This Week in Startups - Peloton's new CEO + Cake Ventures' Monique Woodard Angel S6 E5 | E1383

Episode Date: February 11, 2022

In the opening news segment, Molly and Jason break down the news around Peloton's new CEO, Barry McCarthy,  including the open letter he sent to the company, his background and principles for success (2:05).  Then, Monique Woodard of Cake Ventures joins for Episode 5 of Season 6 of Angel (32:50). Monique was a founder, startup community leader, VC scout, and VC partner before raising her first fund. In this episode you will learn: Her thesis on investing in demographic change What fundraising is like as a founder vs. fundraising as an aspiring fund manager Why she chose to have multiple closes for her fund  Why Monique focused her efforts on institutional LPs, even though they take longer to close than individual LPs What it takes to operate as a solo GP (0:00) Jason and Molly tee up today’s topics: Breaking down Peloton’s new CEO background and leadership style and an amazing interview with Monique Woodard (Cake Ventures) (2:05 ) Understanding Peloton’s new CEO and the value of its user base (12:47) LinkedIn - Post your first job for free at https://linkedIn.com/angel (14:15) Some more fun with numbers, plus breaking down Barry McCarthy’s introduction email to all Peloton employees (21:43) Ourcrowd - Check out the deal of the week at https://ourcrowd.com/twist (22:54) Finalizing McCarthy’s “principles of success” list and reflecting on the difficulty of a turnaround (31:32) Embroker - Get an extra 10% off insurance for your business at https://Embroker.com/twist (32:50) Introducing Cake Ventures’ Founder & Partner Monique Woodard: Understanding Cake’s thesis on investing in demographic change (42:20) Fundraising as a founder vs. fundraising as an aspiring fund manager, understanding how different types of LPs invest (50:58) Check sizes differences from institutional LPs and individual LPs, understanding multiple fund closes (1:07:18) Managing deal flow as a first-time fund manager, is the industry becoming more welcoming to underrepresented fund managers? Check out Cake Ventures: https://cake.vc/ FOLLOW Monique: https://twitter.com/MoniqueWoodard FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Okay, everybody, we have an amazing episode of Angel today with Monique Wardard from Cake Ventures, and she is awesome. And she just raised her first $25 million fund. She worked, of course, at 500 startups, now called 500 Global. And she's focused on demographic changes in the world. This includes aging, boomers, and minority populations growing globally, and women, having their purchasing power continue to grow. Yeah, it's a masterclass in the idea of thesis investing, but also we cover. real deep basics of raising a fund. Pitching as a founder versus pitching as an aspiring fund manager, how she developed her fund pitch, what she looks for in her investments, and oh my God,

so much more. So much tactical information. And speaking of tactics, first we're going to start with, again, Peloton, which has been quite a ride over the last couple of months. Peloton has a new CEO. He's the former CFO at companies like Netflix and Spotify. And we have his internal email, his 800 word email, we break down all the amazing leadership moments in that email. It's going to be a great show. Yeah, it ends up really being a masterclass in managing also. Stick with us. Stick with us. Season 6 of Angel is brought to you by LinkedIn Jobs. A business is only as strong as its people and every hire matters. Post your first job for free at LinkedIn.com slash Angel. Our crowd.

helps you invest early in pre-IPO companies alongside professional VCs. If you're interested in investing, you can join Our Crowd for free at OUR-C-R-O-WD.com slash Angel. And the Embroker Startup Insurance Program helps start-ups start-ups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off traditional insurance today at mbroker.com slash twist. While you're there, get an extra 10% off using offer code twist. All right. So, we can't stop talking about Peloton. As you know, Barry McCarthy, formerly the CFO at Netflix and Spotify is taking over as Peloton's new CEO. And he announced his presence with a bang. There was a leaked email that we will get to in a minute. And you have to

assume it's the kind of thing that was leaked on purpose. I don't really know. But spoiler alert, It's great. First, let's let's let you know who this guy is. So he was, he's been a CFO since at least 1993. He was evidently born a CEO. He popped out full CEO, CFO. CFO from CFO from, you know, Zuzes's forehead. Yeah. CFO of music choice from 1993 to 1999, the music TV station company, not to be confused with MTV, Netflix from 99 to 2010, which he then took, yeah, exactly. So that's pretty much the run right there. That's when Netflix goes from $10 million to just over $2 billion. He took Netflix public in 2002,

navigated the transition to streaming. Then, not done, he goes to become the CFO of Spotify from 2015 to 2020, takes that business from almost $2 billion to almost $9 billion and then helps it go public through a direct listing in 2018. Yep. Sits on Spotify's board. He's on Instacart's board, so he does have exposure to, you know, massive logistics businesses and has been on six other boards in the last decade.

Jason, fair to say, this guy's a gunner. Yeah, I mean, if you're coming in as a CFO to take over the CEO slot, CFOs at an at-scale business like this might not necessarily be the product visionary. but let's say the fundamentals of the business needed clarity and tightening up. Well, now you put somebody in charge who knows how to work a spreadsheet. This guy's got like Excel open and seven windows right now. So he's going to come in there and really look at the business with fresh eyes and be able to say, how do we get this business to profitability so that investors start believing in it again?

and we have optionality for the shareholders. So what would the goal there be? Well, if we lay off 20% of the people and we clear out some supply chain issues and maybe we change pricing or we do a little bit of maybe a secondary, add some cash to the bank account, he's going to look at that balance sheet, the PNL, and figure out how to make this business look very attractive so that either investors start buying the stock again

and it goes up, or an acquirer goes, hey, this would tuck in nicely at Amazon, Apple, etc. So this is a way of signaling to the market that the founder who has a propensity to spend money and be enthusiastic about product and shiny new objects, that's not what's driving the ship anymore. We're not going, you know, it's not a party anymore. Now it's going to be a lot of discipline.

And the party's over. It's 7 a.m. the lights are on. We're going to clean everything up. You know, like it's a day after. Yeah, that's a great point. Vimy and Daddy are home. What happened last night?

We don't care. We're cleaning first. So get some garbage bags. I know you've got to hangover. We've got to clean this mess up. So this is the cleanup. This is a very specific analogy, Jake. I'm just saying it's very, you've got the points of how you deal with this all worked out.

It's a, it's a cleanup. This is a fixer cleanup kind of guy. You know, he's coming here, clean this up. Yep. We have done some back of the envelope math, actually, on, I love that back in episode 1344. So it's stock price now is lingering right about where it was in mid-December, which is when we, this by the way, is lingering right now as we are recording this exact minute.

Let's pull up our chart here and let Jason work as magic. Well, you know, we looked at how many subs they have. The connected fitness subs, I think is defined as like you have the physical hardware and the, you know, subscription to the classes, the software, the software. app. And then they have digital-only subscriptions. It looks like $890,000. And you get the annual subscription costs there, $200, $450, whatever it is. And you can look at over four years what that equals, right? If that was the lifetime value, you can see those connected fitness subs spend a lot of money. So much. Almost $500 a year, $468 a year for that.

But what they're thinking, since they're paying, you know, whatever it is, I guess, somewhere in the range of 40 bucks a month for that subscription, you're thinking if I take 1.5 classes, I'm in the black, right? That's how a Peloton user thinks about this. Because if you go to a spin class, I think those are 30 or 40 bucks typically.

That's what I'm told. So the Peloton is like, hey, you can do, if you're into doing this more than twice a week, twice a month, you're in the black. And that's how I look at my Peloton subscription as well. Because I don't go to Equinox, which I used to back in the day in New York, or I was

in Chelsea Pierce, actually, and then Equinox when I was in LA. Those things cost $150,200 a month now, I understand, like a good gym subscription, like a Class A one. Yeah. So, you start looking. I mean, this is not, yeah, this is not a lot of money like on a relative value compared to a gym at all. But what it really says is that they do pay a good amount and then evidently have very low

churn. Right. Because if you buy this thing, you're serious. Like, it is a commitment. You need to have space. you need to have it installed. You know, you start thinking about this. Like, you're getting married to your Peloton, right?

You make a room in your house. You know, this is, I got a lot of good analogies today, but this is a deep relationship. This isn't casual, you know? Yeah. You know, you buy a set of weights or a jump rope. That's a casual relationship. You buy a Peloton.

And the thing is, like, a lot of people buy a lot of stuff that's expensive and that they should commit to, but they don't. The thing that Peloton really has, and this is why when you hear about 2,800 layoffs, you don't hear about any of that being related to the, content or the instructors. Because people love that group experience. I mean, they are religious about their peloton.

So from that part of the business, you know, and as you can see from these charts, and Barry refers to it in the leaked email, that is not the problem. So if you were to put this out and you said, what is the lifetime value? I don't know if they really have a great calculation on that. You can calculate lifetime value by taking how much money the company makes. and people have different versions of lifetime value. So this is how much is a customer that we have today going to be worth in the future on average.

But you can take the churn rate, the number of people who leave every month, quarter a year, deduct that and then kind of get a blended idea. Now, you have to do this by cohort because, let's say you acquired a bunch of people during the pandemic. Well, maybe they weren't super committed and they churn at the rate of half of them go away in the first three years. But maybe the ones who are pre-pandemic

really did want this. It wasn't just because they needed something to do in the pandemic, and they got antsy or had a stimmy check. So you kind of start to calculate the lifetime value based on churn and, you know, how many people leave. And eventually, you know, if people stay for 10 years, six years you can see in this chart, you know, they're producing a lot of software,

100% margin business. This is not the hardware business. Yeah. So I always thought that this business could get to reasonably tens of millions of customers around the world. You could picture them, you know, having this in, you know, German for 110 million German speaker, Spanish, you know, you know, I don't know if it would be kind of hard to get into China with this product.

But, you know, there's other places and other languages that they could actually make this work. Right. You could have Australian instructors. It could really, I think, become a global phenomenon. And I think they could have five devices. Right. And also, there is a universe where you could divorce this from the hardware a little bit, where you could have a pretty robust subscription service.

I mean, imagine if they had a Netflix for workout videos. Like, some of that kind of exists. You can cobble it together with YouTube. That really is what the digital subscription is. It's kind of like the unbundling of it. Right. And that's not the goal. You still want to sell high margin hardware.

Don't get me wrong. But I think it's actually, they should just try to break even on the hardware. I think like the tonal system, which I have as well, which is brilliant. I think tonal is so expensive to install. Like they have to put two by fours.

They have bolted in your wall because you're pulling weights and it's a heavy system. It's that thing. It's like the... Yeah, they really have. It's incredible, though. I have to say the tonal system is not an ad for it. Although they did advertise once years ago. I paid for my unit, by the way.

I don't like taking free stuff. But you know, you're pulling, you know, whatever, 100 pounds on this thing, whatever. And it's got to be really securely attached to the wall. So my understanding of the business is it's kind of hard to make money on the hardware. But depending on the price of a company, you can then look at the business. company, you can then look at the number of customers. You put a value on the number of customers. So what we were trying to do with this chart is just look at if they have three million customers, ballpark, what's their valuation and what is the value of each customer? And I think that's

where you start to kind of figure things out. And by figure out, you mean figure out a potential acquisition price? The acquisition price or if it's worth buying. So, you know, what is the market cap today divided by $3 million? I think we'd be it where it's just over $3 million was it. It was almost 3.5 million. So let's let's go with 3.5 million just to round it up. So somebody take the current market cap divided by 3.5 million and report back of, you know, the value of each of their customers. And, you know, you could do that with a company like Facebook as well. Facebook has 3 billion people when they were worth, I'm sorry, yeah, 3 billion people and you could divide that into when they were worth, but they ever hit a trillion? It was just under, right? So you do like

900. They just been stuck at 800 all. Yeah, then they lost all that money. So then they went on to six. So you can start to figure out what does each user value that? And when Peloton was, at some point, Pelotom was worth 15,000 or 20,000 a user. It didn't make much sense to me. But when you start looking at the lifetime value, if they were valued at 5,000, you'd say, oh, maybe that makes sense, especially because they're going to add more users. So it's just one lens at a company.

People did that with Clubhouse as well. So when Clubhouse did the $100 million valuation, everybody knew they had 4,000 members in the venture community in the beta. So everybody's like, oh, okay. So it's, you know, whatever amount per user, $25,000. thousand dollars, whatever it was. It was pretty ridiculous. So anyway, just fun with numbers.

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So, market cap $12.5 billion, $3.5 million, $3,5,000, $3,570 per user. That, to me, seems like a good purchase. Yeah, actually. If the user could be worth out in revenue and maybe they have some cash in the bank. So if they have, you know, I don't know if they have $500 million or a billion in cash in the bank, you can take that out of the valuation, makes this number go down. And then what if they can get to,

what if they can get to profitability, you know? That's going to be the big, interesting moment here. But anyway, McCarthy sent this 800 word email. It's kind of like a medium post-sized thing. What did it say? It was a little long, I will say. However, it was a really good email. The email was leaked to Business Insider

and then tweeted out by the account internal tech emails. I do not believe for a heartbeat that this was an accident. We're not going to read the entire email, but there were some highlights, as you know, we've been talking for two weeks now about how one of big, you know, Peloton's big issues has been this leadership question. They asked to the CEO kind of for a reason. So, among the highlights of this introductory email from Barry, in the last 20 years, I've had the opportunity to partner with two visionary founders, read Hastings of Netflix and Daniel

like of Spotify. Now I'm partnering with John to create the same kind of magic. Notable. If you thought today's news meant John Foley, right? outgoing CEO? Yeah. We'll be scaling back his involvement with Peloton. Let me assure you, I plan on leveraging every ounce of John's superpowers as a product, content, and marketing visionary to help make Peloton a success as my partner. I know today's restructuring news has been difficult.

There's no sugar-coating it. It's a bitter pill. And in my experience, the sting has a long half-life. That's a good line, I thought. That's pretty honest as opposed to other people who get mad at their employees when they're laying them off. Totally. And then he goes, but the hard, I love this too.

But the hard truth is either revenue had to grow faster or spending had to shrink. The math simply didn't work otherwise and the status quo was unsustainable. I love some real freaking brutal honesty here. I'm here, he writes for the comeback story. And here's why I think we can pull it off. The love of our members and tons of it. Over the past 12 months in the U.S., our net promoter scores have hit 88 and 89 for the bike and tread respectively, which is ridiculously great.

and our subscriber turn numbers are the best I've ever seen, which means our customer lifetime value, ding, is truly exceptional. He says, he goes on to say, take care of the business, and the stock price will take care of itself. Don't do that, and your roadkill. Wow. Yeah. I love this guy.

I mean, this email is great. Winning in my experience, love this right here, starts with accountability. Wow. Me to you, you to me, and you do each other. We sink or we swim as a team. It's a freaking great email. This guy's, I like this guy.

You know, leaders at their best are going to define reality and inspire a team and make a plan and then execute against that plan, right? And this is a famous quote from Max DePree. I think it was a general or something. But I heard it first from Warren Benis, who was on this program. He's a managed, has passed away at this point, but we had a famous management coach on the show in the early days named Warren Benis, a very famous guy. I mean, I was really taken by this guy. And he said to me, you know, Jason, what leaders do is define. reality, whether it's in war, and this guy had been in the wars,

I think World War II. And you see him defining reality here for folks. Hey, listen, it's unsustainable. We either got to cut costs or we got to grow revenue, but this path is not sustainable. And if we're going to win, it's going to be because of the product and these customers would love us. And so that is the hope here, and that's why I am here. But it's going to suck to get laid off.

Again, defining reality. And it's a bitter pill to swallow. And the half-life is long. And it's going to suck to stay. after other people get laid off, right? Like, I see that. It sucks. It's hard to lose colleagues.

Right. Yep. And once you define reality for people, then nobody can say to you if they stay. I didn't know what to expect. You know what to expect. We got a lot of work to do. We got to be there for each other.

And this is clearly a comeback. This is a turnaround. So he's not sugarcoding it like, remember. Right. Is that pretending that things are tough? Right. Yeah.

She was like, you know, doing a chant. F. John Kerry Roo for. from the Wall Street Journal. And it's like, well, that is, not only is that not defining reality, that's engaging in delusional thinking, right? And this is why, you know, when you look at leaders,

just tell the truth to your team and tell the truth about yourself. He's telling the truth about Foley here too. He's like, listen, John's a savant when it comes to Brada, but the rest of the email is like, he kind of got us into this mess. We're going to put him in the right desk.

Totally. This guy, it up. Beep. Sorry. I'm going to clean it up. And we're going to put him in his zone of excellence. Like, he's going to be in the product lab.

Because he's good at stuff and we're going to use it for what he's good at. Exactly. Which is also a really good leadership principle, right? Like, you know, absolutely. You find what you figure out where you need a hitter and you put a hitter in that spot. And then you maximize what they're great at. Now, so then he went on to share this is like, this is like one of those leadership things that I'm not sure how I feel about. Then he went on to share his 10 principles.

of success, his management principles of success. Okay, here we go. This is sort of a famous like Uber move, right? This is a TK move. Yeah, be super pumped. Be super pumped. So one, be stubborn on vision, flexible on details. Okay, I like that.

Great. Love it. Sure. That's the mission and the tactics, right? That we talked about the other day, like the mission stays. Which you will hear on Sunday. Yeah, which you'll learn about Sunday. Number two, fast is as slow as we go.

Okay, I like that. Catchy. Love it. Love it. Intuition drives testing, data drives decision making. Yes. So when you're formulating a test, you, when you're coming up with a test, hey, should this thing be $40 a month or $20 a month, you can use your intuition.

I feel like a spin class is 25, so we can probably get away with 30 or 35 because they're going to think about it as, hey, if I do the second class, I'm already saving money. Totally. Okay, that's my intuition says that. Okay, now let's test it. Let's test it. and then use the data to decide if we continue, like not keep rolling on the intuition if it doesn't work.

Love it. Right. Your comfort zone is your own worst enemy. Okay. So that means you got to be a barraiser. I like that one. It's like a little live, laugh, love, but I'll take it.

Talent density is foundational. Yes. You learn that from Reid Hoffman. Mm-hmm. You know, like at a certain point. Does this just mean you need a lot of talented people around you? Like, I'm not sure what that even means. This is specifically to inspire people when hiring to,

to not fill positions to fill seats. When you're at a large company, there is this pressure to fill the position. We need somebody in product. We need somebody in Marcoms. We need somebody. And then you get somebody in there like, this person's a 7 of 10.

That's better than zero. And it's like, nope, you have to be as good as the other people who are better. You've got to be barraiser. So what Netflix figured out and what Amazon figured out. And a lot of these folks

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Understand in order to be understood. Yeah, be a good listener. Live, love, love. Get Real. Patty McCord, sorry, Patty McCord. Number eight is get real. Wait, what is get real? Yeah, exactly.

Now you're like, you're just trying to fill out your list of 10. You don't need 10. It would be fine if you had seven. Be candid, right? I think it's sort of like his email, which he is in this email, right? Like, this sucks. We're going to, like, sure, be candid. He's running out of a theme, though, in the list.

It kind of is, though. Think from first principles. And then number 10 is put first things first. Yeah, prioritize what's important. If the customer and the product are the most important things, you got to prioritize. Yeah. 100%. Yeah.

I mean, this is like pretty inspiring. It's a really good email. Like, I read it. And I was like, wow, there were many times that we could have gotten an email like that at the last place. And we didn't. Like, it's, I think. think you could see an email like this from your boss. It's very easy to be jaded as an employee of any place,

especially when that place is large, which Peloton is and potentially careening out of control. But I sort of do you think if you read this email, you'd be like, all right, let's go. And then the bottom half, like it does run, it gets a little, goes a little too long. Yeah. I would have edited.

Yeah. You think you only needed five to seven principles. I would say, you know, this reminds me, like the way he's talking to the existing founder reminds me, I don't, you ever see the movie Gladiator? that's my favorite film in addition, shout out. There's a great scene in that where Marcus Aurelius, you know, the father

is talking to Comedus, his son played by Joaquin Phoenix famously. He says to him, your faults as a son is my fault as a father. And he apologizes to him because he has not become a great man, Comedus. And Comedus is kind of like a broken, whatever.

Anyway, I think that's kind of how he's like talking to, you know, this is sometimes the talk you have to have with people if you're the hiring manager, If you're the leader, the person doesn't hit the notes, you hired them. And I have now later on my career taken this approach, which is anytime somebody's not performing, I say, listen, this is not me. We hired you. We gave you instructions of what to do.

And we obviously did not put you in a situation to win. You're fired. Yeah. But I usually, if I'm rooting for somebody, I'll have this discussion with them. Like, listen, this is my fault. It's our fault in management. We hired you. We did not keep you focused.

We did not clearly tell you what the outcome should be. And then they're like, well, no, I didn't do it. And then they literally say, but I should have done that. I got distracted or I could have done better at this. And you're like, okay, great. So there's probably the majority us in management and probably, sure, you contributed to it too. But I'll take 80% you take 20. What's our plan to get out of this mess?

And, you know, when you kind of move to that level of leadership, like it's a, it's a different level of leadership. And that's what I realized later in my career. My original idea of how to coach was to ride people. Like if they weren't hitting what they needed to do, I'd be like, listen, you're not good at this. You need to get better at that. I would be like a little too intense. Now I'm just like, wait a second.

I don't have the time to get this person to where they can actually succeed. I need to cut them now. It's a mistake. Here's your severance. We really appreciate the effort. We're done. Now let's get somebody in who is a barraiser. Let's get somebody in here who can actually hit the notes without us pushing them, right?

If we got to run alongside you, if we got to clear some stuff out of your path, that's fine. But it's just a tip for people on management basis. Like, if you've got to really push somebody up the hill to get them motivated, it's not going to work. Get out. Yeah. It's not going to work. They want to climb that hill themselves. Get out.

Jay, last thing on the business, the business challenges that remain for Peloton, Jay Sidu, in our chat points out, Comedus didn't take the feedback well. No. And it does sound like in Wednesday's all hand's meeting at. at Peloton, the employees were not of the mindset to take the feedback well. So, you know, for us on the outside, nobody got laid off here today. It's easy for us to read this email and be like, this is great. You didn't hear about the 4 o'clock well hands?

Is it just a Zoom? It's just a Zoom. Nick, your failings as a nephew are my failings as an uncle. If you're not invited to the 4 o'clock Zoom, you're fired. Molly's going to be doing another Zoom on Google Hangouts, and you can use your personal Gmail to get to that one. We invited you through your personal Gmail account. We're going to have a happy hour.

No, wait a second. Am I correct? I saw some headline go by that previous employees bum rushed. The all hands. Fired employees snuck in. So that was the trending thing on Twitter the other day. Morale is tough. Morale is a hard thing to turn around, right?

You can have a lot of great management, but morale is a hard thing to turn around. Sometimes you have an employee who, gets into the, what I call the bitterness spiral. Like they're just too. The negative zone I call it. Yep. Yeah.

A same thing where they're too mad and they can't pull out of it. And they just, and those, you almost have to let go of them too because they've just not. Yes. There's a point at which you can be upset and you either need to quit or get off the pot. Right. Like you either show up and do the work and figure out a way to be happy with your job or get reinvigorated or you have to leave or be fired. Like you just. So I suspect that Peloton probably has some people in the bitterness spiral right now, too,

and that's going to be another management challenge. It's not a, it's turnarounds are hard. That's one of the worst things to be a part of as a leader and an employee. If you take decisive, Barry, Godspeed. And if you take decisive action, which he's doing, it goes a lot better. Yeah. So, you know, you know that couple that shouldn't be married and they're like really uncomfortably fighting at every dinner party, they don't get invited to me.

more dinner parties because everybody's like, you're on the dinner party again. You're arguing over nothing. Guys want to break up and we can introduce you to our other single friends. This is like a metaphor machine today, by the way. Metaphor machine. I finally woke up. I don't know what's going on. I bought this like Starbucks ice brew, cold brew, and it's just hitting different today.

But I do think you have to just, you know, take the medicine quickly. You got to amputate. You got to quickly get divorced for the sake of the kids. Can't be fighting. Mom and Dad or Mom and Mom and Dad can't be fighting. Can't be fighting. You got to... And then what happens is,

I think it's like people are shell-shocked for about two weeks. And then you see everybody else who left is like, yeah, I'm working on Google. Yeah, I started my own company. Yeah, I'm in Bali. And then the people who are in the company

trying to fix the mess are jealous of the people who got laid off with the six months, seven, three-month sevens, and I'm like, what do I get laid off? I want to go ski 28 days. So it's pretty funny how that can,

that dynamic can happen. But the people who do stay, you just have to take them to lunch, you got to talk to them. And once you get to that week two or three, it's like, okay, this isn't the end of the world. This isn't, you know, Dunkirk, you know, like, it's not life for death, folks. Everybody's going to be okay. This work. Enough, enough winter, of course. Anyway, we will, of course, be watching. Right now, though, we have a great interview coming up today in the Angel series, Monique Woodard of Cake Ventures who is defining thesis-based investing.

And then we go deep with her on the literal mechanics. I mean, this is like a manual for how to respond. Very tactical. Very tactical. What's one of the goals of this series was to love it. You know, bring these first-time fund managers in. So it's fresh in their mind how to set up a first-time fund. I think we did a good job.

And by we, I mean, the producers, did a really good job of picking. This is number five in the series. And we're only halfway there. And I think these are like a masterclass. I think we could take these. I might take these down in a couple, like six months and then make them into like a book or something, you know, like a video series or something. And then have somebody write some accompanying materials with the how-toes and you can like maybe get into an audio book. It's so good.

It is honestly, it's yes. Because everybody who's been on so far has had a slightly different approach. Yes. As pointed out a different entry point, a different version of the market. Like it really, I mean, I'm learning so much from these. it's incredible. And Monique is just fantastic. She's awesome. She's been a friend of the show. She's been on four or five times now. So she can get her five-time jacket soon. All right. Enjoy the interview.

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Welcome to season six, episode four of Angel. This is a series we started because everybody likes to hear from fund managers and capital allocators. Each time we do a season of 10 episodes, we try to come up with a theme. We had the three comma club and people who had over a billion dollars under management. This season, we decided to talk to people who had just recently, or were in the process of raising essentially their first fund. So some of them may have had experience in venture capital before. others it might be their first time doing venture and we've had a real range mac conwell aka mac the vc from rarebie adventures kicked us off david rosenthal from kindergarten vc and the acquired podcast came in next

then uh the uh always cheeky and uh a bit controversial packy mccormick from not boring was on episode three we had a delightful episode four with page fin dardy from behind genius ventures who wrote a book seat to harvest and she is a 22 or 23-year-old has got her own first venture capital fund putting us all to shame my how the industry has changed in last decade. Today I'm really excited to have Monique Woodard back on the program.

She's the founder of managing partner at Cake Ventures. And maybe Molly, you could tease us up with a little bit of Monique's background. Yeah, Monique, welcome. We will go through some of this with you. You've been in and around the venture world since it looks like about 2011,

been a previously co-founder of Black Founders, March 2011 to the 2017. And then most recently, a venture partner at 500 startup. So I'm going to begin with like the layup. What made you want to build your own fund? Yeah. So in 2018, I decided to leave 500, which was my first like full, full-time institutional, you know, venture role. And I left and I didn't really know what I was going to do next, right? I didn't have a plan. I decided to jump out of the plane and I figured I would build a parachute on the way down. And, you know, I was lucky because Jeremy Liu at lightspeed asked me if I wanted to scout invest so I could keep doing deals. And I took them up on that. And then I started advising SoftBank on their emerge program. And so I got to keep, you know, keep a foot in venture while I

figured it out. And, you know, there were certainly people who reached out and wanted to talk to me about joining their firms or, you know, sometimes joining large firms or either starting firms with them. And I just didn't feel really compelled to do either one of those things. I felt like I had an investing thesis that kind of was strong enough to stand on its own. And I look back and I was sort of looking at my my small angel portfolio and my 500 startups investments and my light speed investments and realized that I was investing in demographic change and I didn't see anyone any firm around doing that. And so my ambition being what it is, I decided that I wanted to be the firm to do that, not that I wanted to like try to shove that into some other firm.

And maybe you could unpack that a little bit. Why is this such a compelling space to invest in? And what does that mean? demographic change? Yeah. So for the purposes of cake, there are three big layers of demographic change that I like to focus on. So the first layer is aging. There are 10,000 people turning 65 every single day in this country, massive market there. Second layer is companies that look at to multi-billion dollar outcomes based on the economics of women. And third layer is the rise of a new majority where people of color, Asian, Latino, and black mostly become the majority in the United States and are already a global majority. And so those are demographic changes that point to changes

in the internet user base. And I thought that was a really interesting jumping off point and point of view to look at companies through. And, you know, there are companies, there have always been companies that fit into what is a demographic change thesis, right? You can look at companies like eargo, which is in the hearing aid space, which is squarely within aging. You can look at companies like Finti, which is Rihanna's company, which is within the new majority, or sorry, within the second layer of the cake. You can look at companies like Citiblock Health, which is in the new majority layer of the cake. So these companies have always been around, but I don't think anyone has really put a wrapper on the thesis in the way that I have at cake. And so that was,

That in and of itself was kind of compelling for me, and I really felt like I could carve out a really important niche with that demographic change thesis. Talk us through getting ready, you know, all the tactical stuff for people who are listening who might be like, hey, I want to raise a fun someday. I want to jump out of the plane and put together a parachute on the way down, which candidly we're hearing a lot of people just saying, hey, Yolo, I'm going to do this. now's the time. What are the technical steps to starting your first fund? What do you have to do in terms of the legal aspect, maybe making a pitch deck and then your targets for who you're going to pitch on joining this firm, getting that first couple of checks in, the anchors perhaps? Walk us through that first couple of months of ramping up to start raising a fund. Yeah, so it was really getting clear about the story and the point of view of the fund first,

right? So you heard me talk about demographic change and the three layers of the cake. it did not sound like that in month one. Like that pitch was rough. But it's so smooth now. There's no flower lumps in that better. Right. It was rough. And so it was getting very clear about,

it wasn't even called Cake Ventures. It wasn't called anything yet. But it was getting really clear about what demographic change was and how I viewed the opportunity. And then it was really practicing with people who either were going to be friendly, ears or we're never going to invest in a fund one anyway. And so it was fine to like just, you know, go and go and practice with, you know, some big endowment that's not going to invest in a $25 million first time fund. And so that's what I did. I did a lot of practicing, a lot of practicing the pitch, a lot of a lot of massaging the story. And, you know,

then I also on top of that started reaching out to lawyers and trying to find out who was going to be my fund lawyer. I ended up at Cooley. Same as us. We use Cooley for Fun formation as well. They're considered a top firm in that space. Exactly. They're great. It was kind of a no-brainer. And so it was really kind of nailing down the fundamentals of story and then, you know, how do we actually operationally put this together? And, you know, finding coolly and getting them under contract and then, you know, figuring out who is going to be my back office and who is going to be my banker and all of those like not necessarily like the most fun sort of things to do, but, you know, must, must have things was kind of what I did first. But I think

the biggest thing I did first was go out and just have a bunch of conversations with people and just kind of check the temperature on what I was pitching and whether I was pitching it well. And after doing a bunch of those with people who were great ears, I would say like Lo Tony at Plexo Capital, he was an early year. David Hornick was an early ear. Kate Mitchell, who started scale venture partners, was an early year. And so being able to kind of, you know, talk to those people who would be friendly to the pitch and tell me where I was going wrong. and what sounded right was the first thing out of the gate.

And you had been a founder before, and then, of course, were a co-founder of black founders. So at least you had that starting point, right? Like, do you think that other first-time fund managers and would be venture capitalists don't have that same level of, like, empathy? How did it help you being a founder who had probably already had to pitch, right?

Or help other people figure out how to pitch? Yeah, I mean, just the act of pitching and putting together the story was familiar, right? Because I had done it before as a founder. I had helped other founders do it. I had seen a gazillion pitches at 500 startups. So, you know, being able to get the story right and figure out the elements of the pitch that were going to be exciting to people and were really going to tell the story well, definitely drew from that experience.

And then, you know, in the day-to-day dealing with founders, I think that former founders have a lot of empathy for, you know, a founder pitching you these days over Zoom. But, you know, whether it's over Zoom or across a table, you know, it's a hard thing. It's a weird thing. And it's a weird thing to have to do for anyone. And so I think that certainly founder empathy is an important part of what I think. I bring to the table. What is the difference between doing a pitch for a fund and the pitch as we see on the other side of the table coming from founders? Is there a difference between those two or are they essentially the same? There's a big difference. One, just the elements of the pitch are different, right? So people want to hear about, they want to hear about your background, you know, what deals have you done. They want to hear about the performance of those deals so far. They want to hear about how you're thinking about, you know, I did have, I was, I was pitching an endowment and I'm on Fund 1. And one of the questions that he asked me was, well, what does Cake Ventures look like at Fund 10?

And I was like, oh, geez. I mean, I know what this thing looks like at Fund 3, but geez. That's pretty far out because each fund is two years, two to three, I mean, say, Three years? Three, yeah. Three. So you're talking about it. In 25 years.

Exactly. In 2050. What will you be doing? I don't even know. I wouldn't even know my name. What are you talking about? You're lucky if I make it. It's, you know, you're definitely talking about a longer time horizon, right?

And there are some LPs who like for you to kind of push out toward the edges of that time horizon and tell them what life looks like for you and your fund. and the LPs who have invested. And so being able to do that and to think about not just like this fundraise because a lot of LPs will want to be along for, you know, multiple funds. The majority of them hopefully will be, knock on wood. But, you know, being able to paint that picture for them of what not only fund one looks like, but fund three, fund seven, fund ten, sure.

Fine. Yeah. A founder pitch has, here's a problem, here's my solution. Here's my team. Here we're looking at, actually, what have you invested in? What's your performance? And then I guess what are you going to invest in? And what's your thesis, which we talked about with the three layers of a cake?

Why should we believe that you are going to be good enough to deliver return on this investment? I mean, certainly there's some element of that in founder pitches too. But I think it's certainly heightened during LP investor pitches. And then, especially when you're talking to a more institutional level investors, these are long relationships. I mean, I had many, many, many conversations with some of the LPs who ended up in my fund. You know, I think I was probably pitching one LP for, that mean, the better part of a year. Wow. Wow.

It's really courting. Yeah. Huh. And then are you in close touch once the fund is raised? Like if you spend a year building a relationship, once the fund is raised, how do you know, like we ask founders to give us a monthly update. How many updates do you have to give? Like how in how, how meddlesome might they be? So I write, you don't have to call your LPs meddlesome on a podcast, by the way. We don't have to do that. I write quarterly updates for for all of my LPs. And some are more involved than the others.

I have an LPAC. And so, you know, some of my larger LPs sit on, it's sort of the board that, it's the board version for a fund. So it's who is the most deeply involved in sort of the day-to-day operations, or not day-to-day operations, but like who is kind of watching what I'm doing. Limited partner advisory committee. who's watching what I'm doing and giving advice and, you know, being more hands-on than the others.

And so, you know, I have firms that are on the Al-PAC and I have some firms who are not on the Al-PAC. And so it depends on, you know, whether you are, whether you're not or how much involvement you decide you want to have with me. But, you know, at the very minimum, you're going to get quarterly updates and quarterly financial. and then others are more involved, of course. With LPs, do you find the majority of them are placing the bet to be in one fund, or are they looking at this now? I'm going to be in your next three, and we'll sort of gauge your performance over two or three of these things.

What do they tell you when they do decide to give you that yes is, you know, hey, we're going to put an X amount now. If it goes, well, we'll put, you know, 2X in the next one. Do they start talking about that next fund and, you know, securing their spot in it? There are no guarantees in this game, right? But in an ideal world, those LPs who are more institutional-grade LPs, assuming I do the things that I tell them that I was going to do and, you know, the fund seems to be performing well

and I seem to be performing well, then ideally they'll be in the next fund and hopefully the next fund after that. But that's really dependent on your LP base. if your LP base is a lot of individual LPs, a lot of them might not have the capacity to invest in fund two and fund three. If your LP base is, you know, institutional grade family offices or fund of funds, then many of them will be able to invest in your fund two and fund three. And so when I was thinking about who I was going to be pitching as LPs,

one, I really thought about these pitches as I'm not just pitching fund one. I'm pitching funds one through three. And that's really what I'm raising for. And I did not have a lot of like wealthy individuals in my network. And so I knew that I had to lean super hard into going institutional or institutional like from the very beginning. And so I would say that my fund is, you know, has a lot of emerging manager fund of funds. family offices, people who took longer to close than individuals, but who I'm pretty sure are going to be around for a couple of funds. That's a super interesting distinction because it does feel like there are a lot more angel LPs. I might be wrong about that, but it feels like in recent years there are a lot more angel LPs, whereas it used to all be institutional investors and actually even family offices are on the newer end. I think this is a new phenomenon. It's large, largely caused by the 506C designation where people are doing public raises like Mac, the VC was talking about or other folks have done where they're just tweeting.

They got a big Twitter audience, got a podcast, got a blog, got a newsletter. Hey, I'm raising a fund. Anybody want to be in who's accredited? Did you do 506C or did you do 506B? B. Private or public rates. But that's so, it's so interesting that it is also tactical, that it gives you this potential advantage where if it's a high net worth individual who like gets wiped out, you know, in the

Bitcoin crash or whatever. Yeah. That there's not that much stability. That seems like good advice for other first time fund manager. Yeah. I think the more, look, the fun one, you got to, you raise it how you raise it. Yeah. Get it done.

Yeah. You just get it done. Get the checks. Get it done so you can get to work, you know, deploying capital and proving out, you know. what you said in the pitch. But, you know, I was pretty, I was pretty clear that I did not want to have to, like, wipe my whole LP base clean for fund too and basically start over, right? Which is often what you'll have to do if you have a ton of individuals in your fund

because, you know, there won't be, they will not have had liquidity from your fund. you will probably not have returned capital by the time you go out to raise fund two. And so a lot of them will be hard pressed to, you know, invest another check into fund two. And I didn't want to have to start from scratch in fund two and fund three. I really wanted people who had slightly deeper and more consistent pockets. And what is the check size typically when you're raising from these institutions, the check size is a little bit bigger? you went for a $25 million fund.

So I guess two questions there. How did you pick that number? And then what were the range of check sizes that you would expect? So I sort of backed into the $25 million fund by saying, look, I want to do roughly 25-ish up to 30 deals out of fund one. Average check size of half a million dollars and 50% reserves. And so that kind of pegged me at a $25 million fund. And it was also a matter of like, also how much do I think I can raise as a fund one solo GP, right?

So being super pragmatic about, you know, even if I decided that, you know, even if I had different portfolio construction and wanted to write bigger checks or more checks, what does what is the market telling me that, that, they want to place with a single fund manager. And being really thoughtful about that. And so I came up at a $25 million fund, you know, with that half a million dollar check size, average check size, and 25 to 30 investments. And then, you know, certainly I have smaller check individual investors who I, you know, wanted in my fund.

There are some GPs at other funds who have invested in my fund. you know, there are a few individual angels. But on the, you know, larger check size, I would say that the larger checks are, start at $1.5 million. Great. I want to ask you about being a solo GP. I respect your commitment to controlling your own destiny, which is clearly like your plan here. How hard is that?

And does it make it harder to raise money when you have to, I mean, the story is indivisible from you. I think it's, I think it's becoming less hard to raise money for solo GPs and solo capitalists because there, I mean, because the volume is so high on the solo capitalist movement, right? There are so many like great examples of solo capitalists that you can point to and say,

look, this is, this is not just me. This is an entire, an entire movement, right? And, you know, we can show operational excellence, the ability to get into great deals, the ability to actually run a fund and create a firm. And I think people are getting more and more comfortable with that story. I think a lot of institutions are still working toward a level of comfortability with it.

But I think they're getting there. Yeah. They didn't used to, right? The solo GP, I was a solo GP. And man, I struck out with a lot of the big endowments, namely because my first The first two funds were 10 million. Last one was 44 million, but even still, they're looking to cut 50 million dollar checks as a minimum in a lot of these cases for them to even go through the process of vetting you. Yeah. And they just can't manage that many fund managers. So when you got no from the big funds, even though you went out and, you know, used them as a, you know, good sounding board,

they want to get to know you. What do you think they need to see? Are you think those big endowments of the world are going to be ready for solo GP? soon? Do you think they can get their handle around a fund that's less than $200 million or $150 million? Or do you think you have to go with these family offices or maybe the smaller endowments? I think a lot of, you know, larger endowments are working toward getting comfortable at smaller, smaller fund sizes. Not necessarily 25, but I would say 50 and 75 and 100. which is small.

Yeah. Right? Yeah, when you've got a $10 million endowment to $40 billion in a dollar end up. There's just so much money sloshing around. It's like, how do they even remember that they put $500K or a million into a fund? They need to have their vetting process at some of these is like a six-month process. They know more about your data than you do. So did you have that experience that I had, which was you'd go into some of these meetings,

you would have sent them your track record. They've done an analysis on your track record. And they know details about those deals that, you know, you wouldn't even think they knew about that, but they might have seven funds that had exposure to your top two or three investments. So they have the cap tables already. And they know more about how those deals went down and who made what money than anybody. Yeah, exactly. I mean, and they have a ton of resources and information at their fingertips.

You know, I don't want to scare anyone away from going after endowment money because I think there are great relationships to be had there. even for emerging managers. I mean, there are certainly endowments like Duke who do invest in in fund ones and do invest in emerging managers. And so you have to find the right ones. And you have to start, the way that I thought about those early relationships

and those early pitches were really as relationship building. Like, I wanted to start the clock ticking on a relationship. So when I come back for Fund 2, and it's $75 million, you don't tell me that it's too small or you don't know me or we haven't we haven't had enough time together like we've had time together yeah so now let's talk about the track record let's talk about let's talk about the real stuff right so a lot of people think about these larger endowment

conversations as wasted time but i like to think about the fact that we're raising money for funds one through three or one through seven or one through ten or whatever yeah you really raising money for the whole thing of it. I took the, it's interesting you say this because I took the same exact route and I could see some of these endowments, they, especially the younger folks

on the team, they were very apologetic. They're like, we kind of do this all the time. We meet with everybody. It's our job to do our diligence to meet with every single fund manager. We know who you are. We love your podcast. This track record's amazing. We're not going to participate in fund two.

We're not going to participate in fund three, we realize that this means you might not, you might be upset that we are not going to do fund for. And I'm like, no, I, funds closed anyway. We got the, we got it done. Sure, of course we'll talk for fun for. But they were, I don't know if you had that would be super, super apology. Super apologetic.

Very apologetic. It's not you. It's us. Right. Yes. And I'm like, yeah, I know it's you. I guess. Shocker.

Clearly not me. Obviously. Duh. clearly not me. But yeah, I mean, a lot of them are very apologetic and don't want you to feel like you're wasting their time. And I never looked at it as, you know, a waste of time. I realize that this is a relationship business and the more relationships you have, the closer you get to, you know, a level of success with getting to a yes from these endowments and larger investors. So you have raised.

We're just moving through the timeline here. You have now raised. You have closed your fund. I haven't done a final close. Oh, okay. Well, then is deployment happening throughout, even before that final close? Like, when do you start actually allocating that capital? So I started allocating capital after my first closed in 2021, in Q1 of 2021.

Okay. So I've been investing out of cake since then. And I think this is something important for us to explain to the audience because actually people don't know this. But when you do a venture fund, you can do multiple closes. And people tend to keep them open for six, sometimes even 12 months. So you can start that investment process, but you don't want to leave it open too long. Because then let's say you hit something that gets a lot of heed, you know, you hit something like a clubhouse, right? Where like, oh, my God, it became like a phenomenon.

Then people might be like, oh, what's in the fund already? And it's month five or six. and you're like clubhouse at the $100 million valuation? Like, did it just go to a billion? You're like, yeah. And they're like, okay, so I get a 10x if I invest now. So you get this like, Molly, almost free option. So that can make the original LPs a little upset

because other people get to take less risk as it goes. Right, totally. How many months do you keep it open for typically? 612, something like that? Well, yeah, roughly 12-ish, 12, 14, whatever, whatever you feel comfortable with. I saw a stat, and I want to say it was, in Pitchbook, but, you know, correct me if I'm wrong on the source, not the stat.

But the average fund one fundraise is 18 months. Makes sense. Yeah. That seems directionally correct. Yeah. So, you know, you should expect to do multiple closes. My strategy was close on whatever I thought was viable for, you know, the first close, and then keep closing.

So I did three closes in 2021. Fantastic. Just keep closing. Just kept closing. Just keep closing. And then just kept closing. Always be closing. Maybe soon.

Or like Dory, always be swimming. Always be swimming. Just keep swimming. Just keep swimming. How soon after that first close did you then, you know, make your first investment out of cake? And what kind of day was that? Like two weeks. Like two weeks.

Like I was wiring. Like the money was coming in and the money was going out. That is awesome. And how much champagne was involved there? Like, how did that feel? You know, there's a bottle of Vuvikilko in my refrigerator right now that I never opened. Okay. So.

I'm around. We're around. Yellow lab, pop that yellow label. Let's go. It's my favorite champagne. It's like you're going to know when you know, you know. That it'll be time to open the phone. Honestly, I was just so in it at the moment.

I was in it. I was trying to do another close very fairly soon after. And I was just like, I did not pause to celebrate that moment, even though I should have. And so now I'm just like, okay, I'll celebrate it when it's done, when it's final, final close, which is coming up soon. How many months do you plan on deploying doing the primary investments? And then how do you think about what percentage to keep in reserves? I think a lot of folks don't understand that dynamic either of primary investment people. You're in follow-on investments.

Companies were already invested in and then wrapping up the fund, basically, and going into harvest mode. So maybe take us through the months there. A few years ago, you would see first deployment, you know, periods of like three years. These days, that deployment time

keeps shrinking and getting shorter and shorter. Crazy. So I like to tell my LPs that I'm trying to like two, two and a half, possibly, you know, more like two, two year deployment cycle is what we're actually more than likely on track for. Which LPs? And that's because of the rate at which startups are coming good and good startups, not just like, not just a startup.

terrible, terrible deals, but like really great deals are coming and, you know, coming into the funnel and getting out the other side as a deal that you should absolutely do. And so the rate of number of startups and number of deals has just increased exponentially. And so that's kind of shrunk the deployment cycle of a lot of funds. I've certainly, you know, heard about funds coming back at one, one and a half years. Really weird because that freaks LPs out a little bit too because they're trying to plan when they're going to get money back so they can deploy. So if everybody in the industry was saying, hey, we'll be back in three years for fund seven of this Sequoia fund or Andreessen Fund or Pernor Perkins Fund. And then everybody is coming back in 18 months and saying, hey, we got another fund.

Oh, we're doing another growth fund. Oh, we're doing a crypto fund. What I found when I went out over the last couple of years, there were some folks were like, listen, we really want to do this, but we're adding two funds. managers this year. We have other targets we need to hit. And all of these existing funds we have are, you know, coming back and we don't want to lose our spot. If we don't do this new fund that they have in crypto, we don't know, do their new late stage

fund or their early stage seed fund, they may not let us into fund too. And we've had a relationship with this organization for 10 or 20 years or 30 years. Sorry, we're not adding many new. I'm assuming you ran into that phenomenon as well, which is like a little bit of indigestion in the system. Absolutely. LPs are experiencing a ton of indigestion right now, trying to swallow whether it's like a new growth fund, a new crypto fund, a new climate fund, and new this fund and new that fund from their existing relationships and not really having the capacity to add a lot of new managers. But, you know, under normal circumstances, they would want to and they would want to spend more time and get to know you more or, you know, put a check in. to this fun one. And I think it's made,

it's made those, creating those relationships a little bit more difficult. Hmm. Because they're just overwhelmed. They just, yeah. Shearly like,

do not have the time. Right. Because there are too many, you know, too many pots, basically, fingers and too many pots. Yeah. There are too many funds coming back

to market too quickly. Yeah. And it's capital and relationships, right? I mean, they, there's just, there's relationships. They might want to start a couple

of new relationships, but then also there become capital constraints because, well, if you're coming back faster and you deployed that last fund in two years and this next one in 18 months, okay, we've got to give you more money, but you're not giving us any money back because the money comes back in year 10.

Exactly. So you used to have like, okay, you know, when are we going to get our money back? Is a big question for these LPs. Especially for emerging fund managers, you know, who are going to be coming back relatively quickly. You're coming back before there's really a lot of performance. data on the first fund you raise.

And so fund two is still, you know, okay, we are investing in you and this thesis and this vision and this team. And it's still a lot of like belief. By fund three, there tends to be a little bit more data. But the shorter you, you crunch those deployment cycles, the less data LPs have to work with and the less data they have to, to evaluate. you against. And so it becomes really challenging to then, to then invest in new managers. It's even worse, because remember we talked to Molly. I sound like an LP right now. I've,

no, I sound like, I mean, that's next. I'm an LP in 20 funds now. I'm an LP in 20 funds now. I like, I kind of now am thinking about this like, oh, if I give this, and I just put in 50K or something, you know, would love to put 50K on your fund. You know, and I do it like just, you know, just for friends to support them, whatever, me, a little deal flow and maybe sharing LPs down the road kind of thing. But I also think, oh, now they're going to come back in three years. Okay, so it means basically I'm committing to 150. If I was putting 50K in each fund, okay, if they do it every three years, I'm up for 150 a decade. If they're doing it every two, two and a half, maybe I'm in for 250, okay, what should my bet size be here? Maybe it should be 25K, not 50K.

But at least you're that LP that's thinking in three year increments instead of, or in three fund increments, rather. I think it's the right way to do it for sure. Yeah. Let's pivot a little bit to your allocation, because it's true, we have turned this into LP Talk, which is so fascinating. But as you are meeting with companies, talk to us about deal flow as a first-time fund manager. You were at 500 startup, so you know people. But like, how has that been? Is it easy? There are people coming to you? Yes, but that doesn't mean that you shouldn't go out and hunt for deals. So, you know, I'm lucky. I have been in this business for long time. I started Black Founders. I've been at 500 startups. I have a really great network. You have a Twitter brand too, which is something we talked about in this series a lot.

Branding matters. Branding definitely matters. I have a brand. People know who I am. People know my name. And so that's a good place to start from. But I'm always thinking about, okay, well, how do I get better? How do I make that deal flow funnel even better, even stronger? right? And sometimes it's, okay, well, what about these VCs that I really like, who are slightly later stage? What about creating relationships there? What about creating relationships with other early stage VCs that I don't know quite well enough yet? The thing I think is that I've done differently for Cake Ventures in particular is, you know, we talked about my white paper, gray new world on the last, the last time I was on the show. But it's,

really putting out more and more writing and insights about, you know, what I think around demographic change and talking on podcasts about demographic change and, you know, really having a really steady drumbeat that tells people what this thesis is about and what types of companies that I'm looking for. And, you know, I've seen time and time again that, you know, a founder will reach out and say, oh, I read your white paper gray new world or I, you know, saw you on that AARP podcast or on that panel. You were talking about aging and here's what I'm building in the senior care space. And, you know, those types of things.

And that's, again, it's more branding, but it's really important when you're starting out a new fund. To not just like rely on the network, which is a thing that has worked for for a very long time for me. But, you know, you don't want to get too complacent. But you're branding within a vertical. which is different than just generic branding. I think that's a key insight here that I have, which is, hey, if you're, Molly wants to do climate, so she's doing every Sunday on this week at startup,

she's interviewing somebody in the climate space, you're doing this aging and this silver market, you know, it's like a really cool group of people. If you make content around that aging and, you know, what people do in retirement, my lord, it's such a great way to let those founders know, hey, there's a short list of people who care about education like Lorraine Powell Jobs and Emerson Collective

are really active in education. So anytime anybody brings up an education startup, their name comes up. When people say SAS, David Sachs' name comes up. With yours, and now with aging, it's really cool that people will think of your name, huh? Yeah. Yep, definitely.

Except you have to put content out in three verticals that are all pretty big. You got to feed the machine. The content beast. for people who don't know who are listening, Monique is a black woman in venture. So I guess we have to ask you to explain Joe Lonsdale. I'm kidding.

I started a tweet. Please stop asking black people to explain Joe Lonsdale. When the Wall Street Journal thing came out like behind the circle, I was like, this name sounds really familiar. And our producers put the tweet in the prep and I was like, yep, that's where I remember it from. It's not murder that you committed on Twitter. let's put that aside for a second and talk about the bigger issue.

You and I have had many private conversations about this. Hey, we were doing even this series. And if I had done this series five years ago or 10 years ago, certainly, I mean, it would have been a struggle to find five women of color who were working in venture, let alone starting their own funds. So maybe you could talk to the audience and candidly how things have changed in your time in the industry and how that impacted your ability to raise this fund. Are things getting better, a lot better, slowly better, dramatically better?

Yeah. I mean, tell us what's, you know, really happening. When I started In Venture, there was really one visible black woman in Venture, and that was Lisa Lambert, and she was at Intel Capital, and that was it. And so there weren't a ton of examples. of black women at firms or certainly starting firms that I could pull from as like, oh, I want to be like that person, right? And there's, you know, this saying you can't be what you can't see.

But for a lot of us who are starting firms now, we had to be what we couldn't see. Like we had to like believe that there was a path to a successful fundraise, a successful like running your own firm. and we just had to like believe, have the belief that we could do it. And so there was a lot of believing what we couldn't see, what was not visible. And now I think that there are a number of visible black women fund managers like myself and Arlen Hamilton and the folks at Fearless. And so many people now they, I mean, I see so many, but like I could practically count them all off on a couple of hands. So many in the fact that like many more, not enough.

Not enough. Yeah. And so, you know, the industry has changed quite a bit in that regard. I still think, you know, there are, we've still got a really long way to go. Black women fund managers are not raising the size funds that I think we should be raising. You know, we were compared to our peers. and I think that, you know, we should be able to raise much larger funds than we all have. I think there's a stat that came out of Black VC today that said that black fund managers in general,

not gender specific, but raise 46% smaller funds than their non-Black peers. And so, you know, you add the gender lens on top of that and, you know, it's pretty dismal. but we're out here and we're executing and we're investing in great companies. And I have to believe that we are going to all raise much bigger funds than we all have today. I mean, it would be a fool's errand if you do what I do if I didn't believe that. Well, I mean, it also is if there, if black women weren't supported to start funds, then all of them are going to be on their first fund or maybe second. And so the first funds and the second funds, as we talked about, are those smallest.

So sometimes you see the change, but it's not reflected in the dollar amount, but you could see the quantity early. I see this with a lot of the discussion around fundraises and say, oh, you know, dollars allocated to this group are very small. And I say we have about how many deals? Because when you look at the Y combinator stats, the deals in those early stage companies, we're starting to see a lot more diversity across all vectors, gender, race. But the dollar amounts, yes, you could, that's an overhang,

six, seven-year-old companies are raising a billion dollars, and that's the entire totality of accelerator investing this year. So one deal can skew those numbers dramatically. What about with LPs? We do see LPs have a mission, a mandate in a lot of cases to get more diverse. They've been holding a lot of the traditional funds to account. Like, hey, we're visiting your team page. No women, no people of color.

Like, really? like kind of making it hard for us to give you the next billion dollars or hundred million dollars. And then also climate and all these other issues. I think a lot of the funds and endowments are starting to think, hey, we're responsible for allocating capital. We need to put pressure on folks to do the right thing here and to make some change in the world. Did you feel more supported by LPs now, you know, being a black woman or maybe that's a misnomer? No, no, not really. Not not.

Not, I don't think we're that far along, we haven't, we haven't come quite that far yet. Haven't crossed that Rubicon yet. I think, I think for me, you know,

the LPs who got it and who understood what I was building really understood what I was building. It's been a lot of time with me. And there were certainly, you know, I was raising in 2020 during the height of

George Floyd and the black squares on social media profiles and all of the pronouncements about what people were going to do and how they were going to allocate capital. And I would say that very, extremely little of that has ended up in cake ventures. And I think that sometimes people see a black fund manager and they assume that that fund manager is only going to invest in in black entrepreneurs. And I would say that I invest in more black entrepreneurs than the average fund. And my deal flow is more diverse than most people. But that's not part of my fund thesis necessarily. And so I think a lot of those people were disappointed by that and that they wanted to see. They wanted a one-stop shop. They wanted a one-stop shop for

their diversity theater. Yeah. And I didn't deliver that for them in the way that they wanted it to be delivered. And so I think, but if you look at my portfolio, it's like 60% underrepresented founders of some sort, whether it's LGBTQ or Latino or black or women or whatever. And, you know, I don't expect that to, to change. But the fact that I couldn't give them like the one two diversity punch headline. Checkbox for their.

Still going to have to keep working, guys. Metrics. Yeah. Right. Well, yeah, I mean, I've heard it said many times by people in the venture industry that if you want this industry to change, look for the LPs to change it. Like if they wanted, if they wanted this industry to change, they would snap their fingers, right? Yeah. Exactly. No, if LPs wanted, you know, you know, name a firm to have more black investors, then they would just say, we're not going to invest in your, in your next fund until you have more black investors. But, you know, I think that LPs are not willing to take that risk that they'll be isolated out of the next fund and someone else will get that spot if they make too much of a, if they make too many waves with existing funds. So I think it's going to take a lot of soul searching on the side of LPs before that kind of change. I think that's very true, by the way, because if this fund is oversubscribed, and there's a line of people trying to get in

and this fund tends to quadruple people's money on some regular basis, cash on cash. You lose your allocation in number eight. You're out until, I don't know, maybe you you're out forever. Yeah, exactly.

Never get back in. So there is this sort of exclusivity. I do see, you know, I can sort of white man's plain this from the inner chambers. Like these funds are scared to death of their team page, especially over the last couple years.

And they are trying to get their house in order real quick. And so you, the problem is to be a GP and a fun takes a decade, right? And so you build this little club of five dudes, you know, and they've been playing cards together or golf or went to Stanford and like nobody swaps in or out. They don't have a partner, but every 10 years. And so there's a lag. what you see is the next tier is down. Okay, well, look at all the associates.

Look at all the researchers. Look at the diversity in that group. And so... And, you know, candidly, the senior level black investors, you know, the Charles Hudson's, the low tonies, the Monique Woodards, we decided to not play that game and wait around.

We're not going to wait in line for someone to, like tap you on the shoulder and say that, okay, we've chosen you and now you get to become a GP at this firm. No, we're just going to go out and build our own thing. We're going to build our own table. So much more efficient. Yeah, I mean. Yeah. If you were at a firm and it was a $150 million firm, you'd have $25 million to invest. They would have just chopped it up six ways. And then you'd be in a room trying to convince a bunch of people that they don't understand this vertical, this group of people, how they think. It'd be a waste of time.

You're better off just making your own decision. Exactly. Exactly. And building a firm that is going to be the firm of tomorrow, right? Right. We're going to be those firms, you know, in five, seven, ten years. And so why not just short circuit that and go for it? How big of a team are you building?

Because with a fund like this, I've been through this myself. And the management fees on $10 million, not that much. Then you get up to 25, you got a little bit of extra. of money to hire a couple of people, but not an army. So how do you think about building a team? Obviously, the next fund will be double or triple a size. But with today's fund, you get an associate, get a researcher, get an assistant. How are you thinking about building out your team? Yeah. So for fund one, it'll be myself and ultimately an associate analyst sort of person. But I expect to, you know, pretty quickly build AUM in the next fund. And then eventually I won't be

a solo GP. I'll probably bring on, you know, additional. senior level investors and bring those along too. So I'm definitely interested in growing the bench and growing AUM and not just running a fund, but actually running a firm. And so that takes people who think differently than I do and who have different points of view than I have. Awesome. What's AUM?

Assets center management. Thank you. So when you have launch fund one, 10 million, launch fund two, 11 million, launch fund $34 million, put the three numbers together. You have $65 million in the first three funds and then take the other whatever we put $100 million, $150 million from the syndicates together. We have $200 million under management.

And then every year that goes by, hopefully you would still get some fees on that. So when these funds stack, you might in your three or four be getting 2% or 1.5% of that first fund. And then now you're getting 2.5% of that first fund. points or three, you know, on the new fund. And then there's another fund. And so they start to stack and layer like a cake. And you might have some more management fees that you can, you can build out your team. Or you could do it my way and just have a profitable podcast to pay

for it. But, you know, eventually, you know, you start to get, I mean, literally, the first fund I did, I just charged 20% carry and no fees. Because it was like, what am I going to take? Two percent of ten million dollars? Nothing. And that is the trap for a lot of these young funds is they don't have any fees to run the show. You really got to get to 25 million minimum to have some fees that actually can pay somebody's salary or for some decent expensive. Exactly. I mean, it's not easy being an emerging manager. Yeah. Before we let you go, will you tell us about your top portfolio companies? What are your favorites? Your babies. Oh, I don't have favorites. How about ones that are, how about ones that are

in the news that we should know about? have one of my first investments. Actually, can I? Yeah, sure. We can always edit it out. If you're the boss now is the thing. Well, the founders are the boss. I invested in Sarif, which is a LGBTQ plus community. So they're building the first vertical social network for LGBTQ. you. I'm super excited about them. Brian is the CEO and I think that he's one of the smartest people

that I've met. And people have been queer online for a very long time, but having your own space and your own social network for that has been, has not really, you know, taken off. But now, I think we're at a point in time that we're ripe for that kind of company. And, not only is it about social connections, both online and offline, but it's also about where do you go to find a queer-friendly medical provider, or where do you go to find a queer friendly, uh, officiant for a wedding or an adoption service? Um, so I think that, you know, being able to be the hub and spoke for queer life, um, is such a great idea, building itself into. It's such a great idea. We, I was actually going to invest

in fab.com, which came out of Fab.com. I remember fab.com. Yeah, and then the founder called me, said, hey, J-Cal, I know you're going to put 100K in. I'm pivoting. And I said, okay, what's the pivot? Because I had logged into the system, and it was like, woo, this is fabulous. Like, this was a party. Like, people were really into it.

And he said, yeah, you know, I don't know if the social network's going to work or not, but we are going to start doing flashels like Von Preve and these other things that are, you know, of the moment. And it became worth a billion dollars. and then came quickly back down, it didn't work. But I always loved his original idea of fab.com. Yeah. I have to check.

So how do you spell that? Seraph as in S-E-R-I-F. As in S-E-R-A-S. Very good. Dot space. Oh, okay. Well, we'll look forward to that. I guess it hasn't launched yet.

All right, listen, continue success. I can't wait to see it again in person. We'll have an All-In Summit again. We'll have you speak. We'll be the pandemic will be over. We'll all pop some, bring some yellow label, get that Vof Clico out of the fridge and have a nice glass of champagne. Congratulations on the new fund. And hey, maybe that associate is out there listening now and we'll pitch you on becoming an associate at the fund.

I hope so. Looking for hungry, talented people. There's a lot of talented people out there and, you know, you got to choose wisely because you're going to have such a small team and they represent you. So it's not easy. Yeah. You got to really be thoughtful about it, right? Mm-hmm. Definitely. Hiring. Hiring is hard. All right, everybody. Thank you so much. Great to meet you. I've been a fan of yours on Twitter for a long time. I also am excited to have champagne in person eventually. Yes. Very similar. All right. We'll see you all next time. Bye bye. Bye. Bye.