How I Invest with David Weisburd - E71: Interview with RAISE Global Summit & Akkadian Founder Ben Black

Episode Date: June 11, 2024

Ben Black, Co-Founder of Akkadian Ventures, sits down with David Weisburd to discuss the RAISE Global Summit, the largest LP/GP conference. This is a masterclass on how venture capital GPs can raise venture capital funds and develop long-term relationships with LPs. David and Ben also delve into what differentiates the top venture funds, the importance of operational excellence in fund entrepreneurship, and prioritizing and managing relationships.

I was talking to a senior person at one of the big fund funds, like the $10 billion kind of fund funds. They said among their managers that next year, the re-ups will be 5x this year. One of the real skills that we've developed as a secondary firm is the ability to underwrite companies before we meet the CEO. When you're a secondary buyer, the company does not care about these deals getting done. Typically, they're not going to be like, here's my 10 customers. You want to talk to customers? You got to find customers yourself. The last decade was like the golden age of venture. Like it was incredible.

We're the bell at the ball. We're the best asset class going. And I think it's gotten really hard again. And you're going to have to have people that really love it. Ben, this is a long time coming. I'm excited to chat. Welcome to the 10X Capital Podcast. Oh, it's great to be here.

Thanks for having me. Appreciate it. Most people know, but not everybody knows that you run one of the largest LPGP conferences, actually the largest LPGP conference in the world. Tell me about the RACE conference. Happy to. Ironically, people know me more than that for my day job running Acadian Ventures. Not what I intended, for sure.

People know me more for my podcast, so I know how it feels. It's good. It's good to be known for something, right? So about 10 years ago, I started a conference called Raise. And originally, it was intended to be a conference for fund entrepreneurs. Like all about how do you, like I got to the best fund entrepreneurs, like Kate Mitchell from Scale and Phil Black from True Ventures. We all got together talking about how do you start a fund and go from nothing to institutional capital. But I quickly discovered that what people really cared about, what VCs really cared about was just raising money.

And so quickly, the conference morphed into a GP LP event where the GPs get to come. It's invite only. A very select group of GPs get there. And we get 20 to 30 GPs on the stage every year in front of, gosh, over 300 LPs. And then another 70 GPs get to participate in other secondary areas. And really, it's just about, man, I want to create the best place for GPs and LPs to get to know each other in an authentic, real way.

And so now we've been doing it for, this is going to be our ninth year this year in the Presidio on October 24th. Applications for GPs open in June. And so be able to look out and you can just go to Raise Global, just Google Raise Global Summit, and you can just go sign up

to make sure you get invited to apply for the conference. How much have GPs raised that conference? It's a little hard to know exactly because two things. One is GPs do not like responding to surveys. Like they just don't like it. You know what I mean?

So we get like- It doesn't lead to money. They're not gonna- Yeah, I know. It's like, so we get pretty low. So wePs do not like responding to surveys. Like they just don't like it. You know what I mean? So we get like, it doesn't, it doesn't lead to money. They're not going to, I know it's like, so we get pretty low. So we always do these follow-up surveys, constantly searching for, uh, for, for LP commitments last year, the LPs are better at actually saying what they did. So last year, the LPs that attended had made in total 180 commitments to raise managers, um, in, in the previous years. So it's kind of aggregated up. And I hear fundraising, as you know, is a very, very long term game, right? Like you may meet somebody in 2018 at

Raise and not actually raise money from them until 2022 or 2023. So it's hard to know, but we know what happens. We don't have a good scale. Last year, of the 100 funds that attended, they had raised about $8.3 billion of capital in their existence, and they were in markets to raise about 5 billion more last year. That gives you a sense of scale of the funds.

But the important thing is it definitely works. I get messages all the time from people saying, "'Oh my gosh, Ben, I met my anchor GP in Fund 2 at Raise "'when I was just doing my fund one four years ago. Because this is where relationships start. This is the goal. We want to start GP and LP relationships, and we want to build those relationships between early emerging managers and LPs early, as early as possible, so that everyone can find the relationships that they want to build. I want to double click on that for a few reasons i think a lot of people look at fundraising as episodic versus continual you know you have fun one fun too so you have

these kind of natural episodes but there's a couple things there that are important for gps to understand and most lps intuitively understand this one is you have to start the clock on the relationship just like vcs look for the slope not just a point in time. LPs also look for that. They're looking for, is that GP doing what they said they were going to do? How are they evolved? Are they learning? Are they, yeah, they might be making mistakes. Are they improving that? The second aspect is I think GPs and LPs are both deciding whether they want to get in a relationship. It really is a two-sided relationship. To use romantic relationships, you could have a toxic GP, you could have a toxic LP.

So you want to also be vetting your LPs as well, make sure that they're the right partners, make sure they have the right values, make sure they understand the asset class. But you've seen hundreds, if not thousands of these marriages. What makes a good marriage between a GP and an LP? Boy, it is a marriage.

And I do think that that is probably one of the best analogies you can have. But I mean, at is a marriage. I do think that that is probably one of the best analogies you can have. But at the core, what we've seen at Raise is that the GPs that do are the most effective at fundraising. And we've seen more than 2,000 funds come through Raise since the beginning. And I've met at least 600 or 700 of them in person. And the people that do the best job view fundraising as like farmers. They start small, they start educational, they get to know people as people, they add value to the LP, and they aren't just out there pounding against a list and looking at it as a numbers game.

I've seen small funds be successful with just pounding away, but I think it's really, really ultimately negative because people just get so tired of it. You know what I mean? And like every year at Raise, we can tell within our, we have a portal where GPs and LPs can connect. And I can see, you know, when GPs try to hit every single LP that's going to come without any discerning between like who's a good fit and who's not. You know, and if you're a $20 million fund, one seed fund, and you're reaching out to a pension, that's just a waste of time for everybody. And the best fundraisers, the people that do the best

are the managers who just spend a lot of time really trying to get to know the LP in an authentic way, adding value to that LP, whether it's through education or events or connections or doing something that enables them to create a relationship before you ask for a check. The people who just pound and look at it as a numbers game, I think ultimately it's very self-defeating. And I think that they don't have great LP bases because they just happen to find somebody who in the moment sort of took a meeting. And if we do

enough meetings, we're going to get to our fundraising target. And I get it. And I'm empathetic to it. But it's really exhausting. The LPs do not want to be hounded by people that haven't even read what the LP strategy is. And I see that happen all the time. What is the smartest way that you've seen GPs provide value to LPs prior to investing? It's all around being highly informational. I mean, I think that the GPs who are able to really educate LPs about an exciting new area.

I saw this in the early days of AI with some AI focused funds who were really out in front of this and being very, very sort of controversial and insightful in their efforts to fundraise. I really liked, one of the managers that came through Raise is Jazz Venture Partners, who have a whole fund around human performance. Fantastic fundraisers. I mean, absolutely fantastic fundraisers. And they were able to really build connectivity among, they had a really amazing set of original LPs and they were able to leverage that. This really created a lot of good relationships between LPs. And that I think has done very well for them.

And those are, I mean, it's people that like, especially when there's something like brand new, you know, we had like three space funds last year for the first time, you know, you see a lot of new things and then the people that are going out there and educating about new spaces and being highly educational. So they're doing dinners, they're interviewing experts, they're bringing LPs in and giving them really unique experiences. And it's hard work. I mean, here's a question for you, David. I always ask this question to GPs that I think are really good fundraisers. I always ask, how much of your time do you spend

fundraising versus working on investments or your portfolio companies? Of the best fundraisers, what do you think it is? It's a controversial question for several different reasons um let me first sidestep that question and then while i think of an answer for me a lot of people think that podcasting takes a lot of time and what they don't realize is i don't do any fundraising outside of podcasting uh for different reasons. One is I enjoy building the two-sided relationship. I'm vetting the LP as much as they are vetting me. So I'm able to basically go through that.

I'm also learning instead of pitching. So I get to learn from LPs instead of having to pitch to them something that I already know. So to me, it's more of a reallocation of my resources in terms of fundraising. This is a really good mousetrap. This is a really great fundraising mousetrap. Yeah, that's what I was going to say, which is there are different mousetraps. And just like a business, you want to be differentiated and you want to dominate some niche. So, you know, other people, there's a lot of people that try to do VC podcasts. It's just such a saturated space and it's difficult to get in front of it.

So you have to be novel in how you scale your platform. But I would tell people to do the unscalable. I've seen a lot of interesting mousetraps. I've seen people that put on amazing events. I see people that write books. All these things are things that take a lot of time, but they provide unique value. And most of the best models I know are scalable, meaning this podcast, thousands of people listen to every episode, even though I put in a lot of effort into it. So it is actually much more scalable than it would appear. Yep. No, it makes all the sense of the world. I mean,

I think that one fun that comes to mind is that has a really great event is Peter Sonderling's Zero Prime. He runs the Data Council. And Data Council is sort of the preeminent place where the best of big tech software engineers go and try to tackle their biggest data problems. And he gets to meet, this is how his deal flow gets, but it is a really amazing VC mousetrap because he gets to meet the most incredible technologists in the world through this conference. And LPs love that. Another fund that I really like for what they can do for their LPs is E14, which is kind of the dominant fund that focuses on MIT. And when you go to see them, they bring to bear all the coolest projects at MIT into one place. When you can expose LPs to that, that's like catnip.

Because you are seeing the future, you're just like, wow, this is the future. And these guys are right in the middle of the epicenter of it. And it's a really cool event and really insightful. Any LP that's going to go in there. I was. I mean, I'm like cynical. I've been doing venture out here for years. I just went like two weeks ago. I was like, this is amazing.

And that's a really good example. It's interesting with the race conference. What a moat that is. It's a network effect business because every year you guys get bigger. Every time you start, you start with a critical mass of LPs and GPs. And I think I would advise VCs to be thinking about themselves like they would think about a startup. What is your competitive advantage? What is your moat? Ideally, you have network effects.

What's your differentiation? What's your branding? All these things that ironically, a lot of VCs don't think deeply on. One of the most unintended consequences. I wish I could say I had all this, I just saw this all happening, but a lot of this happened organically, but like now we had 700 firms apply last year for a hundred spots, right?

It's really hard to get in. We have a panel of, amazing panel of 30, 35, institutional LPs like Northwestern and San Jose Retirement System to like help us select the top hundred funds, right? Which is really hard and it's a lot of work but what people don't appreciate is like the sheer amount of learning that you get from being a participant in this because VCS what do they do in their decks? They say this is the new exciting area that I'm doing and you get to read 700 decks in a very short period of time

I can actually never read them all like I poop out about 350 It takes me like two weeks every August The learning that you get just from sitting there and watching VCs like one after another pitch, watching another present and meeting them all, and they're all talking about what's exciting, it's a forward looking indicator on what's gonna happen. Like one year back before, early in the conference, all of a sudden we had like 14 LA funds pop up.

And there were no LA funds back in 2014, 2015. All in 2016, it was like 14 of them. And that really was an indicator of what was going to happen in LA and how they all blew up. You know, one year, you know, I think 2017 or 18, we had like 11 AI focused funds. I was like, what is all these AI focused funds? Now, now there's like 150, you know what I mean? And so early trends, I mean, this business is all about spotting trends early, right? And it's an incredible platform for that. And it's something that people just don't appreciate when they look at it from the outside. Oh, all these VCs are trying to raise money. No, they're there to educate you on what is going to happen. And that's why an LP

should be in that room. This should be the day that they go see everything because it's like a year of networking in one day. Essentially, YC but for funds. Right. Absolutely. I remember the first time I went to YC, to your point, I think on the 50th or 60th presentation, it was the first time that I actually was getting a little bit tired from seeing startups. It had never happened before. I was always able to process very quickly and I'm like, wow, there is actually capacity to how much information you could process in a day. Yes, that's definitely true. I'm curious, you bring in 100 out of 700 funds. What differentiates the 100 that you bring in

from the next 100? I think that we have tried over the years as the steering committee was sort of to determine the rules. And that's much bigger than us because we have a bunch of great people involved. We've manipulated and like worked on trying to like have the perfect mix of criteria, right? Like early on, it was very focused. It was overly focused on track record, which meant that you got much more mature emerging managers. And that was just because track record is the easiest thing to glom onto. And so we consider an emerging manager anyone at 200 million or less of AUM. So these are pretty substantial. You can be pretty substantial at that point. We found that that, frankly, was a little bit under-optimized because we wanted to see the amazing fund ones and the

people with incredible backgrounds. So last year we changed the criteria. But what makes it the key thing that differentiates the funds that get in versus funds that don't is this. The funds that get in have a clear reason for being. They have a clear point of view. They have a clear strategy that's well articulated. And they're not just, I think just being a C generalist, a good guy with good connections, that is something that you just get too many of them them it's hard to tell the difference um these are people

that have created an ecosystem around their funds we look for ecosystems so we want to have firms that have a clearly defined ecosystem of people of talent uh we look for people who like can show they add value in a very clear way track record helps but but we've de-emphasized it because because we want those people who have incredible sort of lives of achievement. Last year, we had like 10 or 12 fund ones that were just had no track record. Just people were starting funds who were just had done amazing things before. And at the end of day, like, you really do want to create a day where there's a lot of

diversity of managers and strategies. So I think one of the best things that people do is when they can point to like having like a really great conference or event or a book or something that distinguishes themselves from somebody who's just got a good network and write checks and is in Silicon Valley. The second thing that really is important that people underestimate is just the professional quality of what I call the core information in funds. These should not be sales documents. These should be professional, sober track records. And if you left a big firm, you should have attribution. All the technical parts of presenting a fund that professional LPs look for and expect. So many emerging managers, they just don't pay attention to the details.

And it just comes off as unprofessional and kind of not ready for prime time. And if you don't submit a track record and you were at a big firm or you had prior funds and it's not done in the industry standard way that you'd expect, you're going to get done. You're not going to get in. And that is like very clear differentiator. What is, what is the industry's gross net multiples? Oh no, I'm not saying the number. I'm just saying like, you know, okay. But the example, like an unprofessional deck will say something like, Oh,

this fund, which is currently at a, you know, 1.2 X, you know, gross Mike, projected five X, you know, with a a big red arrow up into the right. Professional LPs just throw up all of that. They literally make fun of those kinds of presentations. You want to see a track record that's laid out. Company, date of investment, security, cost basis, realized or unrealized or unrealize, you know, returns, percent, like, and, you know, IRR and then by line, like you want to see, it drives me like batty when I see presentations that just talk about gross multiple invested capital. Like you have fees, you have

costs. We see through that. You know what I mean? Like, and you just look really unprofessional. It just, and people, the reviewers just be like, that's a zero, that's a zero, that's a zero. And people, good firms do it all the time. Good firms think that they're like, sometimes firms think that they're too good to put their track record information and they want to be private and secret. That's also not going to work. Like people are like, there's because there are other good firms that are putting the numbers in. And there are outstanding funds that get in just the basis of the numbers. If you've got a six or seven X fund and the fund one, you're raising fund two, you're getting invited, right? But there's lots of funds that get invited who the basis of the numbers. If you've got a six or seven X fund and the fund one, you're raising fund two, you're getting invited, right?

But there's lots of funds that get invited who don't have great returns because they have a great deck. They have a great story. They're building a great ecosystem. And it's something that LPs can hold onto and be like, I can see why this is going to be successful. And I appreciate the honesty of the complete presentation,

even though not all the information is good. Sounds like you guys are almost looking for a post NDA deck for the Duchess. Totally. They should, you should treat all, by the way, you're going to get your information read by some of the best LPs in the business, like legit LPs. So treat them like they're LPs. You know what I mean? Holding back information and being secret is not going to accomplish anything. We have an NDA before you get into Data Room and I'll be very upset by that.

How common is that to have an NDA going into Data Room? I sign them all the time. To me, it's just like, you know, part of the process doesn't bother me at all. I mean, when I'm looking at funds, you know, it bothers me. Now, if you try to, you know, if you have an NDA that you require raise to sign, we're not signing that because I'm not managing all those relationships, right? And this information is going out to a committee, like I've not, you know, but by and large, like we've been doing this, I've never ever had any complaints about an LP misusing information that they've received through the application process.

Nine years. Never happened. I mean, we've had other complaints. We've had LP LPs do terrible jobs and like, obviously not read the decks, write it back. Then we have, then we have an absolute fire drill at the end. We're like, I'm like, I need somebody to read 25 decks. Who has, who could do this tonight?

That's not right. What are you looking for from your LPs? Oh, just, you know, something we try to make it so easy for you. We give you like a standardized criteria list. You just have to read 25 to 35 decks and give it and give your best estimate. And you know, there's always such activity, but what, what we can see is like people who, who just like either rate everyone like really bad or, or really great, because they're trying to like influence things one way or the other like try to put their finger on a scale

and then we end up just kind of discarding those the biggest problem i think we we have is that when you're dealing with big institutions like you know multi-billion dollar um fund funds you know sometimes the you know i'll get the big partner who will agree to do it but really they slough it off to an associate um and that just happens and then we can kind of see but we normalize all the scores i've got you know the guy who introduced us, Eric Sipple, is one of our raters. He's my number one, most favorite rater. He's just great at it. And so, like, actually, whenever we have issues about, we see, like, if one reviewer is very high, another viewer is very low, we actually have those decks read three more times. We do everything we

can to, like, clean up the data. This is a volunteer times. We do everything we can to like clean up the data. This is a volunteer activity. We do everything we can to make it really good and really fair. But, you know, we're human. Investing in funds is extremely subjective, right? Like it's a very subjective exercise. So you're going to have differences. So you're going into your ninth year at Raise. How predictive has your judging been to who's ended up being breakouts?

That's a really good question. I've never got to look back and be able to say like, has the judging been to who's ended up being breakouts? That's a really good question. I've never kind of looked back and been able to say, like, has the judging been predictive? I would say that, you know, firms have come through raise that have been very early on that have gone on to do absolutely great things. And there have been firms that have rated really well that, you know, hit a wall for one reason or another, especially, you know, sort of fund one people that get in because they have really big resumes it's one of the surprising things about raise is that i've seen is that like spin outs people who spin out from big firms think they're going to have an easier time than they do they're coming out of lightspeed or kleiner and they're doing the fun this is a solo gp and they think that that you know they are the most likely to underperform and find it really hard to raise money if they leave and they spin out and they're like i'm look looking at this track record I have from, you know, big firm, insert the name. So often, they are so shocked at how hard it is to raise fund one. And the shock because guess what, they didn't own the LP relationships when they were at those big firms. You know, and they just find it really hard. And they're the ones also because their expectation is that it's going to be easier because of their resume. And I'm always like, so you left this amazing job you had

without any LPs, like saying, I'm in business with you, like, you know, and that people do that, right? And they look around and say, well, this person did it and I'm better than that. And, you know, and then they're like, well, you don't know that person had 600 meetings, you know? I mean, fun ones. Availability bias bias they only see the headlines that work yeah why is that is that is that hubris is that lack of lp relationships why is it that somebody let's assume they have an attributable track record at you mentioned light speed or kleiner why would it be difficult for them to race well because like i go back to what we said at the beginning which are lp relationships are built like marriages over years and you have to do that

you know 50 times times. Right. And an LP who's incliner 10 or whatever crazy number they're up to. Right. Unless I question at those firms, like how much exposure do the, you know, non, you know, managing directors really get to a lot of those LPs. And I think it is a lot of hubris. It's a lot of thinking, you know, those people who have done gone to those big firms has never failed at anything typically, right?

They've had like golden careers until then. And then they say, oh, well, it'd be great to run my own shop. And they just have never, you know, never raised an LP dollar. You don't understand how many choices LPs have. You don't understand how many spin outs there are. You don't spend every year at raise. We probably have 25 tier one, you know, VCs who are spending out trying to raise fun one or fun two 25 out of 100 25 no 25 out of like 700 yeah how many of those 25 get in i've never looked at it um they definitely get

in a higher rate than the general audience for sure like i would say three times more likely to get to get in conference and like when they don't i mean the people that when they don't get invited in year one the people that i hear from like how the hell did don't get invited in year one, the people that I hear from, like, how the hell did I not get invited to this? And look at all the other people that are here. That is the most common fact pattern. There is somebody who was a partner at a big firm, and they didn't even get the top 100. And I'm like, I can't tell you, you're not as special as you think. There's just a lot of choices. I mean, think about this. There's like, how many emerging managers are there?

There's like 2,000, you know, in total, right? Some people think as much as 3,500 to 4,000. So I don't know what the number is. How many of those, how many of the 2,000 to 4,000 emerging managers are still going to be around five years? Five years. Well, you know, around as in they made it, defined as it made it. A new fund. A new fund that has a stride pattern. I think less than 30%, i love emerging managers like we've done so much business with them on the

acadian side and uh and you know so much of my personal connectivity is with emerging managers and um i'm obviously like a huge believer i mean we did a big data analysis last year that said they basically looked at 2 000 fund returns and we're like okay you know if you're going to find a 10x fund in the emerging manager marketplace, you can only really do fund ones. Like 80% of the 10x funds of the people who have come to raise were in fund ones. I'm a huge believer in that you have to go in emerging managers. That said, the amount of money that's being focused on the mega funds compared to the ever shrinking pie. I haven't seen the latest numbers, so I think I've just got my head in the sand on this.

But last time I looked at it, it was like, I think the $12 billion was raised by emerging managers in 2021. And I think we were on a run rate as of Q1 for like 1.2 this year. That's bad. Another fact that just sort of highlighted how hard it's going to be next year, because next year is going to be the gate. It's the great gate. Fund one to fund two? Yeah, fund one, for any emerging managers, fund three, fund four, you know, yeah, fund three to fund four, like just emerging managers raising new funds. I was talking to a senior person at one of the big fund funds, like the, you know, $10 billion kind of fund funds. And they said among their managers that next year, the re-ups will be 5x this year. And the number of requested re-ups, right?

Right, the number of requested re-ups, exactly. So if you think about everyone hitting the market next year at the same time, it's going to be a brutal year for everybody. Like LPs making hard decisions and GPs pounding their head against the wall. And I think then you can always kick it off a year and try again.

Like these things do have a way of stretching and hoping that you get returns. And right now, the biggest problem is like the returns in early stages don't look very good, like across the funds that we're looking at. Right. So like with the lack of growth rounds, like there's been very, very few growth rounds that are giving big up rounds because 2021 hangover. And that means that the early stage guys aren't able to show the level of progress that they did in the past. And if the early stage guys can't show great numbers they're not going to raise new funds so it's it's all part of the same system and we're like we are like you know an anaconda that ate the antelope called 2021 and the industry as a whole is trying to digest

all the all the capital that came through 2021 and you know and we just got to survive to get through the other end and we need an ipo market some exits to make the numbers look interesting to bring investors back uh we just did a series of raised dinners in Boston and New York. We're just talking to LPs and like they were just kind of saying, ah, this venture is not very much on their minds these days. They're focused on their public. They're focused on something else. You know, it's just not top of mind.

And that's rough for the industry. But there's a lot, but we have AI, which is super exciting. So we'll see how that goes. A lot of endowment, foundations, institutional investors. Most of the smart money is very interested just because they're counter-cyclical. They're contrarian in nature. But a lot of the followers and the ones that always complain about not being able to access funds, a lot of them are not interested. So there's a trade-off there.

That is a great correction. I think that with Ray's kind of managers, you're always looking for like, where's the net new dollar going to come from? You know, we've seen success. Managers have success with RAs, you know, that are under allocated to venture. We've seen a fair amount of success with managers going international. In fact, we're starting a series of events, international events with Ray's will be hopefully back at Slush. We did Slush last year and we were going to do a raise in Costa Rica for LATAM family

offices. I think that's going to be really great for the industry and try to get away from this to our traditional LPs in North America that I think are going to be much harder to access next year. How do you both run Raise as well as Acadian? Tell me about how you split your time and how do you build a team around you? I have very understanding partners on the Raise. This is not a for-profit thing. We lose money on this every year. And Acadian Bank rolls it. Traditionally, I probably spend 20% of my time on race.

20%. I just hired a new guy, a new guy to run raise a guy named Scott Dubin, who has come over from Learn Capital. And so I'm very happy to have, for the first time, like a general manager to run this whole thing, which is going to be amazing for me. That's an exciting moment as we sort of try to scale this up. But then again, at one point when my partners were kvetching about the cost and my time and distraction, I was able to go back and show how many of our investments at Acadian had come through relationships that started at Raise. And that stopped the conversation pretty quick. So it's a great thing.

I mean, it's great for the firm. It's a key competitive advantage for us. And, I mean, the access and the information and the relationships that we get, I mean, they're the best. And so, you know, that's something that I think that the firm sees and they're understanding. But, like, my goal is to get it down to, like, 10% to 15%. Tell me a little bit more about Acadian. Acadian is one of the OG direct secondary funds. that I think that the firm sees and they're understanding, but like my goal is to get it down to like 10 to 15%. Tell me a little bit more about Acadian. Acadian is one of the OG direct secondary funds.

I started doing direct secondaries back in 2010, when I think we did our first $136,000 deal. And, you know, really started around like back when, you know, I was like educating people that like direct secondaries were legal and doing mostly like little tiny positions. There wasn't insider trading. Yeah.

I mean, you wouldn't believe back in 2010, people just don't remember this. Like you only did secondary when the founder was litigating with the company because they got pushed out and then there was only way to get rid of them was to buy them out. You know, and then Facebook happened, right? And the whole secondary market just kind of blew up around us. And so we evolved the firm direct secondaries to option exercise loans, the whole company liquidity programs.

And now we view direct secondaries very much a service business where we start working with a company like we work with Splunk DocuSign Ring Central and we go in and say, let us help you take care of all the problems on your cap table, like this is clean up. People have issues. Companies are private for 10, 12, 14 years now. You know, you're going to need, you're going to have lots of problems.

You want to have a partner who can take care of all that. My partner, Mike Dinsdale, was the CFO of DocuSign, DoorDash, and Gusto. And I worked with him at DocuSign and at Gusto. And so he just saw the value of having that kind of, like, very service-oriented partner in his pocket. So when people had, when anyone had an issue, they, you know, want to buy down payment on the house, call Ben. You know, if you need to pay a tax bill, call Ben.

You know, and those types of relationships are our best. We're currently investing in our sixth fund, and that is a $300 million vehicle. It's an interesting and complicated time for secondaries, for sure. Good values to be had at part, but also a lot of overhang for 2021. It makes getting deals done really hard. and you know like everyone we're sort of waiting for the ipo window to open up and

have get some exits going again because the whole industry you know it well it's getting definitely better there's a lot more bidding um there's a lot more buyers in the market and so you're starting to see prices come up in a lot of names most of us still really concentrate like the 15 you know big names that everyone knows we We don't do those. We mostly come in between series B, series C, start pretty small, get to know a company really well, and then sort of aggressively expand our position

in our two or three best companies. 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, 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.

Tell me about your own firm building. You're in six fund $300 million. How much easier has that gotten over time from fund one to fund two fund fund three? Has it really gotten that much easier? Or tell me about that evolution. Yeah, I don't think that it's ever got, I don't think it's ever been easy. I feel like we've always been, it's always, you know, being a fund entrepreneur is, I think people really underestimate how hard it is and how hard it is to keep it going.

I don't think it's that hard for persistent people to get fund one and fund two up. I think by fund three, you have to show DPI in real numbers. And by for fund four or five and six, you have to show that you can develop long-term in, you know, you have to show that you can develop long-term LP relationships. I absolutely did not want to have a big firm. I didn't want to spend my day managing people all the time. And I liked being close to the action. And I liked having a very small firm. Big partnerships are just unwieldy. I think you see so many partners that are like four-person partnerships blow up because managing all those personalities is really hard. So I was a sole GP for fund one,

fund two. I brought on a partner for fund three, fund four. I went back to being a sole GP because I just, that was the right thing to do at the time for a whole host of reasons. Fund five. And then when Mike Dinsdale, when he quit being a CFO,

it was just kind of like, wow, this, it was a really good friend of mine. And he's somebody I'd like love working with and just love him as a person. And he, when he was trying to decide what to do, I was like, man, he had raised like $2 billion of, of, you know, venture from every big growth fund under the sun. And I knew all these emerging managers.

I said, man, the two of us together, we got the industry covered, but we could stay really small. You know, like, you know, there's, we're a two person investment committee, right? Him and I just have to agree on deals. There's, we have a wonderful team, but it's small. We're a two-person investment committee. Him and I just have to agree on deals. We have a wonderful team, but it's small. And we're now growing for the first time. We're not growing anything. I've been at this for 14 years before and finally letting it grow. So I've been a very slow fund entrepreneur. There are similar firms to mine that have gone much bigger than me. And sometimes I look at that and go, gosh, I'd love those fees. But then again, I don't know if I'd want to run them. So really, I just want to be happy every day, man.

I want to work with who I like working with. I want to have investors I love. I have investors that have been with me now for 16 years. I have investors from my seed fund in 2007 who are like dear friends. And that's the way I want to live my life. It's not about size. It's about quality.

We were talking offline. You were saying you could tell who will be a good, fun entrepreneur versus a good, fun investor. First of all, what did you mean by that? And second of all, tell me the difference. I think what I was saying was slightly different than what maybe came out. But what I was saying, like, I've noticed after looking at 2,000 firms, this one trend that just strikes me. The funds that execute the best are usually a combination of a great fund entrepreneur and a really solid investor.

Sometimes that can be, like, one person. But what I mean by that is most of the great fund entrepreneurs have been operators, like really good operators. I think like quintessential story is watching fifth wall, like Brendan Wallace. He was an amazing operator, entrepreneur. The execution of that business was epic. He came through, raised like fund one and just was like, wow, the speed of execution is super impressive. Or I feel the same way about base 10, you know, one pure investor, one former operator, fund an entrepreneur, but again, like the execution, the operational execution of those two funds were, you know,

just fantastic, like top, top tier. And so when I see that operational excellence get paired with a good investor, like that's where I see that people that are able to create truly institutional platforms, platforms very quickly. I don't know a lot of funds that have reached institutional scale just based on people who have only been investors. They're almost always entrepreneurs on the team. And I think from NFX, it's all operators. The beginning of that firm, and I haven't followed it that closely anymore, like they got up so fast, you know,

in the operational excellence at the beginning was really apparent. And so, you know, those firms were those great operators get involved in the creation stage. I think they probably overdid their strength. They realized that starting companies was very hard to scale. Yeah.

I think they went to a fun model there on the record for that. Sometimes the strength could be too strong. Just to unpack that a little bit, why does a fund need a fund entrepreneur? And what exactly are you talking about? Is it just fundraising? Is it something else? I talk about the strategic execution of the fund from day one.

People realize that they're going to create an ecosystem around their firm that you can see. I think Fifth Wall is a perfect example. Very clear purpose. They got the best LPs in the business that decommoditized their money. If you were doing a PropTech deal, now we can argue PropTech's been up and it's been down, right? Hard, right? Yeah.

But the execution of that from day one to say fund four was insane, amazingly impressive in my book. Fundraising, sourcing, developing an edge, developing a brand. Brand, all of it, all of the things that go in to building a firm that's bigger than the founder is. And that's fund entrepreneurship, that's what I mean. You know what I mean?

I mean, I think that Mark Schuster with Upfront, like amazing fund entrepreneur. Do you know Logan Allen from Finn? I know Finn, yeah, yeah. But I don't, I mean, he came through, they came through Raise at some point, but I don't know him well. But yeah, they're one of the most conscious and thought out venture fund family strategies I've seen. I've gotten to chat with him and just the way that they developed everything. They know exactly

where every investment goes, who's the team, what's the strategy, what type of LPs, that kind of like firm building. Yeah, that's the first person that comes to mind. It's a great example. And like the other people that do that well tend to be, in my mind, they tend to be people who have built really great businesses outside of VC, VC fund. The business building is an art into its own. And fund entrepreneurship, that was my original goal with Raise, ironically. If you have an operating company, there are so many places that you can go to learn how to build an operating business. But if you're a fund entrepreneur, there was nowhere to go to build.

How do I build this? All the parts of it, from fundraising to investor relations to team building to sourcing to ecosystem building to information advantages. There's no place to go. Now, ironically, I kind of wanted the conference to be all about that. And then the market told me that that's not what they wanted. They wanted to just talk about fundraising. Yeah. You listened to your customers.

I did. Well, I mean, the product market fit was crazy. I mean, when we first had this room that was just empty, and we just like threw 10 GPs and a pitch LPs, and everyone in the conference went and jammed into that room. I was like, okay, well, that's what you want. So, you know, but it wasn't what I wanted. They didn't want corporate governance.

How to read the FDA, how to pick a back office, you know, how to compensate venture partners. Our listeners are very sophisticated, so they'd love to hear about all that. We attack distribution and allocation. How many people do that? When should emerging managers think about fund building? Is it from the first fund? Is it as they go from fund one to fund two? And why?

Explain that. I'll tell you why. Because, like, it takes a long time. And, look, if you're going to start building a ship, just start building. You don't just start with a robot. You start building the outlines of the ship you want to build. I also think that the earliest that you can start building the thing that is going to make you different and stand out and give you a competitive advantage, the better off you're going to be. I see way too many people just think that being a VC is about writing checks.

And they don't think about brand, strategy, ecosystem building stories. Like, you know, you should be able to explain why you're different and what your competitive advantage is from day one. Even if you don't, you know, you haven't built it all yet. At Acadian, you've built this incredible network of emerging managers. How do you like to partner with emerging managers?

Well, you know, so we have started doing some fund investments. That's new. So we are doing some of that now. And so we're finally out of the fund. And we have a separate vehicle now for that, which is great. And so that's very traditional. It's very easy.

The emergency manager that we do the best kind of treat us like we're LPs, even if we're maybe not. And they know that a lot of times our entry point in working into a growth stage business was through the GP. So for example, we collaborated with Nadav Elath to build a position in a company called Placer. Nadav is awesome. And I'm a personal investor in his fund. It's the largest actually fund investment I've ever personally made. And we love him. Basically, the good emerging managers come to us and say, hey, look, Ben, I've got this company I love. They're going out to do a Series B or Series C.

Do you want to maybe collaborate on it? And then we go do all of our due diligence on our own. And then we come back before the rounds even started. And then we make a big commitment in partnership with that emerging manager, more than pro rata, something like in the $5 to $15 million range. And for the emerging manager, they get all this, they get a single purpose SBB with, you know, they don't have to raise any money for it.

They just, you know, we back them. And those, you know, we've done that a number of times. It's worked out really well for everyone. When do you want to hear about those opportunities?

Ideally three to six months before the round. Yeah. We want to, there's a sure path into a round, but enough time to do full diligence. Right. And then we do it like very quietly. You know,

we don't involve the company. We never want to make anyone look bad. One of the real skills that we've developed as a secondary firm is the ability to underwrite companies without actually ever meeting before we meet the CEO or before we get involved with a company. When you're a secondary buyer, the company does not care about these deals getting done.

They're not there. Typically, they're not going to be like, here's my 10 customers. You want to talk to customers, you got to find customers yourself. You got to find experts yourself. This skill ends up being really important to the strategy because we showed up to a company like Placer. We already made the decision. We wanted to do it. Then it's just a matter of like, boy, we made that seed manager look like a hero. When he starts, before the process has even begun, he's like, I'm in for 10.

That's great. Follow in. It's a total flex. And then that creates a lot of momentum into the round. It's an amazing signal for everyone, and everyone wins. On the other hand, we've had to say no. One of the challenges, I've worked with a version manager that's shown me two or three deals. And, you know, any deal, it's always hard. Like, getting to yes is always hard, right?

And there's good companies which we pass on for all sorts of reasons. And then, you know, you do two or three three deals and then they're sick of showing you stuff. And that's the downside of it. So you try to manage those really carefully. And sometimes, I think I'm a personal investor in like 17 funds. I think Mike is in 40. A lot of times we see, we just are following these funds and we say, we really like this company. We'll approach the manager and say like, hey, I want to go do this. And this is something that Greenspan used to be really good at. They were very on top of their portfolio companies, of their managers.

They came in very strongly and said, I want this one, I want that one. And we're trying to kind of do the same thing. You're managing a lot of relationships. You have your race conference, you have your LPs, you have your emerging managers, you have the underlying companies. How do you manage all of your relationships? Tell me about kind of how you prioritize, how you rank those. I start, I mean, I think that the most important thing with Acadian is that really,

as we have grown a lot in the last few years, and we will continue to grow, is coming at it first from a servant leader kind of approach. That's kind of what everyone was like. I try to approach these relationships like, how can I make your life better with a team on Acadian? What can I do to make your life better? And I try to do the same thing with managers.

I spend a lot of time coaching and counseling managers, especially those that are frustrated with fundraising, which is most of them, or have firm problems with LPs. I just realized that at this point in my career, I'm in a pretty honored position of this, having seen so much over a long period of time and coming at these relationships first with that kind of service orientation, which is also how I try to come

at the companies is like, how can we be of service? And everything else sort of flows from that in my view. Like if you have that attitude, good things happen over time. The primary attribute I think of being a VC should be enormous patience and enormous empathy for everyone involved because like building businesses to successful outcomes, investing in them systematically is really, really hard. And I think we had this period of time where it felt easy. And I think that the managers who joined in 2018 or 2019 and then just had the most incredible run, and now it's really hard again they're spoiled we did an event um called uh like surviving the downturn like that we did at the chase center um with jp morgan and i had like all these vcs that had to be a speaker at that

conference you had to have survived uh 2000 and 2008. and so you had to be in business in the 90s right so i had all these amazing like vcs who had been there and done that and getting up and talking about it. And you look at how bad the returns were from 2001 to 2007. And who could have foreseen? The last decade was like the golden age of venture. It was incredible. We were the bell at the ball. We were the best asset class going.

And I think it's gotten really hard again. And you have to have people that really love it. And a lot of the mercenaries are not going to be here. And the missionaries, people who just love this, that can't help but build things, um, they're going to survive. And so, you know, I'm just really thankful that I'm still going at six funds. Like, you know, that, that, that in and of itself is something that I'm very thankful for.

The fact that I've been able to survive so many mistakes and share those mistakes with others is a real honor. Very curious. Has your career as a VC been really about one or two really large outcomes? Has that defined your career? We've had some big outcomes, but I mean, the one that I'm known for mostly

with my investors is DocuSign because that, you know, we invested a lot of money at a pretty early and you know, that, and then it went to 300, you know, we distributed at 45. We bought at 750 on average, we distributed at 45, which is a really good outcome, but not that easy. Late state. That was like Series B, Enterpoint?

Yeah, about Series B. But then it went to 300. So people were like, Ben, this is unbelievable. You just bought me two houses. And that was amazing. But will I ever see a company that in 18 months goes from 45 to 300? I don't know. That was a pretty unique time. Yeah, that was the Zerp trade. Yeah, Zerp trade. Everybody had one of those in their portfolio. Well, Ben, this has been like a one-hour conference, one-on-one conference and a masterclass.

What would you like our listeners to know about you, about Raise, about Acadia, anything you'd like to shine a light on? For LP, the most impactful day, we want the most impactful day of your year to be the Raise conference. And for day. We want the most impactful day of your year to be the race conference. And for a GP, we want the most impactful day of the year to be the race conference. And so, you know, we wish that, we wish that we could figure out a way to do it for more GPs.

And that is, that's really hard. And then like, you know, if, if you have anyone, you know, if you have any companies where you really want a secondary partner, that's in the, it's not there just for a transaction, but there to make your company better, you know, we'd love to talk to you. Excellent. Well, thank you, Ben. Thank you for taking the time and look forward to meeting up in Bay Area or New York very soon. That's great. Thank you, David. Really appreciate it. For more ideas on how to raise venture capital in this market, make sure to subscribe below.