investment, then the Schusterman family came in with a big anchor investment, and Bank of America came in with a big anchor investment. So it started feeling like we were off to a great start. My early years were just about survival and understanding how New York worked. Once I figured out how it worked, it was about getting to the next level. And once I got to the next level as a venture-backed founder who was in the media law, who was being written about in the New York Times as the next big thing and all of that, how do you actually live up to that promise and get to the next level? And you can't actually do it unless you have people in your corner who really believe in you and who lift you

up. For more ideas on how to raise venture capital in this market, make sure to subscribe below. Claude, welcome to the 10X Capital Podcast. Great to be with you, David. I'm actually a listener, so it's good to be actually on the other side. So let's get right into it. So let's start with Trace TV. So you spent 14 years building this brand, Trace Magazine, and you were a first-generation African founder. Tell me a little bit about how you came to found Trace TV. Before Trace TV, I had actually launched Trace Magazine, which was a monthly magazine that I started in London around what I'll just call the promise of hip hop as a subculture that would bring people together. And Trace became an overnight success in London. And I moved to New

York 25 years ago as a destitute immigrant with big American dreams. I just said, you know what, I'm going to move to the center of gravity of hip hop and launch my magazine there as well. And that's when we ended up launching the US edition of Trace, which ended up doing really well. And that led to an investment from Goldman Sachs, a $15 million investment from Goldman Sachs, which is when we launched Trace TV to compete with BET internationally. What was the main differentiation from BET? We were global. And me being a son of Togo, native son of Togo, being an African who also grew up in Paris and also being a French citizen, having lived in London and coming to New York, I really wanted us to look at global Black culture and also to look at the African diaspora.

So we were all about representing the Afro-Brazilian experience, the Afro-Caribbean experience, the African-American experience, the experience of African immigrants and European Africans, and also people who were actually living on the continent. So that global approach made it more, I guess, international than what BET was doing at the time. We'll continue our interview in a moment after a word from our sponsor. Most businesses use up to 16 tools to hire, manage, and pay their workforce. But there's one platform that's replaced them all. That's Deal. D-E-E-L.

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no-strings-attached demo with Deal today. I'm very curious. You lived in London, you lived in New York. I love visiting London. There's something about upward mobility that's more difficult in London versus New York. Did you experience that yourself? I did, I did. Because I came to London, I was 20 years old. I had been living in Paris where I went to a Catholic boarding school outside of Paris.

And that's where I spent my teenage years. And that comes with its own set of challenges. But I came to London because I had heard this record by a band called Massive Attack. That album, Blue Line, really changed my life. And I said, I really want to be in that environment where it's all about cultures coming together and fusing. And London very much felt to me like a global city that embraced all kinds of immigrants, all kinds of foreigners. I started working in London after experimenting as a student, I realized the stratification in London is very much subtle and very much unspoken. And it's very much about how you speak and how

you understand the hidden codes and the hidden language. And I found that unfortunately, a lot of Londoners ended up excluding people who actually were coming from the outside. Whereas after I moved to New York, literally, I felt like a New Yorker within the same six to nine months. I felt like the city really embraced me and welcomed the fact that I was different in a way that London never had. But it certainly wasn't an easy journey. So tell me about that journey and tell me about specifically the journey before you got investors such as Goldman Sachs. It was a difficult journey, David.

I mean, I was living hand to mouth. I didn't have any money. I didn't have any network. I came to New York. I didn't know anyone. And I made it my mission to identify people who were shaping this hip hop culture that I hung my hat on. And I literally drew a list of all the people that I needed to meet in New York City. And I got to meet most of them. Most of the people on that list I got to meet. And those people introduced me to other people. And that led to new ideas, that led to new team hires, that led to funding eventually. That's how I got to Goldman Sachs.

But before I got to Goldman, I was really struggling. It was that typical kind of scrappy first-generation founder experience where there were times when I had this office on Broom Street in Soho in New York when I was dodging the landlord on the first of the month because I didn't have the money. And there were months where I couldn't make payroll. It was a very, very difficult and very brutal experience as a founder of New York. You somehow went from ditching landlords to getting 15 million from Goldman Sachs. I'm guessing there were some intermediate steps. So tell me about how you were able to make it where millions of people in a similar situation have not been able to. I got very lucky because I met Alicia Keys. And I met Alicia Keys when she was a teenager, and she was on the

verge of releasing her first album. And there was huge interest in her, and her album actually debuted at number one on the Billboard charts. So we ended up throwing this party where literally there were people lining up to get into the party. The party was at the old Nike town on 57th Street in Mintown, Manhattan. And there was a line around the block on both the Fifth Avenue side and the Madison Avenue side. So it was just like a crazy moment for me where all of a sudden I was like, you know what? It looks like things are going to be okay. And Alicia Keys gave this incredible performance. The issue ended up selling out. Now I had advertisers reaching out to me. And one of the people who didn't get into the party, but who was trying to get into the party was working at Goldman. And that's how I got to Goldman because at that time, I think Goldman

realized there was a bit of a buzz around Trace and that there was something happening around this hip hop subculture going mainstream that they should invest in. And so I got lucky. The harder you work, the luckier you get. But in terms of Goldman's investment, how did that accelerate things? How did that practically help you in your journey? It helped me in many ways, but I also made some crucial mistakes along the way. So the person at Goldman who was literally waiting in line and couldn't get into our Alicia Keys party that we threw for the release of that issue, his name is Rich Wehner. And he was a vice president of Goldman at the time. And he ended up a few months later being introduced to me by a mutual partner so that we could create a bigger company, a real proper media company, and not just some independent media outfit that I was running from my Soho

office. And that led to an investment from a specific group within Goldman called the Urban Investment Group that was looking to support underrepresented founders. Moving on to the fund. So I looked you guys up in Cambridge, you're guys right now top 5% vintage in fund one. So phenomenal. Congratulations. Thank you. Let's take a step back and tell me a little bit about how you started Equity Alliance. When I think about that, because this was three years ago that we started Equity Alliance,

I really think about the fact that I'm really an accidental VC wanting to become a VC. I was never planning on becoming a VC. I got a VC. I was never planning on becoming a VC. I got a call. And the reason I want to maybe take it back 20 years is because, remember I was telling you about how I had a list of New York arbiters that I needed to connect with? Well, one of the people on that list was Dick Parsons. Former chairman of Citi, correct? Yeah, he was the former chairman of Citi. But before that, and at the time that I met him, he was the CEO and chairman of Time Warner, back when Time Warner was the world's largest media company. So I went to a conference where he was speaking, and there was a huge line, people wanted

to speak with him. And I knew that I probably only have maybe 30 seconds, maybe a minute to speak with him. And I immediately just said something that he remembered, because I said to him that, oh, my name is Claude. I run this media company, Trace, and we just got funded by Goldman Sachs. And you're going to have to get to know me because I'm the next Dick Parsons. And he laughed because, you know, the reason I wanted to connect with him is I had been reading so much about the fact that a guy from Brooklyn, black guy from Brooklyn, whose father had been an electrician. And he managed to rise to the very, very top of the American corporate world, running one and then eventually two Fortune 100 companies. I was like, I'd never met anybody like that. Nobody in Europe had ever achieved anything that even came close to what he achieved. So

we connected, we hit it off, and he started mentoring me. And I built a relationship with him over two decades. And then three years ago, he called me and he said, well, I read a statistic, white men get more than 90% of the funding in VC, and there's not enough diversity in VC. And I was talking to my friend, Kenny Lehrer. So one of his best friends, Kenny Lehrer is the Lehrer of Lehrer Hippo, one of the two Lehrers of Lehrer Hippo. It's one of New York's most active early stage VC funds, a very successful fund. So Dick and Kenny Lara were talking about

how this doesn't make any sense. And so Dick called me and said, well, you're going to have to build a fund. And that's how we started the Equity Alliance around this mission to help to democratize access to capital and provide more capital to women and people of color. You brought together some phenomenal other partners, founding LPs. Tell me about the roster that you put together for Equity Alliance.

Well, we brought together some big names, Scott Kaepnick. A lot of people don't know Scott Kaepnick, who's a very successful financier. Scott Kaepnick created HPS Partners, which is $110 billion credit firm. So he was one of the first investors. Before that, Dick's very close friend, Ron Lauder, who is one of the owners of the Estee Lauder cosmetics company, he came in and was an early investor. Kenny Lehrer, who I mentioned from Lehrer Hippo, he and his son and business partner, they came in. Mike Novogratz, he came in. Then his sister, Jacqueline Novogratz, who heads the Acumen Fund, she came in with her husband, Chris Anderson, who is the CEO of TED. We had people like that who were all really big leaders.

Ron Lauder's son-in-law, Eric Zinterhofer, he runs Searchlight, which is a very successful private equity firm. He also came in as an early investor. And so we were able to kind of assemble a bit of a who's who of leaders, mostly based in New York, who really liked the premise that we were kind of presenting to them, which was, again, around helping to foster economic mobility, but really democratizing access to capital. The Ford Foundation came in with a big anchor investment. Then the Schusterman family came in with a big anchor investment. And Bank of America came in with a big anchor investment. So it started feeling like we were off to a great start. We'll get right back to the interview.

But first, to stay up to date on all things emerging managers and limited partners, including the very latest data on venture returns and insights on how to raise capital from limited partners, subscribe to our free newsletter at 10xcapitalpodcast.com. That's www.10xcapitalpodcast.com. So you got this rockstar kind of team of financiers. You had the premise, which was solving the inequity. What did you then, what was your next step? How did you go about launching your fund? I was on my own. So I relied on Dick and two friends, actually. So I relied on Max Jan, who is the managing director of R&R Venture Partners, which is a venture capital firm that

Dick Parsons and Ron Lauder started together to make investments together. Max, I'd known since we were students at MIT together. So he's a really close friend. He was running his own VC firm, but he was literally helping me as an advisor to launch this fund. And also Julia Paliar, who at that time was working at Ron Lauder's family office and has now set up her own shop called Sage Collective. She also became an advisor. And I look at them almost as co-founders because they were really helping me to understand how the IC works, how to write an investment memo. I didn't know anything about this. And so they were schooling me. And then I also spent

quite a bit of time at Lara Hippo, working with Dan Rochkine at that team to understand how actually VC works on a day-to-day operational perspective. And we were also kind of incubated, is the word that I use, at HPS Partners. And it was almost as if these people gave me an MBA in fund management, an accelerated MBA in fund management for those first six months of the year 2021. I really had no idea how this worked because my only investment experience was making angel investments after I sold my company. But I guess I'm a quick study and it actually worked out for us because some of those early investments are paying off. One is a coincidence, two is a conspiracy. You seem to have this skill of being able to get

incredibly prolific and busy people to mentor you. What would you say, where does that skill come from? I feel like a lot of people can relate to my honesty and my ambition and my drive. And the fact that I'm very coachable, I don't think I know everything. I've made a lot of mistakes and I know that I have a lot to learn. It's almost like when I think about a conversation I had with Ron Lauder, who I've always had so many great conversations with, you know, he asked me once, why are you not rich? And I thought about that. I thought about that because I've done well, right? I've made a couple million dollars, but I'm not rich. And as somebody who was always ambitious and who always wanted to get to the top, but whose growth

was slightly stunted by some bad decisions that were very much linked to inexperience. What was your mental approach to kind of overcoming the early mistakes that you made? As an optimist, we looked at it as a glass half full as opposed to a glass half empty. So if I look at all the other native sons of Togo who were born in 1970s, very few were able to achieve what I did, right? Very few were able to go to MIT, teach at Harvard the way I do, get funding from Goldman Sachs, start a company, raise money, sell their company, and get to an exit, right? And so the thing is, I look at that as a glass half full. The other part is I would have made a lot more money had I been smarter about knowing

how the investment world actually works and how venture actually works. But the glass half full is knowing that I still have a lot to learn. And the only way that I can learn is by leaning on these mentors. And so to answer your previous question, I think a lot of people saw something in me that reminded them of themselves at a younger age. My early years were just about survival and understanding how New York worked. Once I figured out how it worked, it was about getting to the next level. And once I got to the next level as a venture-backed founder who was in the media law, who was being written about in the New York Times as the next big thing and all of that, how do you actually live up to that promise and get to the next level? And you can't actually do it unless you have people in your corner who really believe in you and who lift you up. I think that it takes a village. And I was really fortunate in my New York journey to meet people who lifted me up because I was a total outsider trying to understand how it worked.

So you've propelled yourself, but you've also sustained your relationship. So how do you leverage other people and other people's resources in a way that makes them feel good and that is sustainable over many decades? I think that I'm a great HR in the sense that I'm really good at spotting- PR or HR? I guess both, but let's start with HR. I mean, if I look at the kinds of artists that I helped discover when I was running Trace, whether it's Alicia Keys that I mentioned, or people like Rihanna, who became really big, and other people who really ended up shaping this culture that we're all living in now,

I could easily spot talent because that X factor is something that really is immediately identifiable for me. Now, in the world of business, I've also been able to spot really talented people in the media world. Like Shilman Nadi, who I brought from London to work with me at Trace, is now the head of British Vogue, having been the editor-in-chief of Vogue.com, working hand-in-hand with Anna Wintour. A lot of people who work with me at Trace have done really well in the media space. John Karamanicka is one of the star music writers at the New York Times. There's a bunch of people who've done really well. It's because I could really see early potential in them in the way that my mentors and supporters saw early potential in me. And so with the Equity Alliance, it's all about the people, right? We know that venture is all about how the partners work together and how the strategic

partners kind of lean in to help the fund outperform. And so six months into the early equity lines journey, I was introduced to Adam Kiki Charles by Jeff Buskang, who is a professor at Harvard Business School, who happens to be a successful- Flybridge. Yeah, Flybridge, exactly. And he introduced, I said, I need somebody. I can't, I'm on my own. It's so much kind of hard work. I'm working till two in the morning every day.

This is really too difficult. I shouldn't be I'm on my own. It's so much kind of hard work. I'm working till two in the morning every day. This is really too difficult. I shouldn't be doing this at my age. And he actually introduced me to Adam Kiki Charles, who was wrapping up his second year at MIT Sloan, finishing up his MBA. And I interviewed him along with Max Yan, my friend who runs R&R Ventures for Dick Parsons and Ron Lauder. Immediately within, I want to say two minutes, we knew that he was the one. And so I ended up hiring him as our senior associate to help me to build this fund. And the two of us were kind of this very small kind of duo for a while, raising fund one, making investments. And of course we could rely on our advisors. We could rely on our investors and a lot of the strategic partners who wanted us to win.

But it was so important to identify the right person as the first hire after me. Yeah, the first hire is existential. And he's now a partner in the fund. And then after that, we hired another partner who is now the chief investment officer, really kind of overseeing all our investments. Her name is Adrienne Reese, and she is the third partner. If we're looking at the three Musketeers, it's Adrienne, Adam, and I, and we have our specific lanes. We know what we're really good at, and we know what the areas of improvement are for us and for each one of us. And so I think that we finally have a team that can help to take the equity lines to the next level.

But in the early days, it was very lonely. It was very, very lonely and very, very difficult. We share a similar skill of being able to see the diamond in the rough. I think I was a first generation refugee. So we kind of see our own potential in others. Projecting positive traits onto people that may not deserve, for lack of a word, or may not grow into that positive projection. Do you also struggle with that, like overseeing potential in people? I do. And I've made a few mistakes, but I have to

say wisdom is kind of teaching me to make fewer and fewer mistakes because I've seen the entire cycle of people over-promising and under-delivering. And now I kind of put people in two different categories. There are people that the more you see them and the more time you spend with them, the more you want to be around them. And then there's a second category is the more you hang out with them and the more you see what they're really like, the less you want to be around them. And so I'm pretty good at knowing which category people fit in now, because New York is such a city of strivers, of people who are climbing and who are on the ladder. Everybody wants to do well. They talk

a big game and they don't deliver. And they try to pretend that there's something that really not. And they always try to paint a pretty picture. And this is something that has been really helpful in our evaluation of founders and fund managers for the fund. You know, there's so many fly-by-nights out there who pretend to be something they're not. Especially in bull markets. Especially in bull markets.

And who project this image of success. But once you actually speak to the people who work with them, you realize that they haven't been that successful, that they took credit for other people's work, that their resume really isn't what it is painted to be. And so in that respect, I think I've become a really good judge of character. When I started hanging out with a lot of famous and rich people, all these people kind of were just contacting me always in the same way. Hey, long time. How are you doing? I'm trying to get in touch with Spike Lee. Do you think you can make an intro? And these people, when I interacted with them before, they never delivered on anything they said they were going to deliver on. So of course,

I'm going to make the intro to Spike Lee, right? And so I think that it's really important to protect your relationships and to see those who are able to pass that litmus test of trust and authenticity. I have almost an unbreakable rule where the two people that always connect with each other, first of all, have to be double opt-in, have to be accretive to both sides. I learned that the hard way because, you know, because I was in the creative industries, I didn't realize that tech people operate in a really different way. Like the double opt-in is something I learned from tech people, actually. A lot of people in the creative industries don't do that. They just make intros and expect that it works out.

And often it doesn't. So you're starting this fund. You now have these three partners. You have this phenomenal LP base. How did you go about coming up with your strategy? A lot of that was really empirical. And it was some of the early discussions that we had with Dick Parsons, with some of our early investors, with Maxion and Julia Pagliar. I mean, that early team helped us to identify a strategy around who are going to be the

best emerging managers and how can we build a platform that is going to be an enabler and an accelerator for the best emerging managers. So you invested in Serena Ventures, Serena Williams. So tell me about that. That came about via an introduction that was made by one of our investment committee members, Heidi Messer. She is a dear friend. She's somebody that I admire so much.

She is a successful serial entrepreneur. She's out in the Bay Area now, but she's really a New Yorker. Her brother, Steven Messer, had created a company called Linkshare that they sold to Rakuten for $425 million. And they just have this history of success. And they always give me great advice. So anyway, Heidi introduced us to Serena because Heidi knows everyone.

And Heidi is one of those people who are very good at double opt-ins. And she said, you should talk to Serena. The fund is doing really well based on some of the early investments. And we believe that it's going to be a winner. And so Heidi introduced us and we got to know Serena and her co-founder. And it just that it's going to be a winner. And so Heidi introduced us and we got

to know Serena and her co-founder. And it just felt that, again, despite Serena's fame, despite her status as somebody who's a true winner, proven winner, she still had that humility and that drive that kind of confirmed that she still had something to prove. And it felt like VC was the next frontier for her. And once we got comfortable with the fact that she was going to focus on Serena Ventures and that it wasn't just one of her many side hustles, we got to know the team really well. And we were comfortable making a $1 million investment in that fund. And what was really funny about that fund one that they closed was that they could have raised a lot more money, but Serena ended up closing at $111 million.

And I couldn't understand that number. Why $111 million for that fund one? And Serena later explained to a bunch of us who were at a conference with her that she only likes number one. How did you go about the diligence process from first meeting to check? First step was really the sourcing and the screening. At this point, I've spoken with over 350 fund managers in the last three years. Literally anybody who I have fund, who was a woman or a person of color, who was an emerging fund manager in the VC world, I spoke with on Zoom. Literally anybody who contacted us, you didn't have to be connected to

Dick Parsons or Scott Kaepnick or Ron Lauder or Mike Novogratz or anyone. You would be able to get on a Zoom with me and then with me and Adam or Adam, and we heard everyone out. And so because we have such sophisticated network, I'm not going to be modest about it. We have a sophisticated network that was built upon years of success across various industries. We had so much inbound. And so once we evaluated them and kind of cherry picked a few contenders, we started our initial diligence, which was, again, do they align with the Equity Alliance investment thesis? And once we were comfortable that they did, we produced a brief investment recommendation. And then we got into

detailed due diligence. Are these people for real? What is everyone saying about them, people who've worked with them? What have they learned from their mistakes, from their failures? Are they honest about not repeating those mistakes? Once we do that, we produce the detailed memo, and then we have the best IC ever. And then we take it to the IC and we've approved, I want to say more than 90% of the people who've come and presented in front of our IC. So we're really happy with that. Majority, unanimous? It's unanimous, yeah. And so there's six members in the IC, and it has to be unanimous. And so we argue it out. There's been disagreements, we argue it out. And we always have the same format

for every IC meeting. Heidi Messer always speaks first. And then we have an IC member who's also an investor. His name is Will Mesdag. Will Mesdag was a partner at Goldman Sachs for 23 years, very, very successful financier who really cares about this space. And he's one of those people who asked a lot of the tough questions. Because in the early days, I felt like I was asking too many softball questions. And Will, you know, everybody is in the good cop, bad cop role, but it works really well because we end up having a really interesting and honest exchange. I think a lot of people look at their IC as this annoying impediments to getting things done. And other more humble people see it as a true thought partner and gathering feedback and learn. Seems like you fall into the latter camp. Absolutely. And we're proud to fall into

that camp because again, we have so many different skill sets in the IC actual debate, as opposed to kind of rubber stamping it just because this person came highly recommended by somebody that we know and respect. Absolutely. Well, you've taken us through your own mentorship journey, whether from MIT and New York City and Trace Magazine, and of course, Equity Alliance. You live a fascinating life. I really appreciate you jumping on the podcast and sharing your story. What would you like our listeners to know about you? David, I really have enjoyed this podcast. I want to say that a takeaway for the listeners could be, I'm that guy who, again, came to the United States with my own American dream.

But I've always been consistent in promoting people of color. And I've done it across media. Now I'm doing it in venture capital. I've always been on the same mission. And I didn't just jump on the bandwagon because I realized that I was quote unquote woke. I've spent my entire adult life doing this. And I'm really happy that I've never strayed from that mission. Absolutely. Your work speaks for itself. Well, Claude, thanks again for jumping on the podcast and look forward to hanging out. We will.

It's been really fun for me, David. Thank you so much. Thanks, Claude. Thanks for listening to the audio version of this podcast. Come on over to 10xCabal Podcasts on YouTube by typing in 10xCabal Podcasts into youtube.com and clicking the subscribe button. On the YouTube version of this podcast, you could see the graphs, visuals, and key takeaways that accompany every episode.