I asked some investor friends to share, as the title suggests, one thing they wished people better understood about venture capital. There were no ground rules other than to specify that ‘people’ could be founders, politicians, LPs, etc and that it would be default attributed but anonymous if they desired. Reporting out in batches of five. Here’s Part III:

The term “VC” is a convenient, encompassing term, but it is an ambiguous categorization. For better or worse, “VC” is a disorganized, unruly, messy set of people and firms whose emergent behavior about important things does not converge. When folks want to vent/disparage VC they should feel free to use the ambiguous category. When people want to better understand it to raise capital from folks who can help, they are best served accepting the annoying bespoke/boutique nature of it and handling it accordingly. [Anonymous/Large Multistage VC]

[Hunter: I don’t believe this was specifically what they were referring to but I’ve noticed VCs hate when the press says/implies “all VCs” and press hates it when VCs say/imply “all reporters” ¯\_(ツ)_/¯ ]

I wish more people understood that VC’s have investors too. Called “LPs” or Limited Partners. The VCs will invest on behalf of a group including individual investors, endowments (like universities), financial institutions (like Banks) or Non-Profits. With a few legendary exceptions (like Hunter and Satya) most VCs haven’t had the personal success to deploy millions into startups. They have to fundraise just like startup founders. In exchange for managing LP money, a VC firm will get up to 20% of the amount raised as a management fee (even if every startup they fund fails) and on top of that, will earn 20% of any profits. For example, if a VC fund has $100M dollars under management, the firm is getting paid 20M over the course of 10 years just for setting it up.

You must follow the money to understand incentives! VCs are investing other people’s money – employed by a firm, taking a salary…working a JOB. They usually don’t have the same risk tolerance as a founder. A VC firm’s fiduciary responsibility is to their LP. When you read a thought leadership blog post from a VC – is it actually advice for founders… or is it to establish expertise so LPs keep giving them more money? Founders should not put VCs on an unnecessary pedestal! If you are relying on a VC’s insights to build your startup, you are playing with fire. Don’t take their advice too seriously, and don’t take it personally if they don’t invest in you – there’s an unseen set of stakeholders at play. All money is green. [Maya Bakhai/Spice Capital]

[Hunter: Incentives make the world go round! Sometimes folks will say VCs’ true customers are LPs, not founders. I’ve always thought about it a bit differently: LPs are my partners, not my customers. I wouldn’t be in business without them (historically) and value their needs, but I have the agency to run my business the way I want to, and work in service of our investments.]

So much has been written about venture-backed startups and particularly about the most successful outliers. Yet despite our collective fascination with those awe-inspiring stories, it’s still under-appreciated to what extent power law governs venture capital. It’s not always intuitive, but a small number of companies, led by exceptional entrepreneurs, determine the financial performance of the entire industry. Finding and investing in those select few is an obsession and ultimately a craft in its own right. [Paris Heymann/Index Ventures]

[Hunter: I think there was some data which showed that every fund they tracked which hit 3x net returns had at least one 20x outcome. As Paris suggests, slugging percentage tops batting average.]

I wish more founders understood that the power law and power law style growth drives all behavior from VCs. Accordingly, if you’re building a venture backed startup and/or want to raise venture funding in the future, you have to architect your company for a growth rate consistent with a power-law style business in mind. Of course, foundationally strong unit economics are critically important for a business to be durable, but growth and ability to paint a larger-than-life future for the startup lead to more excitement from VCs than every other factor. 

As an extension to this, I’d urge all founders to read Paul Graham’s post: Startups = Growth. To quote PG from his famous post: “If you want to understand startups, understand growth. Growth drives everything in this world.” [Nakul Mandan/Audacious Ventures]

[Hunter: I put this one next to Paris’ because they’re so similar. Founders who take traditional venture capital should assume their goal and expectations are these sorts of outcomes. At the same time, venture investors need a degree of patience and conviction to support companies as they figure themselves out, and the grace to be constructive even when it doesn’t seem a specific investment will achieve outlier results.]

That the act of investing — esp. if building a firm vs. a GP in established platform — is often a very small % of how a VC spends their time. 

Raising capital, recruiting talent to the firm, managing people, investing time + resources into brand-building (still the single most important moat in venture), etc. — all take place *in addition to* partnering with and supporting founders. 

Necessary to understand the firm and who they want to be — that will dictate how they spend their time. [Eric Tarczynski/Contrary]

[Hunter: One of the reasons we never wanted to grow Homebrew very large -and- in 2022 declined to raise a traditional next fund (investing our own capital instead), is that our goal is to spend as much time as possible with founders we’ve backed and founders we might back. Plus time togerther as a partnership working on getting better, not just operational overhead. These choices come with different tradeoffs but they’re our north star. ]

Part I: Andre Charoo, Bill Clerico, Ryan Hoover, Amy Saper, and Dan Teran.

Part II: Victor Echevarria, Chris Neumann, Micah Rosenbloom, Alexa von Tobel and Roseanne Wincek.

Part IV coming soon….

I asked some investor friends to share, as the title suggests, one thing they wished people better understood about venture capital. There were no ground rules other than to specify that ‘people’ could be founders, politicians, LPs, etc and that it would be default attributed but anonymous if they desired. Here are the first batch of responses (with some of my reactions). More to come in batches of five answers each post.

The beautiful truth about the game of VC is that it consistently rewards difference. This difference comes from the outlier returns driven by backing founders who are different. Of course, difference inherently carries risk. Despite this truth however, institutional LPs aren’t incentivized to take that risk. I wish the structure behind institutional LPs were more conducive to backing GPs who are different. Because, in turn, these GPs will back more founders who are different, which will lead to more outlier returns, which ultimately leads to more products and services that change the world. [Andre Charoo, Maple VC]

[hunter: 100% agree. The majority of established venture firms are evolving into large asset managers, and this creates space + opportunity for all sorts of new strategies, the best of which will absolutely outperform, on a multiple basis, the entrenched. It’s part of the reason we started Screendoor, a fund of funds aimed specifically at new VCs. And we’re proud backers of Andre/Maple.]

There are many ways to play the game in VC. Knowing your strengths and which game to play is critical when managing a fund (and more broadly, any professional endeavor).

Some investors get pulled into different games, perhaps unknowingly, through their career as a manager. One of the biggest “traps” is in escalating fund sizes. Deploying a $10M fund is wildly different from operating a $100M fund. It can be alluring to raise more capital in each consecutive fund, but doing so often requires the fund to deploy larger checks, shifting their position as a collaborative investor to competitive player among peers. Now they’re stuck fighting to secure the lead position in a round and sourcing companies earlier in their fundraising cycle. Some will succeed in this transition. Others won’t. [Ryan Hoover, Weekend Fund]

[hunter: The gravitational pull of venture is to grow each fund larger than the last. And it’s often to the detriment of everyone involved, but especially to the detriment of founders and LPs. I’ve been a personal LP in every one of Ryan’s funds and part of what has always impressed me is his understanding of these tradeoffs in strategies and incentives.]

There is a large contingent of the venture ecosystem that believes “the best founders don’t need help.”  In my experience as a founder and as an investor, this is not true.

The road to building a large business is paved with opportunities to kill your company through inexperience. This is especially true in the early days.  While it is not the job of the investor to build the business,  preventing terminal mistakes can be there difference between a 0 and a $1B+ outcome.

In reality, everyone needs help.  Whether or not investors are qualified to provide it is probably the right question for founders and LPs to be asking. [Dan Teran, Gutter Capital]

[hunter: We backed Dan when he founded ManagedByQ and are personal LPs in both Gutter funds, so I’ve gotten to see him on ‘both sides of the table’ so to speak. My POV here is that we seek to invest in founders who have an outsized chance of succeeding without our help, and then try to increase the probability and velocity of their success with our assistance. As Dan also notes, self-aware uninvolved but ‘do no harm’ investors are much better than those who offer help that is either (a) inconsistent, (b) incorrect or (c) self-destructive.]

Venture capitalists arbitrage risk by raising capital from risk averse institutions and using it to back founders in highly risky endeavors (with potential for outsized return). This requires a sometimes difficult translation – and so most firms end up focusing on one vs the other. But if you become too LP-centric, you build a soulless asset manager that turns the best founders off. Don’t learn to speak LP and you’ll stay a small fund forever without the ability to be a significant partner to founders. [Bill Clerico, Convective Capital]

[hunter: So there’s clearly a ‘bias’ in the sample set here, caused by my own interests and networks, but I think it speaks to the mindset of those VCs who decided to start their own firms, versus those who joined existing large shops.]

The frequently overlooked importance of “founder-investor fit”
I’ve been an early stage venture capitalist for five years at two very different firms, Accel and Uncork Capital, and have gotten the chance to collaborate and co-invest with VCs at dozens of other firms across a large range of AUM, stage focus, sector expertise, and portfolio support. One element of venture capital that I don’t think is discussed or appreciated nearly enough is “founder-investor fit”.

Founder-investor fit involves ensuring that a particular VC (both the individual partner and their firm) aligns with the specific needs of a founder, as not all investors are the same. What many founders don’t understand is there’s no singular ranking of the “best” VC for all types of founders. It’s important to think deeply about what level of support you’re looking for, what specific activities you’d like involvement in, and what kind of relationship you want to build with your investor. My advice is to conduct thorough reference checks on potential investors (mainly with founders they’ve backed), understanding what other founders sought in their founder-investor relationship, and how the investor in question delivered based on those expectations. Some founders may prefer a hands-off investor with a large personal brand, others may want specific help planning their GTM motion and intros to key customers. It’s crucial for founders to identify what they need from a VC, and reevaluate these needs at each funding round. [Amy Saper, Uncork Capital]

[hunter: So true, especially at early stages of a company. I also believe that many VCs aren’t incredibly self-aware about what type of founders they’re best suited to work with – either because they don’t want to ‘disqualify’ themselves from any portion of potentially successful outcomes; not many venture firms provide great mentorship, feedback, 360 degree evaluations; and the dynamics between founders and their investors often don’t allow for honest open conversations.]

Another five to come soon!

“You see, I was hoping to work on Saturday Night Live.” That was my request of the NBC Human Resources department when making my case for a 1994-1995 internship. Enough years have passed that I don’t recall whether I received an actual verbal response or just an extended eye-roll. But I do know the choice they offered me instead: The Phil Donahue Show or Late Night with Conan O’Brien.

Familiar enough with Donahue from my NYC suburban upbringing I picked Late Night, opting for a personality that seemed more edgy, more provocative, more current. Only recently did I learn how, in his own right, Phil Donahue also deserved those descriptions.

On a recent The Daily podcast host Michael Barbaro recounts his love of The Phil Donahue Show and in doing so, served as my professor for where the host fit in journalism’s history. The answer? Much more groundbreaking than I’d realized. Beyond longevity, Donahue played a critical role in elevating and involving the studio audience, not as props, but as people with opinions, questions, and concerns that were of equal importance to his own. He believe in standing up to the powerful and creating space for dialogue. He followed up when someone dodged, and pushed back where appropriate. He made room for celebrities and politicians, but also regular humans (if not average ones). Oprah has said there’s be no “Oprah” if there wasn’t first a “Phil.”

There’s much more in his obituary, but I’ll end with this quotation which summarizes what he was striving for: “We were looking for a cacophony of voices, not a well-trained choir.” This was what he thought democracy deserves and requires.

Thank you Phil. I’m sorry I didn’t get the chance to work for you.

I am reluctant to call someone a ‘friend’ unless the relationship has crossed the threshold honoring the depth of commitment behind the designation. By that framework I started out as a ‘fan’ of Javier Soltero way before we became friends. It was his mobile productivity startup Acompli (later acquired by Microsoft) which first caught my attention. The state of email and calendaring apps at the time was depressingly basic despite the importance of them in day-to-day work, so I was an enthusiastic adopter of whatever developer was building for power users and not simply ‘making an app version of the existing web interface.’

Our journey from ‘fan’ to ‘friend’ had a substantial time lag – an intermediate period of friendliness – but I’m comfortable we moved to the F word a few months back after a nice walk in Marin. It was our first time outside of DMs, emails, texts, and we learned a lot more about one another. That increased my desire to continue probing, and, share it here, via Five Questions. There are some real gems about technology careers, entrepreneurship, and so on. Enjoy!

Hunter Walk: We both started our Silicon Valley lives in the late 90s, you most notably at Netscape, which was obviously important and influential. Did it feel that way in the moment – that you were at the origin point of something quite transformational – or more so only in hindsight? 

Javier Soltero: Short answer is yes, it felt like something amazing was happening and it was great to be a part of it. On a personal level, the idea that I had started my first professional job in an industry and an area that I had been so passionate about since I was a kid growing up in Puerto Rico. I suspect a lot of people my age who entered the industry at that time and who were not from California felt similarly. 

More broadly, that time represented an interesting time for the industry and its relationship to its enterprise customers. My time at Netscape coincided with the moment where almost every company in every sector had determined that it needed to invest heavily in internet infrastructure (email, calendaring, proxy servers, application servers, and more). However, as I spent my first year working in Netscape’s nascent professional services group, it became clear that most companies were neither ready to embrace this big change in their approach to technology nor particularly clear as to why they were doing it in the first place. It took at least another 5 years and the dot com crash for this to sort itself out. 

HW: I’m sure you get hit up for career advice all the time. Are there things you tell people to consider, or frameworks you recommend, which apply almost regardless of the circumstances? For example, I believe it’s really important to know what you’re optimizing for when thinking about the next phase of your growth. 

JS: The most general yet useful bit of career advice I often give is for people to look at the progression of their career as a story, and do their best to make the story compelling. This applies to the decisions that people make about future opportunities as well as the way they talk about and derive wisdom from their past experiences. 

I’ve noticed that many people who are evaluating new opportunities understandably focus on the specific change between what they’re doing now and what they’d be doing next. I encourage people to think through their larger story, how they developed their interests and specialties, how they evolved as leaders/managers, what they learned from their own mistakes as well as those of others around them. Whether they realize it or not, everyone has or is developing an interesting story. It’s critical to learn how to tell it and how to evolve it over time.

The most of the critical choices I made in my career were made with a healthy amount of emotion and gut and would not likely survive close, rational inspection. Yet each step in my career, from my early mistakes in college all the way to the work I’ve done at Microsoft and Google all tie together in a way that, at least to me, tell a much more interesting story about how I’ve developed over the years. 

Years ago after Microsoft acquired Acompli I was asked to come tell my story at Carnegie Mellon. Their initial expectation in extending the invite was that I’d go up there and say something along the lines of “well, I went to this great school, got great grades, moved out west, started and sold a couple of companies and now here I am”. As I reflected on what I really wanted to say I ended up having to warn them that my story was a bit more complicated, starting with the fact that I got such horrible grades my freshman year that I was asked to take a year off to “re-evaluate my goals”. In the end, I got my act together, returned to CMU and moved on from there, but I could not pass on the opportunity to tell the story in a way that to me really highlighted the lessons. 

The talk ended up being about how at each step of what looked like a perfectly planned and well executed career, there had been doubt, mistakes, and irrational risk taking that really provided the lessons that are worth sharing. The talk was called “I never learned to spell successful” (which is true, as a non native English speaker I often drop an extra L at the end). 

HW: You’ve been a startup founder as well as an executive at larger tech companies. When hiring into teams in each circumstance how do you assess fit differently? Especially if, say, it’s someone who has only done startups making the case they now want to be at a BigCo, or even more commonly, the BigCo person wanting to join a startup. Do they ever really know what they’re getting into?

JS: I’ll start by saying it’s absolutely critical to know whether someone has or hasn’t worked in a startup before and to understand whether the majority of employees at a startup have prior startup experience. I don’t believe that lack of startup experience should rule someone out from a job at a startup. People who have the right skills and experience can be successful in both environments and just need to have their expectations about the job calibrated accordingly on their way in.  

Even more important, the hiring manager and the founder/CEO should ideally be aware of the implications of having an employee base where a large number of people have never been through the experience of being in a startup. The uncertainty and risk are obvious factors, but perhaps even more important is the level of visibility and information that employees at startups tend to have about how things are going. The founder/CEO has to make a choice about how/when/if to be transparent about the things that are happening (good and bad) and the level of startup experience within the group will be a critical factor in whether the decision to be transparent turns out to be a good one. 

Here’s a couple of examples of this from my personal experience:

As a first-time CEO of Hyperic back in 2007 I had made the choice to be very transparent with our growing team about the financial objectives of the company and specifically the quarterly sales target. As the company continued to grow and meet or exceed these targets we chose to celebrate the progress openly with the company like many other companies do. At some point I noticed a change in our culture. People in the company seemed to be behaving in a way that suggested we had somehow “already made it” and were starting to show signs of entitlement and lack of perspective. As a person who bootstrapped the business with my co-founders for the first 2 years, this did not sit well with me. I ended up choosing to ask two simple questions at the following all hands: 

One, who here has worked at a startup before? 

Two, what percentage of our paycheck comes from customer revenue vs. investor dollars? 

I learned most people had never worked at startups and pretty much everyone thought more than half their paycheck came from customer revenue. Both of those questions and the conversation that followed proved to be a very effective way of preserving the drive and energy in our culture while keeping folks grounded in the reality of early stage companies.

Years later as CEO of Acompli, I knew I had hired an excellent team of startup veterans, but crucially none of them aside from the founders had seen success. In fact most were quite jaded about prior startup experiences that resulted in companies going out of business. Once again I chose to be as open and transparent with the team as I could from the very beginning and when the time came where we were in active conversations with Microsoft about an acquisition, I made the tricky choice to level with the team about where things stood throughout a pretty unique negotiation process. Through the negotiation, we passed on offers that would have been very consequential to every employee but did not reflect the real value of the company. As we discussed this with the team (something that is HIGHLY risky) I was surprised by how strongly the team felt about the decision to only sell the company for the right amount and the right terms. In that same conversation, I was open with the team about how difficult it was to ask for so much money for a pre-revenue company that had only existed for 18 months. Our iOS lead weighed in with a simple observation: “Javier, how many Microsoft apps do you have on your home screen? Answer: None. How much do you think it’s worth it for Microsoft to get a slot on the home screen with our app?” The rest, as they say, is history and I’m proud to say that hundreds of millions of people have Outlook Mobile on the home screen of their iOS and Android devices.

HW: Google’s former CEO Eric Schmidt (who, disclosure, led the company for most of my tenure and was someone who really helped me along the way) was recently quoted in a class at Stanford as basically saying the company had gotten soft (although he clarified this later) You were at Google HQ during a pretty charged 2019 – 2022 period – was Eric’s critique fair?

JS: I only experienced 2019-2022 Google, so it’s hard for me to compare that against what Eric and many others experienced in its first decade of existence. I will say that a lot of tension arose from Googler’s expectations that the company’s culture had to be exactly the same as what it was when the company was one fifth the size. Even people who never witnessed that era of Google seemed to have a strong allegiance to customs and norms that simply don’t scale to a company of over a hundred thousand employees. Yes, there are elements of a company’s culture and values that endure even after decades of spectacular growth, but the way those elements are manifested and the way they influence the day to day operations of the company has to constantly evolve. 

To put it in perspective, I joined Microsoft at a critical time in its history, within the first year of  CEO Satya Nadella’s leadership. It was a time of tremendous change and tension within the company. As a leader who came from outside, I encountered plenty of tension and resistance and even more support and curiosity from even the most tenured Microsoft employees. In the end what made those first few years possible and gave us the Microsoft that exists today is simple: Satya made it clear to the company that we had to change. Microsoft’s culture enabled that message to be heard loud and clear and made the space for many important changes to occur. Google, by contrast, has not been as clear about that. 

HW: One last, more personal, question. What’s something you care about that you wish more people understood or supported? 

JS: Simply put, the impact of technology and device use in children and teens. I know this is a topic that many people are at least hearing about, but I truly wish this was better understood. As a career technologist, I am and always will be fascinated and supportive of any technology that can help us live better lives, achieve more, be entertained etc. However I also bear witness both through my own children as well as those I see around me that the use of devices as a distraction for children requires real discipline and a better understanding of how to employ the parental controls in order to avoid the many negative effects that excessive phone and tablet use can have on kids. 

Most parents agree that they’d love to be in more control over the technology used by their children but few I’ve come across are even remotely familiar with the basic things you can do to control the amount of time spent on the phone as well as the apps they have access to. I’d know we’re making progress when we see Apple and Google highlighting screen time/parental controls in their commercials with the same level of energy they devote to the quality of the camera in their phones.

Thanks Javier!

Sunday reads (and a listen) for you

What It Takes to Raise a Series B [Ted Wang/ICONIQ] – Ted Wang, now investor and previous lawyer (creator of the Series Seed doc template), tackles what he looks for in a Series B investment. B Rounds are the toughest financings right now IMO for a variety of factors so it’s refreshing to see someone put real quantitative goalposts around them, despite the moving nature of said milestones. His focus is around efficient growth but still growth (min 2x ARR YoY, NRR >100%, Gross Margins >70%).

Betting on Theaters, Embracing Tech, and ‘Wicked’ With Director Jon M. Chu [Matt Belloni/The Town podcast] – What a great conversation. Chu is a Silicon Valley native who embraces technology but doesn’t believe it’s a replacement for art, culture, story telling. This tight 30 minute pod covers a ton – from AI, to the Hollywood System, ethnic representation, and why you need to be rebellious. HIGHLY RECOMMENDED.

So You Think You’ve Been Gaslit [Leslie Jamison/New Yorker] – History of the concept of gaslighting, what it actually means (and doesn’t mean), and how its popularization occurred in recent years. The term actually dates from a 1944 film called Gaslight!

Hate to break it to you, but your team is full of under-performers [Molly Graham/Glue Club] – So much gold in Molly’s newsletter.

Hire leaders with at least one 5+ year run [Harry Glaser/Modelbit] – Repeat founder Harry Glaser sharing his own criteria around senior leadership hires. As Vinod Khosla says, “the team you build is the company you build.” After sharing some of his mistakes (“hiring for the resume when I knew in my gut it was a bad fit. The dopamine hit of showing the board and the early team that you hired someone with a big title out of Nvidia or Salesforce is real, and it comes back to bite you every time”), Harry elaborates on his checklist. I’ll put the headlines below, but he elaborates on each of them so I’d suggest clicking and reading.

Hire leaders with at least one 5+ year run. 

Meet three A+, out-of-your-league functional leaders to see what greatness looks like.

Hires from your network have pros and cons, but on balance they’re worth it.

Do extensive backchannel references.

Listen hard for “lightly positive” references.

The interview is about what kind of human they are, and whether you can communicate with them.

The right answer is “it depends.”

Accept no bullshit.

Board referrals are often favors to someone else. 

Retained recruiters just want to get the hire done ASAP.

The biggest risk is the feeling that you must fill this role right away.

Enjoy!

A product executive colleague at Google once joked he was basically an email router; that most of the problems they solved were largely about sending or forwarding a message with a small amount of value added. Certainly my life as an investor has me doing a bunch of this as well. I’m actually quite particular about how, when, and why I’ll make (or decline) an introduction request (as the middle man) but that’s a separate post. Here I’m creating a URL I can send to people when they ask me for best way to make an introduction. Blog as archives!

From Bloomberg Beta’s Roy Bahat: “Introductions and the ‘forward intro email'”

From Foundry Group’s Brad Feld: “How to Write an Intro Email Request”

From Me: “A Strong Cold Email Always Beats a Weak Warm One”

Your lemons tend to ripen before your cherries. That was the advice an experienced seed investor gave me when we founded our own shop Homebrew. It’s a colorful (and delicious) way of describing what’s commonly known as the performance ‘J curve.’ Sometimes you get lucky and have outsized exits early in your fund’s life – these are helpful for brand momentum and recycling – we had one in Homebrew Fund 1 with Cruise (I guess also IRR positive even though it’s really cash on cash that matters). But for the most part, your realized losses occur before your realized gains.

I’m a personal LP in a wide variety of venture funds. Often because it gives me exposure to areas we don’t invest in directly, or as a way to support and learn from friends. Below I’ve take a screenshot of roughly the last ~18 months in my AngelList VC account. You can decide whether ‘using AL’ is a positive or negative selection bias – it usually means just smaller, younger firms so definitely likely more performance variance and lengthly periods to meaningful outcomes. Most of these funds I’m probably making $10,000 – $50,000 investments in (just to provide a scale of what 1x needs to look like versus the numbers below) and I think they represent about 25% of my total LP commitments by number of funds, not by dollars.

As you see there are a ton of very small disbursements! These are mostly the proceeds from seed/Series A failures – what ‘cents on the dollar’ looks like in practice! Every once in while they’re probably interest payments from notes/dividends or escrow payments, which is less relevant.

There are three of any meaningful size (given my cost basis) and none ‘returned the fund’ by themselves – like I said, those cherries are still ripening. Two of them [$4,490 and $16,986] fall into the ‘quick outcome’ bucket – you’ll need to ask those fund managers whether they wished the founders played on instead of taking the acquisitions 🙂

The largest [$20,120] is a partial secondary transaction, and one I especially appreciated. Basically the involved GP solicited my advice about whether or not they should sell a small portion of a portfolio unicorn in a growth round where there was excess demand. Selling this portion would get them to 1.0 DPI (in combination with some earlier distributions) in their first fund and into the carry, as well as create liquidity during a period where other managers are bone dry. It was my strong recommendation to do so, for a handful of reasons:

• The still have a large amount of TVPI in this company and would benefit from its continued growth while derisking the downside a bit. It’s responsible given the fund size.
• We were at a peak in the market and the company (like most) could perform really well and still have to re-earn that valuation.
• Their LPs would remember that they were a good portfolio manager and understood not just how to get money *into* startups but out of startups as well. It would make the next fundraise for the firm that much easier.
• It feels great as a GP to get into the carry!

Now the company has continued to do well but I don’t think this person regrets what they did and regardless I stand by the advice!!!

Venture capital is an easy model to understand and a challenging model to excel at – especially with emerging managers where there’s amazing upside but also more risk. That’s one reason why we believe our fund of funds Screendoor is so well positioned to succeed for LPs, even those who also do direct investment alongside us or into other segments of the VC ecosystem.

The commitment to do “the hard thing when there’s not instant gratification waiting for you.” That’s how Screendoor’s Managing Director Lisa Cawley measures competitive spirit.

David Zhou recently featured Lisa on his Superclusters Podcast, and it’s a great listen for anyone in the business of Being a VC or Backing VCs.

Having been fortunate enough to hire Lisa to run Screendoor, I’m of course biased in this endorsement. But it’s not just me – as David leads with when referring to the backchannel research he did on Lisa for the interview: “the number of raving fans you have in the LP ecosystem is phenomenal!”

Two other sections of the pod I’d direct your attention to which I think make Screendoor especially unique (and compelling) in our backing and support of new VC firms

1. Our service model: Once we become your LP, not only do you get time from the Screendoor team (comprised of three senior investment professionals who have lived in the venture LP world for years), but also our GP Advisors [experienced VCs who have all built their own firms – representing Homebrew (us!), Forerunner, Kindred, Precursor, First Round, and ++++
2. Our investors become your investors over time: The LPs who back Screendoor represent a select group of endowments, foundations, institutions, family offices and other capital allocators committed to the venture segment. As opposed to keeping this group distant and opaque from you, we look to build relationships early and often, so as your firm matures, they can invest directly in you when there’s mutual fit. This abundance mindset gives them the opportunity to tap into the returns of Screendoor while proactively getting to know the best emerging managers and having an inside track to allocations based on the trust they’ve built with you.

If you’re a VC raising a new fund, or an investor interested in participating in Screendoor, we’d love to hear from you.