Investing Billions - E24: Joshua Berkowitz of Berkocorp on Why LP’s Should Care about IRR% not TVPI

Episode Date: November 30, 2023

Joshua Berkowitz of Berkocorp, sits down with David Weisburd to discuss investing in venture capital as a family office and why all investors should care about IRR (and not TVPI). We’re proudly sponsored by Bidav Insurance Group, visit lux-str.com if you’re ready to level up your insurance plans. The Limited Partner podcast is part of the Turpentine podcast network. Learn more: turpentine.co -- X / Twitter: @berkowitz_josh (Joshua) @dweisburd (David) -- LINKS: Berkocorp: https://www.berkocorp.ca/ Dexa.ai: https://dexa.ai/  -- SPONSOR: Bidav Insurance Group The Limited Partner Podcast is proudly sponsored by Bidav Insurace Group. Today's episode is sponsored by Bidav Insurance Group. Bidav Insurance Group is run by my close friend, Amit Bidav, who insures me both personally and at the corporate level. Most people are not aware of the inherent conflicts in insurance, where insurance agents are incentivized to send their clients to the most expensive option. Amit has always been an incredible partner to me and 10X Capital, driving down our fees considerably while providing a premium solution. I am proud to personally endorse Amit and I ask that you consider using Bidav Insurance Group for your next insurance need, whether it be D&O, cyber, or even personal, car, and home insurance. You could email Ahmet at [e-mail]. -- Questions or topics you want us to discuss on The Limited Partner podcast? Email us at [e-mail] -- TIMESTAMPS (00:00) Episode Preview (01:27) Joshua’s background (03:25) How venture fits within a family office (04:22) “Everyone’s an IRR investor” (05:41) How to invest in venture and manage capital calls (08:02) Why time diversification is important (10:42) The importance of always being in market (12:44) How to find and evaluate venture managers (14:41) GP strategy fit (15:52) Episode Sponsor: Bidav Insurance Group (16:45) How to predict whether a manager can pick a powerlaw company (17:34) Joshua’s powerlaw GPs (18:48) Messy (or diversified) portfolio (21:04) Aiming for 20% IRR (22:22) Why Joshua likes diversified over concentrated (24:01) GPs need to be “rough around the edges” (26:25) The difference between early and late stage collaboration (27:27) The different ways to win (29:09) Can anyone beat Sequoia and Andreessen? (29:45) Generational transfers (31:05) Founder vs Operator CEOs (32:44) How Joshua diligences emerging managers and what you need in a dataroom (40:41) Portfolio construction (41:25) How to communicate with LPs (48:56) Joshua’s view on follow-on strategy (52:05) The difficulty of succeeding across all stages (54:30) Change in graduation rates (56:17) Venture investing mistakes to avoid (57:50) How to approach co-investments (01:01:31) Dexa.ai  (01:01:54) Why Joshua is a great LP

There's an old sort of rule of thumb I think people talk about where they want a 5x on a seed fund and a 3x on a Series A fund or Series B fund. Under the hood of those numbers is actually like a 20% IRR. It kind of assumes that for the Series A fund, you're going to have money out for six years and it's going to 3x and that's roughly a 20%. For a seed fund, it assumes the money's out for another two years and you get to five. I think that's roughly right. I want to hit 20% with all of them. I think the reality is the later stage firms tend to have lower dispersion of returns than the early stage firms, right? So if you're an early stage firm doing 15, 20 deals, sort of by definition, you have more variation in your potential outcomes than a series A, B, C firm. So in all of them,

I'm pretty much underwriting to a 20%. The longer the money's out, the higher a multiple that will translate to. I expect that on the seed part of my portfolio, I'm gonna have some 10X funds and I'm gonna have some 0.5X funds. And really I'm evaluating it kind of like a fund of funds where overall does this portfolio of funds equal 20%?

And if not, why not? How do I get there? Joshua, I've been really excited to talk to you. You have a very interesting operator turned investor background. Tell me a little bit about your background, how you turned into being an LP today. Great to be here. And thanks, David. My background started at least from an LP side. My grandfather started building apartment buildings in Vancouver in the late 50s. And so when I was growing up, I was very deep in the real estate world,

always around the buildings, always learning how they were being managed. A few years ago, we restructured the business, ended up taking on the real estate business, and we still own and operate all of the properties that we've accumulated over the years. But all of the new investing we do is on the private equity and venture capital side. And obviously, I'm here to talk about venture capital. That's the part I'm most passionate about.

So we've turned what was originally a real estate business into a diversified endowment-ish style family office where we invest across asset class, across everything. Me personally, I started my career as a consultant. I did a few years working in private equity, worked deep in the real estate business, operating it. And then I spent four years building a company called Bench, which is the biggest bookkeeping firm for small businesses in the States. I was our head of product and have been in and around startups in other capacities here in Toronto and in various parts of my life. Also started a business recently called, I got to give a plug for my startup that we started earlier this year.

It's called Dexter.ai. It's a way to find information from the world's most trustworthy people like podcasts, hosts, and YouTube creators. So you can check it out now, Dexter.ai. Give it a whirl. Great. We'll link it in the show notes and I'll check it out myself. And first of all, welcome to the Limited Partner Podcast. It's great to have you on. So you mentioned your family office came from real estate to venture. One of the things that we're really trying to get on this pod is granularity and how LPs invest.

So I'm assuming you get some kind of distributions from your real estate business and from other aspects of your investments. Tell me about how your capital flows in from other parts of the family office and into venture capital and private equity. How do you manage that? Absolutely.

So we think of venture as like one component, an important component, but really one component of the entire office. And we have many different ways of getting liquidity. So in real estate, yes, we get income every month from tenants paying us rent. We also have sold a couple of pieces of real estate. We can also refinance, which tends to be also a large chunk when you do that, although that's happening less and less these days. So all of that has meant that today, real estate's probably about half of our portfolio and the rest sits distributed among the other asset classes.

All of the cash we have that's relatively liquid sits in a bunch of ETFs, like public equities ETFs. And so the way I manage capital calls and manage asset allocation across all of them is effectively redistributing cash from the public equities portfolio into the private stuff as capital calls come down the line. So you mentioned off camera that you're an IRR, not a MOIC investor, not a multiple investor. Why is that? I think everybody's an IRR investor.

And if they say they're not, they're just like, they don't understand what the word means. Right. And so the alternative to being an IRR investor is saying, okay, I care about Moik. And then the word that comes later is, yeah, but I expect the fund life to be about 10 years and the money to be out five to seven years. And you're like, great. You just said, you just explained IRR. Right. And so you can either use two metrics or you can use one metric. I prefer to use one metric, but I understand that this, you know, sometimes dumb, simple metrics like MOIC in time are easier to reason about. So there's advantages to just talking about it that way. But everybody cares about IRR. The other reason you need to care about IRR is because if you're comparing across asset classes, you can't use MOIC because, you know, other asset classes mightR is because if you're comparing across asset classes, um, you can't use Moik because, you know,

other asset classes might have, if you're in private credit, your money's out for a few years at a time. If you're in public equities, like what the hell is Moik? Um, so IRR is the only metric that allows you to compare across asset classes, which again is why I say everybody cares about IRR. Um, but you might use Moik and, of investment, effectively fund life, to make it easier to think about. So I have a family and I have an office, but I do not have a family office like you. What is the best practice when it comes to managing capital calls for a VC firm?

So the number one mistake I see a lot of family offices make is that often, how do you start a family office? You sell a company is the most common way of doing it, right? You spent 10 years of your life building an amazing institution. You sell it, you have all this liquidity, and now you go, oh shit, what do I do with all this money? Classic failure mode is great. I'm going to put it all into venture capital because I started a new business. I like investing in new ventures. Let me just dump it into venture capital. And then over the next one to three years, if they sold the business for $100 million, they commit $100 million or $50 million or whatever it is to venture capital. That money gets called over a few years. And so the worst possible outcome is

that they keep it all in cash. And then that cash is sitting there earning no return until it gets called. The right way to do this, or I should say, if you're in this game for the long term, and you intend to invest in venture and intend to manage the family office for a long time, is you effectively build a pacing model, which basically says you want to constantly be in market, you want to constantly be backing venture managers. And as a result, you should sort of, a very stupid way to think about it is, say you want to put $50 million into venture. Venture capital tends to be invested for a period of six to seven years.

So divide your 50 million by seven and commit that amount of capital every year to different venture funds. You can use co-invests to accelerate the timing or slow down the timing, but that allows you to stay in market with the goal being that after, say, seven or eight years, eventually your distributions are funding your contributions. And then you've got this machine where you're constantly just staying in market.

You don't need to sort of worry about what do you do with the other cash. So the six to seven years, essentially a 1x DPI, is that what you're implying? Yeah, I mean, it kind of depends onPI. Is that what you're implying? Yeah. I mean, it kind of depends on, like, first, are you making more money? Like, do you have more cash coming into the portfolio? How much money are you spending? So that divide by six, divide by seven is a very stupid way of doing the math. It depends on how much money you expect to earn and how much money you expect to spend and earn from other sources.

The reality is everyone under the hood has a pacing model. And within that pacing model is an expected rate of return, an expected spending rate. You've got to put taxes in there. And so if you feed all of that through, that can give you a more granular idea of how much can you commit to eventually get to the promised land of your distributions funding your contributions. And you mentioned, I think time diversification, to highlight something that you're saying, time diversification is something really critical. If you invest all of your money into venture over the length of a year, you're going to have probably diversification against two to three years. The only thing worse to do is to invest all of your money across in co-invest

or in startups, then you have a time diversification of one year, which is no diversification. You shook your head a little bit. So the traditional way people think about time diversification is like some vintage years funds will perform better than others. So they'll say, so say, you know, all funds raised in 2011, 2012, 2013, like they performed very well in general. Pricing was low. Then you had the SaaS and CloudWave.

Those funds performed really well. And so if you miss that, you would lose out on tons of returns. The reality is venture capital is actually a pretty high beta asset class, right? So if public markets perform well, especially tech stocks in the reality is, first, assuming you're investing across asset classes, you don't just care about how well did a vintage do in an absolute return perspective. You care about how did it do relative to other asset classes, right? In other words, if you could just park your money in SPY and earn public market beta, how does venture capital do relative to that? And PME, like public market equivalent, how does venture capital do relative to that? And PME, like public market equivalent, in other words, the ratio of how well venture capital did relative to public markets,

doesn't move around that much. So you should get some vintage year diversification, but the reason to do it, like, yeah, fine, do it, but it's not that compelling a reason. The actual reason why you want to invest over a long period of time is because this isn't a game you can parachute into and then parachute out of. If you commit capital to funds over a three-year period, first, you're probably going to make a bunch of stupid decisions your first year because you don't know what good looks like. Hopefully, you get better after year two and three. And then if you stop and wait another seven years to get all your capital back, you're going to be in the same position where like you don't know what good looks like, you don't understand how the markets changed, you don't have a network, you like you can't do it. Nevermind the sort of spiky cash flow timing. So again,

if you want to take this, this sort of job of being a professional LP seriously, you got to stay in market at all times. And that means committing a little bit every year on a consistent basis. Venture capital is an access class. I'd say that's where all the alpha is. And the worst thing you could possibly do is invest in a fund that does really good and then not have follow on. That's like shooting yourself in the foot. And that is incredibly common, to your point, because of the illiquidity of the asset class. I also think it's also underestimated how hard it is to know who's doing well, right?

Like often you get, you know, say a fund manager has raised fund one and fund two, and then they're out to raise fund three. Conventional wisdom is it's pretty easy to look at that and decide, is that manager crushing it or not? Reality is it's actually kind of hard, right? The most recent fund you have almost no data for. Fund one is now maybe five to six years old. Hopefully you have a few breakouts in there. It's not always that

obvious which fund managers are going to be amazing in fund three. Sometimes it takes even longer. And then the risk, of course, if you're doing a fund four and fund five is does the team that did fund one and fund two, do they actually, are they the same people investing in fund four and fund five? So I would even say to evaluate the success of a fund manager or a GP within year five looking at a fund three, you have to be in market. Because again, it takes a lot of skill to understand what good looks like. When you say in market, do you mean deploying or do you mean constantly talking to the GPs? What do you mean deploying or do you mean constantly talking to the GPs? What do you mean by that? I suppose you could do it by just maintaining good relationships with your existing GPs.

I think you probably miss a lot of good information by not also talking to new emerging GPs, just because they tend to be the people that are sort of pushing the envelope, testing new strategies. They're more critical of the existing GPs. So they'll give you good reasons not to re-up with existing ones. Could you do it just by staying close to your existing GPs? Maybe, but it would certainly not be optimal. So you said something interesting. You said it's very difficult to tell skill, and then there's team drift. There might be some strategy and AUM drift. But yet here we are talking about venture capital. So I'm guessing that you put your money where your mouth is and you're still excited about the ask class. How do you go about the difficult task of finding top emerging managers? How do you look at qualitative factors and leading indicators to find the best new managers? Let's go through those things you asked for one by one. So first, how do I find them?

Primarily, the answer is network, right? At this point, I know enough GPs that they tend to refer me to other people that they think very highly of and often that they become LPs in. So it's that network through other family offices, through other GPs, through founders who tell me like this is the most valuable BC I have on my cap table.

I think all of those are great ways to get introductions. The next point is how do you evaluate what good looks like? Like I always say, like I always look for lazy ways to do this. One lazy way to do this is just say, I'm only going to invest in people who have great track records. Because there's a lot of data that says if you have performed well in the past, you will perform well in the future.

So I think track record is really important. Now that does unfortunately eliminate a massive class of emerging managers whose track record is either immature or non-existent. That kind of sucks, but it's a good hack. I think primarily what you're looking for when you're looking for what is a great GP is like, what is their secret sauce?

What makes them exceptional? What do they do that's different from somebody else? And that can be so many different things. It can be their own personal brand. It can be the way they think. They can be an off-the-wall thinker. It can be their network. It can be the people they work most closely with. It can be the way founders relate to them. But I think you're looking for something that makes them absolutely special, one of a kind, and as a result that can make them really successful in this job. If you look through my portfolio, though, I think the answer for why I've made each investment I've made is totally different. And it's completely based on the unique situation that that person is in. We often hear like GPs talk a lot about like founder market fit. And I think there's like

the analog for an LP is like GP strategy fit. Are they investing in a way that aligns with who they are, what they've done in their career and how they think? What is what is GP strategy fit? Give me some examples. Sure. So let me call it an investment I just recently did in Kevin Carter's fund. Kevin Carter is an alumni of SV Angel. I think he joined basically right out of school. Very nice guy.

Very good guy. Wonderful human being also. He's seen more decacorns when they were nothing than almost anyone else on the planet. He's also worked with pretty much everybody in the Valley. Everybody knows who he is. His reputation is glowing. And his way of investing, similar to SV Angel, Ron Conway's school of investing is let's collaborate with all the other early stage seed managers and help these founders as best we can.

Pretty hard to replicate that, right? If you say, I want to go be a GP, nothing you can do is going to make me believe you have the same superpower as Kevin has, or the same set of experience Kevin has. And that's unique to him, right? No one listening to this podcast is going to be like, oh yeah, let me copy Kevin's strategy. Like, good luck. It's unique to him. And I think most funds are like that. Most GPs are like that. They have a certain set of experiences in the world, their unique skills. Your job as an LP is to underwrite those and whether they've picked a strategy that fits that. Today's episode is sponsored by Badaw Insurance Group. Badaw Insurance Group is run by my close friend, Amit Badaw, who insures me both personally and at the

corporate level. Most people are not aware of the inherent conflicts in insurance, where insurance agents are incentivized to send their clients to the most expensive option. Amit has always been an incredible partner to me and 10X Capital, driving down our fees considerably while providing a premium solution. I am proud to personally endorse Amit and I ask that you consider using Badaw Insurance Group for your next insurance need, whether it be DNO, cyber, or even personal car and home insurance. You could email Ahmet at ahmet at luxstr.com. That's A-H-M-E-T at L-U-X hyphen S-T-R dot com. Thank you. I think that's a highly underrated, even just understanding what a 100X entrepreneur looks like at the early stage. We had Keith Reboy, apparently has the skill. David Clark, look through episode nine, look through over 11,500 companies. And the most predictive thing of picking a power law return was, drumroll, a previous power law return. So essentially, through the data of 11,000 companies, there's nothing more predictive of finding a fund returner than having an existing fund returner,

which of course, brings us back to the same problem that you said, which is how long does it take to get a fund returner? Certainly a minimum of seven, eight years, I would imagine probably longer, probably more like 10 to 12 years. So how do you predict those earlier? One way is being Kevin Carter and working with Ron Conway, having somebody else, you know, working with somebody else that has a history of fund returners. So that makes a lot of sense. Let me call it another group.

Again, it's easier for me to use actual examples than it is to try to be hypothetical. So I'll call up two that are different. One is Fuse. Fuse is a group that that spun out of Ignition. They're based in Seattle. They want to be the premier Pacific Northwest venture fund that does everything early stage

and sees everything early stage. So how do you do that? Well, first they spun out of Ignition, which is another top group up there that I think had a similar strategy. The three guys have more energy than any other team I've met. Their LP network is the who's who of successful Pacific Northwest business people.

And their ground game, for lack of a better word, there is exceptional. It feels like everybody up there who's tech-adjacent, VC-adjacent knows who they are are and they're one degree away from from most founders and most people starting businesses um pretty hard to replicate that i met every met lots of other groups up there um these guys are special and they they're the way they treat the people in the network is is also really impressive you said if you look at your portfolio we're going to look at your portfolio you told me off camera that that's a mess, that you have a big portfolio. Tell me about your portfolio. Sure. So yeah, I was joking. People ask me, so what does your portfolio look like? What do you, or the favorite GP question is, what do you look for in a GP? And I think they're often used to

getting like a Sendana answer. Like I want, you know, 20 names and I want you to have significant ownership in them. And I want you to be, have names and I want you to have significant ownership in them and I want you to have high conviction about everyone or a Jamie Rowe answer of, I want you to have lots of shots on goal. All I care about is you finding outliers. I would characterize my strategy as it's a fucking mess and it's a mess intentionally. I think there are many, many ways

to be successful in venture. I think the data shows that. I think the most important part is that you're backing exceptional GPs that have a strategy that aligns with that. I don't have a strong point of view on whether seed is better or series A is better or whether you need to be a sector specialist or a generalist. I think, again, as long as your strategy fits who you are. And so I have lots of different stages in there. I have a handful of geographies in there. I think, again, as long as your strategy fits who you are. And so I have lots of different stages in there. I have a handful of geographies in there. I do tend to stay to

sort of outlier performing geographies, which I would characterize as San Francisco, Seattle, Israel, starting to look at India more. But it really is a mess. And it's primarily me following exceptional GPs into strategies they convince me are great for them. You're perpetually looking for alpha, almost with less of a focus on portfolio construction than just pure alpha. Is that a good way to characterize that? The other way to describe a mess is diversified, right?

And so I could say it's a mess, or I could say it's very diversified. I'd prefer to say it's a very diversified portfolio. That means I'm getting exposure across asset class, across geography, across sector,. By nature of having a messy portfolio, I'm also exceptionally diversified. And I think that's by design. Let's talk about what your expectations are about your mess. What do you underwrite for a pre-seed fund? What do you underwrite for a Series A fund? Do you underwrite everything? And how are you looking at your return profile? I mainly look at IRRs. So there's an old sort of rule of thumb I think people talk about where they want a 5x on a seed fund and a 3x on a Series A fund or Series B fund. Under the hood of those numbers is actually like a 20% IRR. It kind of assumes that for the Series A fund,

you're going to have money out for six years and it's going to 3x and that's roughly a 20%. For a seed fund, it assumes the money's out for another two years it's going to 3x and that's roughly a 20%. For a seed fund, it assumes the money's out for another two years and you get to five. I think that's roughly right. I want to hit 20% with all of them. I think the reality is the later stage firms tend to have lower dispersion of returns than the early stage firms. So if you're an early stage firm doing 15, 20 deals, sort of by definition, you have more variation in your potential outcomes than a series A, B, C firm. So in all of them, I'm pretty much underwriting to a 20%. The longer the money's out, the higher a multiple that will translate to. I expect that

on the seed part of my portfolio, I'm going to have some 10X funds and I'm going to have some 0.5x funds. And really, I'm evaluating it kind of like a fund of funds, where overall, does this portfolio of funds equal 20%? And if not, why not? How do I get there? I know you're not prescriptive, but in terms of do you want a concentrated portfolio or a more diversified portfolio on a single GP level? I think I tend to prefer more portfolio companies. And the reason why is, going back to something I talked about earlier, which is how do you evaluate when to re-up on a manager? Let's suppose you underwrite a very concentrated

early stage fund manager. Say they're doing like 15 deals at the pre-seed and seed level. And you underwrite them, you think they have good picking ability, you think they've got a great strategy, they're great people, they reference well, all of that. So you invest. If you run a Monte Carlo based on a good VC at that stage, it's still highly likely that they end up with a poor return, right? Like depending on how you do the Monte Carlo. Luck essentially. Tons of luck. Tons of luck. There's tons of, yeah, exactly. At the end of the day, you're playing a probability game doing this job, and luck can move against

you. And so you can end up with one or two funds very quickly that aren't underperforming, even though you'd argue it's still a good picker. Luck can hit you. Whereas the bigger a fund size you have, the harder it is for luck to move against you. The reality is every LP underwrites results, right? And so if you have bad luck for two funds, you're probably not raising fund three. And so you get a lot more predictability with bigger fund sizes.

And as much as I'd like to say I evaluate based on process, not based on outcome, or I should say based on input, not output, like the reality is everyone's evaluating based on output. And so more concentrated funds just means luck can move, you know, makes you less certain in your decision and can also move against GPs really easily. Let's talk about GPs specifically. You have some interesting philosophies on it. You look for GPs that have rough edges and that have, to quote you, a screw loose. What do you mean by that? I hope Wes Chan doesn't mind me calling him out right now. So Wes Chan is someone I have a tremendous amount of respect for. I think he's one of the best investors of all the time.

I think his track record bears that out. I think if you talk to the founders, he's backed, they would agree with that. He is not a normal person. And I think lots of GPs are, you know, you cited a few earlier in this podcast that I think have very strong personalities and unique ways of thinking and seeing the world. Not everyone's going to like them. Not everyone's going to get along with them. They're not the right investors for lots of companies. They're going to put out writing that people disagree with. They're going to have points of view that are provably wrong often, right? Well, if you're in the game of picking out liars and you're competing hard against other GPs that are also exceptional, you need to have a

differentiated point of view. You need to be a different type of human being. I don't mind at all if GPs are like that. In fact, I think it can be something that really helps them, again, if they use it to their advantage. Wes's sort of unique way of operating and seeing the world, I think, means that he can give founders the advice they need, not the advice they always want. And I think his ability to think from first principles means that he can disagree with the world and be confident in that disagreement. Most people aren't wired that way. Like I'm not wired to disagree with everyone. I'm not a disagreeable guy. I tend to try to want to find consensus. Like I'd like to think I can think independently. I think I do on balance more than others, but to be a GP and to

find alpha where others don't see it requires a certain level of disagreeability, ability to think for oneself that can often mean being paired with a really weird personality. And so I like that. I think it's completely fine. Hopefully, I can still get along with you. But it makes sense that those types of people would often make exceptional investors. I think that's high self-awareness. I think if you take a step back on venture capital, fundamentally as a business, so regular business principles apply. And it's better to dominate a niche, a niche of thinking, a niche of interacting. I would even call the niche of giving honest feedback. And I think that that positions

people like a Keith, like a Wes Chan, and like others that have really built out an incredible business, incredible franchise. I'm a little thought though, that I think that I think that that is a it's more important at the later stages than the earlier stages like stage seed stage tends to be more collaborative tends to be a little bit more warm and friendly um i'm not always sure why that is i think partly that the the businesses are less financial at that point and the personal relationship can matter more i'd love to to have someone tell me why they think seed is so much more collaborative other than just economics. But certainly at the late stage, you have some exceptional people duking it out to lead series A, series B rounds. It's hard to do that if you're a normal, well-adjusted, friendly guy or girl.

I think it's the bifurcation. I think in the seed round, smaller checks, unless you're really writing over a million dollar checks, you could pretty much get into rounds. If you're writing a $50,000 check, then you're doing pretty well. A lot of LPs actually look for GPs for that very specific reason. They want to get access to very top pre-seed companies and they think small funds are able to access them. And I do agree with that thesis. You mentioned every GP is competing for the same dollar, for the same incremental dollars. In your opinion, how do GPs from established funds win? My first thought is everyone does it differently, right? Going back to GP strategy fit, if you hear 10 different pitches from 10 different value firms, hopefully, I think first, they'll all sound different.

They'll get a different feel and vibe for that group of people and what they do to win. Often what they do is also very related to that person. So first, you got to get all the financials right. It's got to be a good offer. You got to get the offer to the founder when they're ready to raise. You've got to make a great pitch that you're going to support them and give them whatever they're looking for. Sometimes what they're looking for is not that much.

They just want money. And then you get the tag of global's going in to mark everything up. Sometimes you have first-time founders that actually really like the idea of having support from a platform VC that can offer them help recruiting or meeting other customers and other important people. I don't think the answer is one size fits all. I think going back to what I said earlier, you need to dominate a niche.

And so it means that you need to figure out what makes your firm or you personally exceptional and use that to win. How do you think they win? I think all the funds that return alpha win almost by definition in differentiated ways. I think what's most important, like any business, is not to be number three in the market. It's the famous GE adage. If we're not one or two, we're going to divest or we're going to get out of the market. I think that's really critical.

That's why I think Sequoia and Dreesen will continue to do well. And I think anybody that tries to directly compete with them without a differentiated approach will have a lot of trouble and will be adversely selected. That's so interesting because Andreessen is a new firm. I think all these narratives about which firms will continue to do well are all so backwards looking. People look back at like, oh, this firm performed well. Oh, then nobody else can beat them now. Look how well they performed in the past. But Andreessen beat other top tier firms to get to where they are. And new firms being born today are going to beat Andreessen and Sequoia to go be the Andreessen and Sequoia of the next decade. So I think I'd push back a little bit and say, it's very hard to compete

with Andreessen and Sequoia. It's super hard, but people will be successful in doing it. I agree. And the competition is different use cases. One thing I'll also note to your point is the jury's still out on whether Warren Buffett and Charlie Munger could handle the generational transfer. Will Mark Andreessen and Ben Horowitz be able to handle the generational transfer? Sequoia has famously done it twice. I think they're the only fund, maybe benchmark as well, that has gone that long in terms of generational transfer. It's the firm today doesn't look anything like the firm a decade ago, right? They've got way more capital, way more partners, way more different, like they've got a number of different funds. They're covering a lot of ground. So I think the question with them is, can they scale up? Can they become the Blackstone of venture? I don't know. No one's ever done it before. But it's a very different bet than re-upping with a $300 million Series A and Series B fund that existed 10 years ago. It's a totally different vehicle.

I had a chance to interview Avlock, CEO of AngelList. One of the things that he said is that in an ever-changing, ever-dynamic world, you need founder CEOs versus operator CEOs in order to navigate through the trenches. What do you think about that? I think that's right. The question is, what is a founder CEO versus an operator CEO? I think there's lots of great operators that act like founder CEOs. Like Satya Nadella is unequivocally doing an incredible job with Microsoft.

There's plenty of other examples like that. I think you ideally want a CEO who acts like a founder. Now they're never gonna have quite the same founder gravitas and rights to make changes that an actual founder would have, but they need to put that helmet on and do their best imitation anyways. I think that goes with venture firms as well. If you have a bunch of GPs that view themselves as

caretakers to a legacy, then the venture firm will die. Instead, they need to say, this is as if I started a new firm on my own. What would I do? What is the right thing to do in this situation and make the hard changes? But again, certainly if they view themselves as caretakers, if they view themselves as just doing, what's always been done, absolutely, they will lose. So going from a very sexy conversation and talking about Mark Andreessen to Ben Horowitz to the most boring conversation, talking about diligence in GPs, which is what a lot of GPs want to know, you said, what do you look for in the GP?

I'm going to bring it on a more granular level, which is what a lot of GPs want to know. You said, what do you look for in a GP? I'm going to bring it on a more granular level, which is, how do you diligence GPs? So I come to you. I'm a fund one. I'm raising a $30 million fund focused on investing in all of my best friends. Nobody else could compete with me. How would you go about diligencing that?

And what do you want to see in a data room with as much granularity as you can? So I think my answer would change quite a bit for an emerging manager versus someone who's got a more established track record. So if you want to go with someone who has almost no established track record, effectively, this is a hiring decision, right? And I would say, how do you hire someone for a job? Nevermind a job, a job you can't fire them from for 15 years. Or right. They say 10 years, 15 years, probably.

And like ten plus one plus one plus one plus one. Exactly. Plus you plus you probably want to be up with them. Right. Yeah. It's a really it's like really fucking hard. And most of the time the answer will be no, not because I learned things I don't like, but because I don't have enough confidence. Let's go to the more you know, there's essentially two cases. One is they were at a large firm like a Sequoia and they had their internal track record. And one is they've been investing as an

angel and they have, let's say, a five-year track record. Let's make it a little bit simple. So they have a five-year track record as an angel. They're starting taking in other people's money. What would you like to see in the data room? So the first thing is I want them to be able to articulate what their thesis is. What is that? What is that GP strategy? How are they going to run it? Why is it the right strategy for them? And have they been running it in the past? And hopefully the data room can show me all of those things. How do you show me all those things? With a deck, with investment memos, with references or videos, ideally, from people you've worked with in the past, telling me the same story that you've given me in the initial pitch. Obviously, I want to see all the track record information, all of the investments you've made, bonus points if you've

documented your thought process of making those investments through an investment memo or something else. All of that will help me. Ideally, you're going to the data room to very quickly understand, right? Let me understand the strategy. First decision point number one, do I like this strategy? Do I like this person? Do I think this is worth doing work on, right? And the data room should get me over that hump. Suppose I'm over that and I'm like, great, this sounds awesome. Looks like they're a really special person with a differentiated strategy and they've made a lot of money in the past. Cool. Now, how do I confirm that? So what should I do? I should be talking to

other VCs they've worked with. I should talk to founders. I should talk to other LPs. Maybe there's an anchor LP. Basically poking at the strategy. Do they agree with the strategy? Do they think the person is the right person to run the strategy? Understanding the stories of those initial investments, trying to get a sense for who this person is, and does the strategy that you initially got excited about, are they in fact actually going to be able to run it? And is everything you read about in the data room checkout? Contextualizing what they're saying. Exactly. Exactly.

You also ideally, like, it's a ton of work. I like to use work other people have done. So family offices, you know, get a ton of benefit from meeting other family offices. I love spending time with them so we can share our diligence, share our notes, and also most importantly, challenge each other. And I love finding people who will argue with me because I kind of do this on my own. And so, you know, getting free diligence from other people, other people's free investment memo exhibits, I love it. And I'll always have it.

I get so excited when people basically disagree with me. I know that I'm about to learn something. Now it took many years of therapy to get there. It took a lot of personal development. I saw a tweet by Harry Stebbings about basically being around people that challenge you. And I realized that I actually literally now just get excited about it, but it did take me quite a while. I get excited challenging other people. That came to me really naturally. It took me another five years to get excited to be challenged. Maybe you do have some disagreeableness. So you have a potential career as a VC as well. But going back to the data room, I've realized

through this podcast that I underpay my operations and general counsel, and they're doing a lot more work than I thought. Operational due diligence, it seems to be a very different thing to everybody. What does that mean to you? What do you want to see in the data room around operational due diligence? I don't actually think I have a good answer to this. I don't spend a lot of time thinking about it. It's pretty rare I'll invest in a fund that an institution has not anchored. And candidly, I'm kind of relying on that institution to have gone through the LPA, make sure it's somewhat standard. I mean, I've read it too, but realistically, I'm not the one who's pushing back and going to help them craft it with their legal counsel. Candidly, I'm relying on others a lot to do that kind of diligence. That said, the quick check boxes are like, are you using fund counsel and fund administrators and auditors that are best

in class and that I've heard of. Does the LPA look relatively standard? It's very weird if it looks weird. You're kind of more checking the boxes on that end. I don't think my operational due diligence is particularly sophisticated. DDQs, ILPA, all of this. What do you think about that for emerging managers? It saves me a lot of time from asking questions that you could could have answered in a ddq so it's it's helpful in the confirmatory stage almost all of that stuff is like is is like downside protection right like in venture most of this game should be about looking for upside what is this what it makes this person so damn special and then most of the other stuff is like dotting your I's,

crossing your T's like, did this person go to jail? If, if hopefully not, if yes, why is the LPA, you know, laid out in a standard way? Do they actually own the fund? Like you're making sure that all of the things are done right. And certainly having all of that stuff in a data room saves me a ton of time from having to ask you or ask other LPs to make sure they've done the work if I haven't. So it's really nice, saves a lot of time. And hopefully it saves the GP a lot of time too, because then we can talk all about strategy and not about boring, fun stuff. Two questions and I promise to move on.

PPMs, thoughts, do they add any value? I wish PPMs were written in English. Instead, they're written in lawyer. So no, like, do they add value? It's a really painful way of explaining to me what your fund does. It's lawyered to death. So it's better than nothing. But I'd much rather have you articulate your strategy and how the fund works than have to read a lawyer document that is just incredibly difficult to get through and understand what's important in there. One example that's coming to mind is a caffeinated capital, Ray Tonsing and Varun's fund. When they came to, when they, it's wonderful. When they raised their last fund, they just wrote a document that explained how the fund worked in pros,

not legally, it's in pros. And it was awesome. It was like the strategy was perfectly articulated, why the win was articulated, how they pick was articulated. Their track record was perfectly articulated. It made my job so easy. I wish I saw more just write down how your firm works. Writing takes a ton of work, obviously, because writing is thinking and thinking is hard. But if you can do it, man, will you save us a ton of time. But also, I think you'll become a better GP because of it,

because it will force you to really think deeply about how you win. One of the things I wanna build and work on is helping emerging managers streamline and standardize a lot of these documents. I think it's sad that GPs sometimes don't get LP capital just because they weren't aware of some checklist. Emerging managers are the spear of the American economy. No emerging managers, no new startups, no innovation.

You know, it trickles down. One final question, portfolio construction. So tell me about what you're expecting. Again, let's assume a first time manager in terms of portfolio construction, how much granularity, how much flex should be in their system? Like, what do you want to see in the data room when it comes to portfolio construction? It's usually a spreadsheet. Occasionally, it's a there's a new app called tech. I think it's called tactic. Um, that does this for you. Sponsor the show. Ah, cool. Everybody used to everybody use tactics. Show me look, the, the point of a portfolio construction model is to show me how you think about probability

and that your graduation rates are reasonable, that your valuations are reasonable, that, um, you understand the basics of how this game works. I think it's more of an idiot test. It's just a reason to fail. It's like a cover letter on an interview. It's like, why do people write them? You write them to show you can write and not sound like an idiot. A portfolio construction model

helps me understand your strategy, but also it better have reasonable assumptions in there. So I know you understand how venture capital works at the end of the day. You know that they know that you know that they know. So in terms of portfolio construction, how much of that first fund, it's kind of like a business. There's some pivoting and some strategy creep. Hopefully there's less than more. Talk to me about the evolution of portfolio construction. How does that play out? Not in theory, in theory but in practice you know you have different market cycles you have different check sizes you you figure out that you're not as cool as you thought you you were and you can't write million

dollar checks into seed you have to write 250k checks tell me about how that plays out and how should gps i'm talking about good faith gps. How should they handle that? Communicate a ton. The biggest mistake emerging GPs make is under communicating. You should be thinking about your relationship with LPs as a continuum, not something that happens every three years. You want to make it so that every time you come to market to fundraise,

it's like, oh yeah, I already know exactly what's going on. Sure. Good life advice on any relationship. That's right. So you can take that to any level by the way, babies and everything. So, you know, with strategy creep, it's like articulate why your thoughts are changing, uh, and in invite debate from your LP is like, do they agree with you?

Do they think you're doing the right thing by by changing your your uh your focus the most common ways i see strategy creep are uh being valuation insensitive as a result then being ownership flexible right two sides of the same coin um changing you know you see a bunch of crypto funds that are doing a lot of ai stuff now because crypto is not cool anymore thesis creep is the wrong word because the Thesis is should change. But the odds that you are a crypto expert and the odds that you are a AI expert are pretty low. So that's a massive that's a massive creep. Massive, massive creep. Yes.

About as extreme as one specialist. Another specialist is almost like the most extreme, especially if you're doing infrastructure. Like it doesn't make any sense. You're going to learn things as a first-time GP. Hell, you're going to learn things always as a GP. So in some ways, zero creep is a little concerning because you're not learning. It's like a politician. Doesn't change his opinion over 30 years.

No evolution. I always hate when people call people flip-floppers. It's like, why are we insulting people for learning and changing their minds? Do it. Just make sure you communicate by doing it. Should those being overly communicated, I think that's brilliant advice. Should that be done on an LPAC level? Should that be done on a update?

Like, tell me how you operationalize that. I tend to prefer updates and then also quarterly LP calls. Your LPAC should be bigger issue. Like, certainly you can use your LPAC for some of that, but I think you want to go wider. If you have five LPs, then fine, do it at your LPAC. You cover most of your capital that way. Most people don't have that. So you want to go wide. Put a lot of time and energy into what those quarterly updates look like, write them well, and then create a forum where people can interact with you. That could be that you have a small enough number of LPs that are interested that

you can have quarterly update calls with all of them. I think that's probably too much work and annoying for most GPs. So just have one big call and talk to them and invite questions and debate. So I'm going to turn around the mic and essentially put the pressure now on LPs. So let's say I have strategy creep. Let's say I didn't go from crypto to AI, but let's say my previous example, I was going to do 20 checks at 500K. And now I see I could only get in 250K. And I have to do 40 checks and I'm communicative. I explain my rationale.

I explain I don't want to get adversely selected. I want to get into the top companies. I communicate that through a quarterly call, which I think is a great idea. And now the one LP is like WTF, you know, you're a terrible manager. Is that not a litmus test on the LP? Is that quote unquote bad LP behavior? It's why you should have me as an LP and not some other fund of funds that has a very rigid view of what they can and can't invest in. Like the benefit of family offices that can think for themselves is that I can follow the GP's thought process. The reality is that if that happens, it sucks. I don't know if it's a bad LP, like LPs have their own pressures. They have their

own commitments they've made. You know, if it's a fund of funds or a multifamily office or even a pension endowment or foundation, the people running those change all the time. LPs are going to have constantly changing pressure on them. That means they're going to lose some. That sucks. That's the game. You got to do what's right for you anyways. The relationship may or may not be good for you,

may not be good for both parties. It has to be mutually beneficial. Exactly. At the end of the day, I think GPs need to realize that the vast majority of LPs are not investing their own capital. They're managing capital on behalf of other people. They've often sold a specific bill of goods to those other people saying, we're only going to invest in these types of strategies, these geographies, this type of GP, whatever it is. If you don't fit that, that sucks, especially if it means losing an LP, but it is what it is. Unfortunately, that means, how do you fight against that? Always be fundraising, always be meeting people.

And so that when it does come time to fundraise, you can replace the people that say no or don't have capital left with other ones who are interested. And I think not to be trite, you have to act with integrity and may the chips fall where they may, but you have to have your own North Star and you have to be doing things. If you believe the smaller checks is the only way to deliver alpha, you go with the smaller checks. And that might be unfortunate for people that want a concentrated portfolio. But I think versus the opposite, which is acting against your integrity, it's significantly worse. It's the lesser of two evils. So you mentioned quarterly updates. I know you have very specific guidelines for quarterly updates. I think the video is really cool. I'm assuming you record those videos. But

what should a GP have in a quarterly update? Give me an overview of what's happening in your world. What are you seeing on the ground? How is your thinking changing? What's the mood like? I think almost all updates already have this in them. Then you want to give me a pretty robust review of the portfolio. How are existing companies doing?

How are the new investments doing? Why did you make them? Then you also want to give me an update on the firm itself. Did you make new hires? Did you lose people? When are you going to fundraise next? All of those things so that I can keep tabs and understand what you're doing. You should also include a section at the end or at the beginning. Here's how you can help, right? Here's what our portfolio companies need. Here's what our firm needs and engage us. Like a lot of LPs, their favorite part of this job is that they get to help the next generation of technology companies change the world. Use us. We all have our own networks.

We all have our own areas of expertise. I think most of us are more than just money. Make asks. And I think you'll be very surprised with how many people come through with introductions, with customer introductions, employee introductions, whatever else you need. The mythical LP value add. Do you think LP or VC value add is more rare in your experience? That's a great question. I think LP value add is probably a more mythical creature. To be fair, if you contextualize your own diligence on the GP side, the problem is most GPs don't have the luxury of doing LP diligence. I think if you do contextualize

it and you will get to ground truth very quickly. You mentioned about portfolio construction. You have some very specific views on follow-on strategy. What is a good follow-on strategy? What is a bad follow-on strategy? What is a bad follow-on strategy? So going back to where this all started, like I care a lot about GP strategy fit. And so I think follow-ons are also something that falls out of what is the GP strategy. If you are taking board seats and working very closely with these portfolio companies,

you also have access to a lot of information. You know them well. You see the writing on the wall before it happens. As a result, you're probably better positioned to follow on to the best possible companies. So it makes sense if you're a lead investor generally to have more reserves. I'm always really, really impressed when for lead investors, when they can sort of like predict the future, when they have a board seat and they, you know, you talk to them and you say, which are your best performing portfolio companies? Usually they have a sense.

And I think the better GPs have a better sense than others. They understand how well the CEO is performing, how well they're hiring, how sales progressing. And they can predict with some degree of certainty, like here's where the business will be at and when it will clear different milestones. All those types of investors should have more reserves. The Kevin Carters of the world, the Yuri Sagalovs of the world, the people who are really collaborative at the early stage and work with lots of others to write checks into

seed stage companies, just by definition of how they work, they're not going to know that much. Series B, they're not on the board. They're not doing due diligence themselves on the next round. They don't have much of an advantage at that stage. And so as a result, their reserves should be a lot smaller. Should is there ever a reason to wait and deploy reserves? Let's say you're bullish on a company, but they have some technical risk. Is there ever a reason to skip the seed and then do more in the series? What are your thoughts on that? I think if you have a big fund like that, the ad is, if you take sort of seed money or pre-seed money from the mega firms, effectively, you're an option to them instead of a real investment. I think that's pretty true, right?

You are an option to them. They want to learn about you. They want the right to be able to lead your Series A when you inflect. They want to be the first people to see it. I think that's a strategy that works if you have a big fund, because the option bets in total are single digit percentage of the total capital deployed. But again, you have to set the fund up to do that. If you're a $50 million seed fund, like no, that doesn't make any sense. At Series A, you're going to be fighting with the big boys, and you're probably not going to be in a position to underwrite those types of companies and win them. So it really all depends on the strategy.

Should pre-seed and seed rounds, assuming that they have good information for the founders, I think you made a really good point, which is the access to the founders and knowing which founders will do well is a direct signal of the relationship with the founders. Another way said is you can't actually be close to the founders without knowing which ones are doing well. In the cases that they do have a close relationship with their founders, is there ever room for preempting kind of a seed extension or something like that? Or do you think that's always going to be adversely selected as a fund manager? Very rarely. like that? Or do you think that's always going to be adversely selected as a fund manager? Very rarely. The reality is most good seed investors are shitty series A and B investors.

Certainly they're bad series C and D investors. There is a very, very small number of people in this world that have had success across all stages. One of my pet peeves in 2021 was every seed manager was syndicating all of their Series A and B pro rata. And so you would get their thesis on this Series B company. And the entire thesis would be, it's an amazing founder, it's an amazing team, and it's an amazing product, which is absolutely the right thesis at seed and the exact wrong thesis at B. So going back to your initial question, should a seed manager do those extensions or do a series A? There's always exceptions to the rule. Extensions are different. If your syndicate of seed investors come together and think you need another million dollars to get to a very clear milestone, fine. But should they lead a series A round?

Not very often. I have pretty strong opinions on this. I think you look at the graduation rates and you look at the series as the lead up. And when you have conviction, you should be putting all of your capital for that company as early as possible in that portfolio. You should not be diversifying within a single asset.

You're already diversified across your portfolio. So it makes no sense for me to pay, to wait and pay 5X, 10X more if the graduation rate might even be 50%. Yeah, 50% failure, 50% success, I'll take the extra 2.5X. I think it does come down to numbers. I think people are,

similarly to how LPs will over-diversify within managers, they'll say, I'm not gonna invest in this manager because they have 15 underlying companies. Well, you're in 30 managers with 20 companies. You're already in 600 companies. You don't need an extra layer of diversification. There's no mathematical basis on that. That's my pet peeve. What are your thoughts on that?

Well, the only reason to want more diversification within a fund is just so you can underwrite it more easily in the future. Not because I need the divers investigation of the top go you and you and jamie road are such great lps that you are trying to get your gps from shooting themselves in the foot just just so everybody understands what we're talking about that's what we're talking about here is that joshua and also jamie of course everybody loves jamie are literally keeping g, keeping them from shooting themselves in the foot. So more power to you. So that was just me to hype you up. One other thing I was thinking about on the last question, like in 2020, 2021, you saw like among companies in certain networks, you saw graduation rates of like 75 to 90%. I've seen some seed funds that like actually had 90%

graduation rates and still no companies that have shut down, which is bananas to think about. It also means that series A was like provably a stupid round to invest in then. You were basically always better investing at seed and paying a quarter of the price, because also the markups were quite high then, than investing in series

a given the ridiculous graduation rates unless it's 10 higher like whatever the math no sense so what do you think the long it's i'm glad you mentioned that what do you think the long-term graduation rates from pre-seed to seed and from seed to series a what's your intuition tell you my intuition says it will go back the long run average which i think was like obviously depends on what universe of companies you're looking at but i've seen my best guess would be like roughly a third will make it to the next round a third from from c to series a it's it's pretty consistent actually round to round even a to b i think is also a third doesn't mean that the business is from pre-seed to seed oh that's a fake distinction. What the hell is a pre-seed round?

What the hell is a seed round? I've heard it articulated in some clever ways. Really, people just look at the price, and if the price is below 10, they say it's a pre-seed, and if it's above 10, they say it's a seed. The entire concept of a pre-seed is absurd because a seed is something you plant into the ground to grow into something. As I mentioned, I hyped you up a little bit in order to bring you down to ground with the next questions about your mistakes. So you characterize your portfolio as a diversified mess. What are the major mistakes that you've made as an LP that others could learn from? The biggest and most obvious is that when I started doing this, I don't think my barometer for what good looked like was that good. And so I said yes to

a bunch of funds that I don't think would make the cut in 2023. I think partly that's me getting better. I also think that to do this job, you probably just need to say yes to a few firms to start learning. I talked to new family offices that are setting up. You don't really want to get into analysis paralysis doing this either. It's probably good to write a few small checks into GPs that at least seem good to you to start the learning process. And so mistakes I made, I think there's a bunch of firms I said yes to that I probably wouldn't say yes to in 2023. I also think I sized them weirdly. Like I didn't think deeply about what size should each check be relative to its stage relative to the number of other funds that I would see relative to the number of opportunities.

I also made some, what I think are, uh, random co-investing decisions. I thought about it as each, each investment would cross my desk. I didn't have a framework or thought process behind how to make the decision yes or no, or how to evaluate whether I'm doing a good job. It's just as important. So a couple of things to unpack there. You said, I made some bad decisions on GPs. Clearly, you're a very intelligent person.

You've had success in other industries. What are some things as an LP that look good that you have learned are not good? I think the craziest thing about this job is you're constantly going to get pitched from some of the world's most incredible people, right? Like GPs by and large are being successful founders, successful investors have come from incredible institutions, have just in general been are generally like very impressive people. And so often when you start this, this role of an LP, you meet these impressive people. And like, you just want to say yes, because

it's not often that you sit in front of a camera or you go get coffee with someone who started a billion dollar company. That's so impressive. And yet that's not enough to be a good GP, but it seems like it should be right. And so I think at the beginning, I was just impressed as hell by people's accomplishment. I was like, oh my God, this person is so smart, so successful. Of course, they're going to be a great GP. And I said, yes. I don't think there's necessarily going to be bad investments, but that's not enough sophistication to play. You need to have more sophistication to play this game. You weren't calibrated on what is and what is not quality because every day you weren't dealing with billionaires and billion-dollar founders

and all that. So you couldn't contextualize the quality on a relative basis. Are they exceptional at this job, right? Venture investing is very different than whatever they might have been doing earlier. It's kind of like a basketball player. You could be an exceptional basketball player. Doesn't mean you should be in the NBA. Right. Or should you have drafted Jordan as a baseball player? You said you did a bunch of random co-invest. What is not random co-invest? What is actually a good co-invest? So at the end of the day, if you're doing co-investing as a strategy, I think the right way to think about co-investing is you're building your own fund. And so then you need to look at your co-investing as a strategy, I think the right way to think about co-investing is you're building your own fund. And so then you need to look at your co-invest as your own fund. And how did your own fund perform? What's your own fund's portfolio construction? What's its

own pacing? How are you going to evaluate if you're making good decisions within your own fund? If you don't do any of that, you're going to look back at it. Some are going to win, some are going to not win. You're going to be like, shit, I don't know. This is just a mess. And you're not going to know what to do. So again, you should turn your co-invest into your own branded fund and evaluate it and underwrite it the exact same way you would underwrite an external GP. Essentially, you should be shining a light on your own track record to get away from narrative to more empirical analysis. I should scrutinize my own track record exactly the way I scrutinize the track records of other GPs.

I should scrutinize my decision-making process. I know it's a rudimentary question, but how are you managing your portfolio? It's in a spreadsheet. Spreadsheet, got it. So it is rudimentary. Absolutely. Honestly, my entire thing runs in a big spreadsheet.

Well, I could see why Alex, Alex Adelson from Slipstream was very insistent that we chatted. It's been an incredible learning experience for me and for the audience. And I appreciate you taking the time. I want to allow you to talk about yourself, about how you are an investor. One of the best things about this business is that it's a repeat game where reputation is so important and we all make money together. It is the opposite of hedge fund investing. This is positive sum.

And so I treat my venture investing like that. I expect all of the GPs I partner with to be the same. And my favorite part about this entire business is we're all trying to win together. We're all trying to build companies that will change the world positively together. I think the most important part of this is to not turn this into an asset class or some finance class. Like at the end of the day, I do this. A huge part of it is because I want to fund founders that are changing the world. I want to fund GPs that are going to look for the founders to give them their shot at changing the world. And I want to work with incredible people who are all aligned behind that. And so if I sound like someone you want to work with, please, please hit me up.

I always love beating GPs and being pushed and having people tell me why I'm wrong. I guess the last thing is I should do a plug for my business, Dexla.ai. We want to bring the knowledge of the world's most educated and creative people to everyone. So you can ask questions of people like Andrew Huberman, Miranda Patrick, and Shane Parrish. And suddenly all those, all the amazing knowledge that's in

hundreds of hours of podcasts is accessible in their fingertips. So we'll have to get you on there soon too, David. That's a great group. And on your behalf, I'll also say you are an IC of one and you are not going to leave your position because it is you. Thank you. I should have added that. So to everyone, yeah, everyone who knows, I think the best thing about family offices, and I'll obviously plug myself here, is I'm going to be doing this job longer than you are. That's not true of every other foundation endowment. And it's my money. And I care about it probably more than they do. And I'm an investment committee of one. So I can make decisions. I'm totally aligned with you. I will be there probably forever. I think family offices

in general make really good partners. I think I do too. Thank you, Joshua. Well, it's been a pleasure and look forward to meeting in Toronto or New York very soon. Absolutely. Thank you for listening to this week's episode. In order to make sure you do not miss out on next week's episode, please make sure to subscribe below.

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