How I Invest with David Weisburd - E59: How Jordan Nel Spots Winning Venture Funds

Episode Date: April 16, 2024

Jordan Nel sits down with David Weisburd to discuss how to spot winning venture funds. In addition, they discuss portfolio construction and concentration, the scalability of venture funds and difficult conversations with GPs.

What I didn't appreciate at the time was a lot of the learnings from investment banking, and I've worked with a lot of former investment bankers, is the ability to eat crap, eat sh** for many, many, many months. And it's actually a skill that's incredibly useful in other parts of your life. I had to go through that same transformation by running my startup. But if I'm completely honest, investment bankers work significantly harder than startup entrepreneurs. If you have 100% foresight that the next Google is in your portfolio, you put 100% of your fund into that one company, then you should take that as a kind of heuristic degree to which you have edge is the degree to which you should concentrate.

In practice, I think we try to think about it at a portfolio and risk level, like we're buying into companies the same as the GP. One of the things we push our GPs on is how you price these companies as a function of the risk that you're taking. So if you're moving further off the risk curve, you should be compensated by lower prices. For more ideas on how to raise venture capital in this market, make sure to subscribe below. Well, Jordan, I've been waiting for this interview for a few months, ever since Dave Wilkins made an introduction.

And I'm looking forward, I think this is going to be quite an interesting and controversial interview. So I'm looking forward to that. And welcome to the 10X Capital Podcast. Thanks, man. Thanks for having me. So, Jordan, you run one of the most interesting fund of funds in venture. Tell me about the genesis of the fund and your strategy today. So it started as a spinoff of Hummingbird Ventures.

Hummingbird is one of the more under-the-radar funds, and this has done quite well. The thinking behind Nomads was kind of 2020, we had a couple of exits and we had some money and we thought to ourselves, hey, no LPs had reached out to us along the way. And we've got a lot of critique on the global generalist strategy and we'd had great returns. And so we thought there's probably alpha being an LP. If folks had missed Hummingbird, they could probably have missed other small funds. And so we started Nomad, which is a fund of funds mostly to back smaller investors, folks kind of leading in pricing rounds, earliest stages, and generally to try and be a material partner to these folks. We want to

have very few restrictions, really bottoms up, but then find people who are moving on some kind of judgment edge, like I think we were hoping to be doing, rather than some kind of unique insights. I mean, rather than some kind of sourcing or winning advantage. You said judgment asymmetry. What are some examples of judgment asymmetry? Yeah, I think generally you're looking for people who are either early to new domains. They have some kind of insight into a domain that's not yet consensus. This can be a structural domain, like an emerging market, emerging tech, or it can be something that's a little bit more philosophical. One of the things we've done at Hummingbird was have a very particular

founder profile. And this was kind of the opposite of what a consensus good founder is. If a consensus good founder is really Stanford stanford mba mckinsey then we wanted some guy who is a shepherd from the backwaters of turkey who taught himself to code and had you know mother father issues so something like this this kind of thing that we think is signal to us that's maybe noise to other people and i think that that like philosophical approach whether it's market-based or founder based or whatever that's kind of what we're looking for in the GPs. We spoke a couple of months ago and you said, yeah, you were talking about your founder thesis. You said somebody that references really badly, mother-father issues, quite

aggressive. A lot of GPs won't back in certain opportunities. You see that as a signal. Let's unpack that. So why is a good founder going to reference badly? To be honest, just on the founder profile, I think this is a little bit of a red cream's waste, Grace. Like as you want to, you kind of come up with something that you think is going to be alpha. That does get arbitraged away quite quickly.

So even for us, like the founder profile, it's the core of the DNA, but we do spend a lot of time now trying to build up market pieces and trying to move on to other sources of alpha. And I think that avoiding that kind of commoditization of whatever your judgment age is, is quite important for GPs. As LPs, we're not necessarily looking for GPs who have the same founder lens as us. We're just kind of looking for fortuitousness in general. With that caveat,

I think for what is a good founder reference strategy, it's not always, you know, like sometimes they do, but what you're looking for is more someone that's a bit non-linear and kind of very comfortable taking an inherently contrarian position this is one of the dnas that we kind of see most successful founders have if you're someone that kind of moves from successful thing to successful thing building optionality and being really nice to people it's unlikely that you're going to have the cuts but that's needed to kind of build a company a really outlier company there's unlikely that you're going to have the cuts, but that's needed to kind of build a company, a really outlier company. There's a famous book, The Courage to be Disliked, somebody that's open to being disliked. Yeah, yeah, for sure.

And you mentioned mother-father issues. I kind of thought, I've been thinking about that for the last couple of weeks. And obviously, Elon doesn't talk to his father. Steve Jobs didn't have a real relationship with his father. What is the rationale for why mother-father issues could lead to a asymmetric return for a founder? It's more of a proxy for somebody that is, you've got to have a chip on your shoulder. This chip on the shoulder lends itself to urgency, lends itself to some kind of desire to prove somebody else wrong. This doesn't have to be mother-father issues. It's just very often not the case that the great founders come from this really nice, loving family. This is, again, really not something that

I think we can make as a blanket statement. It's just one heuristic. I think generally, GPs want to kind of curate a bunch of these heuristics that they lean on, just to kind of screen people out. A bit contrarian on my end, I believe that there's aspects of being a founder that is a sprint and not a marathon. And if you look at how Elon Musk manages his companies and other great managers, they always have this incredible sense of urgency. So it's a manager and entrepreneur that's able to get the very most out of every single employee. And even when those employees don't appreciate that at the time, looking back, they see that in their career, they see the growth that comes out of that. Similarly to investment banking, doing investment banking for the first

couple of years of a career. Interesting. I'm not convinced on the IB. I understand why you say that. I just think that I couldn't imagine Elon doing IB for many years. Let's talk about that. So I was in the same camp. I did three months. It's the only job I've ever had. I did three months at Jefferies and I decided that that wasn't for me. And the reason for that is I was in the same camp. I did three months. It's the only job I've ever had. I did three months at Jefferies and I decided that that wasn't for me. And the reason for that is I was not learning enough. I felt like I was kind of a cog in the wheel, just doing repetitive things.

What I didn't appreciate at the time was a lot of the learnings from investment banking is the ability to kind of eat crap, eat for many, many, many months. And it's actually a skill that's incredibly useful in other parts of your life. I had to go through that same transformation by running my startup. But if I'm completely honest, investment bankers work significantly harder than startup entrepreneurs. I don't think that just putting up with tough times is necessarily as high signal as really urgently executing on a particular thing that you hold dear.

I think that it's the urgency that we want to prioritize, not the just putting up with tough times. That's a byproduct, I guess. And so that's why I think if Elon was the type of guy to go through IB for many years, I would be very curious why he did it. If he's got this idea, why doesn't he execute on that? Let's move on to portfolio construction. I think you have one of the most contrarian views on portfolio constructions. How do you construct your portfolio? Yeah, we're generally quite concentrated. But I think if you think about it as a look-through level, it's more about indirect ownership in companies. We want to focus on this more than

concentration or fund size or whatever you mostly hear. I think there's more factors that go into indirect ownership. There's valuation, pricing discipline. Are you getting a risk premium for whatever frontier you're investing in? GP fund size, our percentage of the funds. There's a bunch of stuff that you have to think about a little bit more than just concentration. Even if you think about a biotech firm, it's not uncommon for somebody to take 40% of the firm.

So the risk tolerance that you have, I mean, 40 of the firm. So the risk tolerance that you have, I mean, 40% of our company, the risk tolerance that you have to have at a look-through basis is more what we're trying to understand. This generally leads us towards being quite concentrated just because like from a selectivity perspective, it's hard to find that many great, great funds.

I think that the levers are more your own check size and then your selectivity. And to what degree do you want to maintain the threshold and then how much can you deploy into that threshold and then that's kind of the balance that you have i don't really think you have control over well exactly like as a fund of funds you don't have exact control over concentration or diversification you say you have high concentration what is your highest amount uh in a fund what's the largest position that you have in a fund what percentage of of that fund? I mean, there's one we're doing at the moment where I think we'll probably net out to be

45, 40% of the fund. This is, again, something that we look at doing, but it's not something we mandate. Very comfortable with anything more or anything less. How would you like your funds to be invested? Do you want them to be highly concentrated? Do you want them to be diversified? Do you not care? Yeah, I think this is a cool question. I think we chatted last time about this. If you have 100% foresight that the next Google is in your portfolio, you put 100% of your fund into that one company, then you should take that as a kind of heuristic. The degree to which you have edge is the degree to which you should concentrate. In practice, I think we try to think about it at a portfolio and risk level. We're buying into companies the same as the GP. We're just

buying them wholesale and in kind of three to five years since as the GPs deploy. One of the things we push our GPs on is how you price these companies as a function of the risk that you're taking. So if you're moving further out in the risk curve, you should be compensated by lower prices. If you're getting the same ownership, then you can also decrease the risk in the portfolio by taking more bets. This is just basic portfolio math, but I think this is also still more practically a function of your selectivity. Like unless you've got, say, founders fund, top of funnel, you probably don't see enough deals to be doing like six, seven deals per quarter. And then still claim that you're doing top 0.1% of deals that you're seeing. So I think for us, it's more bottoms up than a top down exercise of, hey, this is how concentrated or diversified you're seeing. So I think for us, it's more bottoms up than a top-down exercise of,

hey, this is how concentrated or diversified you should be. Even if you saw all of the top deals in the world, you only have the edge to be able to correctly price and get into some of them. And I think that there's that kind of more self-inward component as well. Like it's a relative question for you. It's not just the case in your top funnel.

It's also like, what are you benchmarking on? How did you get your conviction? What is the asymmetry that you have as an individual that gives you insight into these companies? And I think I just kind of caveat that because if you don't think of it like that, then you're probably more likely to think like, okay, maybe I see something that everybody else says is top 1%. So I'm going to do it because I have this, I can trust them. And that is a lot of how venture works. But in reality, you have to have some kind of individual asymmetry that you've brought to the deal. 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. Deal is the all-in-one HR and payroll platform built for global work.

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I think one of the things we believe is venture doesn't really scale, neither on the fund map. I mean, just at one level, the fund map is a lot more tricky to make work when it's a large fund but on another level i think as you start to bring in new partners you kind of it becomes a combination function of how many people have to make a decision and how many good decisions have to be made it's hard to scale into new strategies it's hard to scale into an area where you previously you're not as naturally familiar with it and i think when you start to bring in juniors to the fund, the incentives get a little bit twisted. And the way that you think through this incentive management,

like this is all of the stuff that comes with scaling a fund. This is not the obvious stuff that people talk about when they say funds don't scale, but like this is kind of why we say venture funds don't scale. So I think this is why smaller funds generally are performing. So when you have Andreessen Horowitz, $300 million fund, it's maybe Mark Andreessen, Ben Horowitz making every decision. The argument is that they're better decision makers. And then when they start to bring in partners in order to scale AUM, those partners are not going to be as good decision makers.

Is that a fair way to characterize what you're saying? Also, the age that they were executing on previously would probably change, like the circumstances into which they're deploying, the way that they, like what Mark and Ben would have done before, leading them to that $300 million point. Like that's one thing. And then now they're executing an entirely different strategy and they're managing different people. It's not just an internal team working thing. It's also like an outside of their own sphere of control thing. You know, they're now deploying to a very different environment. That's changed.

Markets change. Like founders change. The network of these other GPs that they join changes the way that Ben and Mark think about their own opportunity set. I think all of these things start to kind of add up together. I think another thing that's really underappreciated is as your fund gets larger,

your check size get larger and that doesn't proportionally scale because now you're, now you have to have sharper elbows. Now, if you're doing series A, you're directly competing against Sequoia, Andreessen and Benchmark and Founders Fund for the series A, which is exceptionally hard versus if when you're doing seed, you're able to be collaborative and you're not directly competing with that. If you think about venture, the earliest, the earliest stages are the ones with the most asymmetry, not just in pricing like also in information it's just there's not

as much discovery that happens over there so the later you move like you said both competition comes in but you get better up the market becomes more efficient and even if you did have the access it's probably priced in a way that's like there's not as much kind of alpha per se there's also an element of like is this is this a stage at which you have edge? Because are you a founder type of person or are you a market type of person? If you are a market type of person, maybe you are suited to like taking these really kind of series A bets that everybody else misses. Like this is something that can be compelling because you can have an underwriting mechanism that maybe the rest of the market misses. If you're a founder type of person,

it's a little bit more naturally intuitive to go early because what you're underwriting there is a lot more of the people. And I think that you can probably get more edge there. Let's talk about your edge. You have a different strategy. So you inherently have a different LP base and different LP demands. What do LPs look at Nomads to do?

Most of the time, we are our first LP's exposure to venture. Our LP's first exposure to venture. They want an understanding of venture. They're not super familiar with the market. It's something that they are wanting to learn about. And so they come to the market and say, hey, maybe I'll partner with a fund of funds to try and understand this a little bit. That's one LP base. It wants to get into venture, but it has to scale up their strategy a bit. Maybe it doesn't have the internal resources to do that. I think another base for us is probably more just folk who are needing to deploy large tickets and are looking for high returns and are comfortable with the

strategy. I think that this type of approach is mostly family offices, multi-family offices, sometimes single family offices, folk who are more interested in a de-risk, not single investment for venture, but something that they think can still return ventures. And what is your target portfolio? Number of funds, number of co-invest? It's more bottoms up, but generally it's between 8 and 12 investors per fund. So we don't really think that we can make at the moment too many more decisions than that.

It's a factor of bandwidth, more than it's a factor of bandwidth and kind of top of funnel. Finding them and partnering with them really early on, we can only really do about this many. I think every vintage there are new GPs being vented. And so we want to really push on ourselves to find these folks. Roughly works out to 8 to 10, 8 to 12 investors per fund. And we reserve a little bit of a fund for co-invests. This is a soft number. It's not something that we kind of anchor on per fund. We do a lot of SPVs that we'll syndicate via our LPs to do co-investments with.

The thinking for our fund in terms of vintage diversification, we're very comfortable having multiple vintages within the same fund. There is a JCO that you have to be aware of where it's kind of your deployment and the GP's deployment, and that's just something we have to fight about all these. But we'll have a range of vintages within a single fund.

How do you make sure you're not adversely selected in your co-invest? This is probably one of the most important questions. I think you have to trust your own edge in the company. And part of that is relying on the GP and believing in the GP's edge so that you believe that, hey, it's a really great company

with a great opportunity. And then you kind of also have to think to yourself, why am I seeing this? That helps if it's not, if it's still quite early. The earlier it is, the less discovery there is and kind of it's not that up.

So partly on the pricing side, but also partly just for ourselves gives the conviction. So a lot of what we do is when we invest in the GP, we'll spend a lot of time with their founders, really try to get to know their portfolio well in advance of any kind of subsequent raises, and try to also benchmark their portfolio to other portfolios that we've seen, so that when we do see something in their portfolio that we think, hey,

this is genuinely quite exceptional, we can also kind of have that conversation with the GP as they're thinking through it as well. How comfortable are you with having a zero on a co-invest? I think a lot of LPs want alpha, but they also are unwilling to have zero, which I think in VC is a mismatch in strategy. That's a good question. Super tough. I think it's probably something we haven't had yet. We have to make peace that it will happen. I want to do my best to make sure that it doesn't. And I think the same as any GP, I think you have to be willing to take this because it's a power law game. You just have to be really savvy about what risks you're taking. I asked you about LP value add, and you said most LPs do not provide that much value add,

and that LPACs are detractive. Talk to me about how you provide value add as an LP. I feel like I'm going to be on a broken record with this. It's quite an arc. I think we want to not impose. That's the number one thing. Mostly, it's just like you said, just don't detract value. We do want to be thoughtful. And I think a lot of that thoughtfulness comes in having global benchmarks for A, what great GPs look like, and B, what their portfolios look like.

So when we're having discussions with GPs, we want to be able to ask really nuanced, granular questions, not just the kind of really high-level stuff. And also I think you want to be able to ask questions that are going to force kind of comparative thought from the GP so that they have to benchmark themselves to these other GPs that you see. That internally changes the way that someone starts to look at themselves, but it also forces them to think, like, do I have alpha relative to these other people

that seem like they have alpha? One more thing I'll just caveat on the kind of LP value add. I think you need to be smart capital for fast co-investments. So in terms of LP value add and being a sounding board for GPs, tell me about some of the hardest conversations that you've had with GPs

where you thought you were a great thought partner. I think you'd have to ask me. Most of the hardest conversations that you've had with GPs where you thought you were a great thought partner. I think you'd have to ask. Most of the tough conversations are in GPs who we really like, but for whatever reason can't get to a conviction on. And so you have to deliver a pass. And we want to kind of do that as genuinely and as kind of frankly as we can. This is if we get to a later stage and we've really spent a lot of time with the folk and then we do pass on their fund or a fund that has come to re-up and we've decided not to re-up. These are the real tough conversations. And generally, we want to try and be quite tangible in our feedback.

If there's a blunt reason, we want to say it. We don't want to kind of make something else up. And so generally, these revolve around GPs drifting strategies a little bit or they revolve around benchmarks. If it's a strategy drift, just framing it like this and saying, hey, look, these are the data points that we have seen. Please help us find some more. And then in that kind of helpful process, if we don't come to the conviction, we do kind of say that. In the instances of it being a benchmark thing, I think we want to try and be like, both protect the anonymity of a GP that we're currently discussing other things with,

but also just say to them, like, look, we're seeing this elsewhere. And I think that it doesn't make sense. It doesn't make sense for us to go with you when this is the relative discussion. What do you mean by the benchmark thing? If you're seeing a deal and you're doing like a 40 million deal in Africa, pre-seed, 40 million post-sales, it's really hard to get an emerging market premium when you're doing something like that. And you, in a vacuum, might not see that. I'm being a little bit hyperbolic, but you can kind of extrapolate backwards. You can see the same thing into other emerging markets.

And so you can, like, on a relative basis, benchmark a bunch of different geographies. This is limited when you kind of go to develop markets, but it works quite well for emerging markets. And you can kind of see a little bit of a bottleneck around particular GPs when you spend time there or not. And very often, most instances, it's like, hey man, I don't think there's a bottleneck around the deals that you're doing. You are coming in and like, these are the same deals that most of the tier one guys are doing.

I know a bunch of growth as it's passing this up. And then you can really push the envelope on what is the judgment edge. And so that's kind of a benchmarking question. We'll get right back to 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. And how do you interact in the LP ecosystem? Are you introducing LPs to your GPs? And how do you interact with others, kind of frenemies of sorts? Yeah, I mean, it's super collaborative. We actually do it all the time. We just, just this literally earlier this month, we introduced a GP of ours to an LP of ours who he then LP invest in the GP and closed out their fund. There is a dynamic where we want to make sure that as the one who knows the GP best, we do get the allocation that we want. That's also only fair to the rest of our LPs. And so we can't over prioritize any single one. To the degree that we can do that, we're then happy to make the introductions. Beyond that, then you start to speak to other LPs. And even in that, it's kind

of like venture. Most of the time, every other LP that you speak to has seen a lot of the other funds that you've spoken to, or if they haven't, then you just connect them. It's no skin off your back. Are you ever explicitly getting pro rata in your funds? So let's say you invested 10 million out of a $40 million fund. You say, I want 25% of the next fund. Are you ever explicitly getting this or is it more of an implicit option? We haven't ever explicitly put that in an LPA. I don't know if we would. I think that it would be a discussion we would want to have with the GP. I think to date, we've been happy to move on handshake agreements. It's kind of like, hey, we want to do this.

We want to be large partners. If you take our money, we want you to know that we want to be large partners. And so we're going to do what we can to build the asymmetry such that we even preempt your next fund. That's kind of the, I guess you can call it an implicit handshake. It's kind of like we're very upfront about that in the beginning. And then we trust that going forward, it's good faith. So let's circle back on your follow-on strategy.

You said that if you have a Google in your portfolio, you should put, and you have 100% conviction that it's going to be the next Google, you should put 100% of your money in that. That intuitively makes sense. But let's take a more realistic assumption that you have a 20 or 25 conviction that the company will be the next google how much do you put in that follow-on investment yeah i love this question uh i think if i if i gave a very kind of prescriptive answer to that i would be exactly the type of healthy that i would want to avoid having i don't i don't think but what are some ways to think about it yeah what are some

ways to think about it i'm going to think about this i i don't think you can put an x percent certainty number it's always a relative question like we said earlier what other opportunities are you benchmarking to how do you get to the conviction that you have these are very key questions that you have to answer and i think one of the framings that we like to use is we're looking for gps who in building that that conviction, rely on judgment, not diligence. It's not necessarily super obvious, but good diligence would lead to outlier investments if the whole world was this very open book and everybody could understand everything and it was just a case of doing more work. I don't think that is how the world is. And so diligence under uncertainty becomes table stakes, but it's not enough. You have to have

these original theories. You follow your nose to places that other people's not enough. You have to have these original theories. You have to follow your nose to places that other people don't look. You have to know what risks you're taking, how to avoid bottom scraping and taking other people's trash. If you follow these kind of heuristics, you do end up in interesting places. I contrast this with judgment because of the uncertainty. And I think this kind of concentration and the way that you think about pricing it is kind of flip sides of the same coin. You've got to think of concentration and the way that you think about pricing it is kind of flip sides of the same coin. You've got to think of it at a portfolio level. Does this risk add or subtract to your overall portfolio? And you differentiate judgment from diligence.

Explain the difference between judgment and diligence. Yeah, I think diligence is doing the reference calls, trying to understand. It's all of the stuff that goes into what you normally think of when you think of good diligence. Judgment, judgment i think is like it's got to be something that's a little bit unique to you if uh by analog if every basketball player in the world is training and eating healthy and sleeping well and going to gym and all of that blah blah blah all that stuff that all the good basketball players should do then the one that is uh experimenting with supplements back in like the early 80s and is like trying to think about the shoes that he's wearing, like these really fringe things that someone is doing to try and gain an edge. This, I think, starts to inform judgment.

In many ways, like alpha is for looking an edge and judgment is more like a checklist strategy. I think in general, like a checklist strategy is a pretty shoddy way to do ventures. It's an outlier business. And naturally, you can't try and index what worked before because it's naturally going to be end of one. This is always what an outlier definitionally means. It's kind of hard because the outliers that come up are combinations of a wide variety of factors. It's a very specific blend of people and markets and pricing and founders. And the way we try to think about avoiding checklists is we want to see thoughtfulness. And I think a checklist is like a

masquerade of thoughtfulness. I want to see how the GP arrived at the unique insight that led to them doubling down that one company that ended up becoming great. Like that, the how is almost more important than in predicting the future success than the fact that they did. What is the largest check that a GP should put into a company? What should be the limit? And should there be exceptions to limits? I think you should always frame every company as an exception to the limit. I think it's very rare that you should try and frame things in the sense of like,

is this a limit? If you're doing something and it's something that you have, it's all the same. It's the thing you've done before. And it can fit into the nice systematic process that you've got. I would question whether it's really something that's going to be an outlier. I like your framework. If you know something's going to be 100% chance to be the next Google, you should put in 100% of your money. I think that becomes problematic with institutional LPs. So then there's more of a practical limit of let's call it 20% at the high end, maybe 25%. But you only really could do that once in a fund

and you have to make sure that you're sufficiently diversified as well. One of the problems of being a GP and seeking alpha is that performance is a lagging indicator of high conviction bets. So you could be technically correct and still be penalized by the market for being over-concentrated and being quote-unquote off thesis. So I think GPs need to balance the search for alpha

with the optics of their portfolio. If you are targeting a particular LP base, yes. And most GPs do eventually. I think this is also one of the, like if you speak to what is our judgment arbitrage, it's this. It's like, I think we're comfortable having a certain view on the world that is going to fit certain GPs for a very certain time in their lives. It's hard for this to fit a GP in his fund six who has all of the endowments as LPs. And like, it's really hard for us to underwrite something like that, because I don't know if it's our game.

We would look at it, but it's not like exactly for the reasons that you just are fine. Like, I don't know if it would be something that's in our sweet spot. And you mentioned you like when your GPs preempt rounds, call it C plus, series A plus. It's a bit of a contrarian view. Tell me about that. Yeah, I think the preempting of rounds, if you have the insider view and you can see things that the market can't, I don't understand why you wouldn't do it. I understand why sometimes you're very uncertain. You want the market to

price it so you can see how your progress has looked. That re-up sometimes looks good. I don't always know if this is... I think this is really helpful if you want to risk mitigate and raise your next fund. I don't always know if it's the best approach if you want to really outperform. For instance, there's a couple of GPs who we have in the portfolio. They had really tiny funds, sub $30 million. And both of them in different parts of the world were... Or from the back of these funds, they were raising hundreds of millions in SPVs. And they would just preempt every single round from pre-seed to seed to A to B and C. And then kind of you have this $30 million fund,

a GP that becomes the largest shareholder in a unicorn company that is like now Series C. I think that that is genuinely a pretty unusual thing for a GP to do. And I think that that approach results in pretty good returns across a range of strategies. So if you ask why, it's got to be the inside of you. It's got to be some kind of edge that you have that you think isn't priced in yet. If an insider is investing, they're investing

for two extreme reasons. One is to save their investment, which is adverse action. One is to double down on an asymmetric edge. Yeah. And I think that this comes back to a little bit we mentioned earlier, like bottom scraping. I think you've got to be hyper aware of what the benchmarks are. Like you've got to be hyper aware you're not just saving your investments, not just trash,

it's just like something that would otherwise die and has no potential. It's very true. Great companies have like near brushes with death. It's really hard as an investor to determine like, is this a a brush with death that if i survive this thing will become great versus um is this genuinely a really bad company that other people are going to pass on and will never raise the future around i think that that

that the degree to which you can answer that question relies on the insight that you had as an individual and this is your unique insight this is also one of the reasons why we come back to judgment so often it's because you have to have that like how much of a signal is portfolio concentration as a form of co-invest so if somebody's putting in 15 of their fund into an investment how much of a signal is that to you as an lp for co-invest that's a very strong signal yeah 100 i think that or if they're raising the spd to lead the round um if they're raising the spd for follow-on and it's like, they just, they maybe have taps out of their own follow-on

and so they want to pass it to the LPs and then give the LPs discretion. That's their signal to contrast it to your example. But yeah, otherwise, 100% think you're right. Well, Jordan, this has been really fun, very tactical. I love these conversations. What would you like our audience to know about you and about Nomads and anything else that you'd like to shine a light on? We are actively looking for funds to invest in.

We are actively looking in all markets, pretty much anywhere. If you think that this conversation has resonated, I would ask that you just ping me, jordan at hummingbird.bc, and we can have a chat. Excellent. Well, thank you, Jordan. I appreciate the conversation. I look forward to sitting down in person as well. Cool. David, thanks, man. Appreciate the time. Thanks for listening to the audio version of this podcast. Come on over to 10xCabot Podcast on YouTube by typing in 10xCabot Podcast 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.