July 22, 2025 • 56 mins
Join us as Anna Garcia from Anna Garcia, shares her journey from Merrill Lynch to entrepreneurship, detailing her roles at Jefferies, JPMorgan, and her startup ventures. She discusses the 2008 financial crisis's impact on careers, work-life balance, and her dive into the startup ecosystem through angel investing. Anna highlights mentorship, relationship building, and forming Runway, exploring venture fund dynamics. Discover insights on venture capital opportunities, portfolio management, risk mitigation, and co-investment strategies. Anna addresses brand building, fund creation, and delivering returns to limited partners in this informative episode.
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Episode Transcript
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(00:00):
What do you make of this uncertainty in themarket?
(00:03):
The world is melting down.
And is true, the public markets are meltingdown.
There's a lot of volatility and uncertainty.
But at the same time, if you have capital andyou are standing by to deploy into this kind of
environment that we're potentially headinginto, that's a little bit less generous, let's
(00:27):
say, on both capital availability and I thinkjust overall kind of exuberance around what's
happening, I think across asset classes, butalso across stages and valuations.
(00:47):
I
think it's really opportune.
Welcome to the investor, a podcast where I,Joel Palafinkel, your host, dives deep into the
minds of the world's most influentialinstitutional investors.
In each episode, we sit down with an investorto hear about their journeys and how global
(01:09):
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
It'll be fun.
Alright.
So I think we are live.
So excited to catch up with Hannah.
(01:31):
I've been talking to her a lot recently.
And it's great to reconnect.
It's been a few years since we met in personwhen we first met and then we got to hang out a
few times at a couple dinners and stuff whichhas been great.
But you know we met I think yeah at least threeyears ago And you're at another fun.
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Yeah, was before the pandemic.
And, and you have a strong track record you'vebeen in venture for a long time but you came
from a traditional background as well right Ithink you came from a traditional banking
background.
So why don't we start with that?
Why don't we start with your career, yourfamily, know, where you grew up, and then how
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you broke into your career, the changes in yourcareer?
We'd love to hear all that and then we'll divea little deeper into Altari Ventures.
Sounds great.
So really going all the way back.
Sure.
Well, I'm excited to be on.
I think it's definitely been an interestingjourney, certainly for me.
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And my background's very international.
I'm Russian by birth.
I grew up in England and Denmark, and then myfamily moved to Montreal.
So that's where they live, as do my in laws.
My husband, I have a Spanish last name, andthat's because my husband is of Spanish origin.
And he grew up between Spain and Montreal.
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And so we have a little mini United Nations inhouse.
I have two daughters who are teenagers, so thatis always exciting.
It's never, I guess, a dull day, but it's allgood.
And yeah, so my background in terms of myprofessional, I guess, history is that I went
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to business school in Canada.
I got a job on Wall Street.
I worked at Merrill Lynch for most of mycareer, about twelve years.
And I went into fixed income trading andderivative sales originally, and then ended up
in debt capital markets and investment bankingkind of through the course of time.
But most of my career, I worked on a tradingfloor and that was a unique experience,
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certainly a very interesting dynamic.
And sometimes people say to me, Well, it's sodifferent.
You worked for a large financial institutionand now you're doing venture.
And what's the connection personally?
And interestingly enough, I felt that I alwaysworked in a very entrepreneurial environment on
the trading floor for very different reasonsthan what I'm doing now and what the
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entrepreneurs that I'm backing are doing.
But it was creative.
It was innovative.
Every day you came in and you had something newto work with in terms of market circumstances
and that kept it really exciting and fresh.
What made it entrepreneurial?
Was it that the traders were just everydaycompeting and trying to obviously generate
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alpha and is that what kind of generated theentrepreneurial spirit or was there a fintech
kind of developing back then to
particular role?
It was about I was covering issuers of bonds.
And on the other hand, I had salespeople.
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So I was working closely with the sales forcewho were selling to investors.
And so there was always a meeting of supply anddemand that I would find myself in the middle
of, where I was trying to create something thatthe investors wanted to buy.
And my users were frequent borrowers.
So they were essentially in the market issuingsomething every day as long as we could get to
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their pricing levels.
And if I could structure something in betweenthat made sense for both parties, that was up
to me to figure out.
And that's what was entrepreneurial for me.
I think for traders, I don't know if it's somuch, I guess, creative or entrepreneurial.
If you're just a flow trader essentially doingbid ask when people are asking you for quotes,
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maybe it's a little bit more entrepreneurial ifyou were actually trading proprietary
positions, which no longer really exist in thatform and in banking.
But there's always an element of surprise, Iguess.
You're always dealing with something that isgoing to be different than what was yesterday
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and you have to adjust.
And I think that flexibility makes it probablymore entrepreneurial for most people on the
trading floor than not.
But for me, there was this creative element ofjust essentially working with different people
on both sides, my clients on the issuer sideand my peers on the sales side who were
covering investors, and just really trying tocreate something that would be interesting and
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attractive and would fit the needs of bothsides.
And I think that was actually a great qualityto develop throughout my career, to work with
multiple stakeholders and try to, not everyonewas always happy.
So you kind of had to navigate a lot ofcircumstances.
And I think that I learned a lot of justprofessional and human skills how to work with
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a lot of different kinds of people.
Also, I think gave me an opportunity to becomea better judge of character because you really
had to figure out how to navigate thesestressful situations at times and find a way to
connect with those people involved.
And so I think that was a valuable insight aswell.
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But to go back to, I guess, my career is thejourney was really, I spent as long as I could
at Merrill Lynch until it got bought by BofA.
And then I think a lot of us who were reallythe Merrill Lynch crowd found it challenging to
adapt to change.
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And I ended up going with a team of mycoworkers to Jefferies.
And we kind of transplanted.
That was happening a lot during that time.
Teams of people were sort of picking up andgoing somewhere else.
And so I went there in search of thatentrepreneurial connection again.
And actually the appeal there was that the firmwas growing very aggressively and they were
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investing in teams of people.
And it felt like there could be an opportunityto break into the bulge bracket and maybe
rebuild a lot of the things that we had atMerrill Lynch.
And so it didn't pan out that way, but that wasthe idea.
And it was great to go and be with the peoplethat I enjoyed working with for many years.
And so that was exciting.
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And then after Jefferies, I ended upattempting, I guess, a career change and going
into private banking at JPMorgan.
JPMorgan sits within the asset managementdivision.
I was very interested in learning kind of adifferent part of the financial services
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industry and did it there.
But at the same time, I actually startedgetting involved in the startup community in
New York.
This was very coincidental that as thefinancial services industry was becoming, I'd
say less inspiring and maybe more complianceoriented and less creative.
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There was this enormous energy that wasbubbling up through the entrepreneurial circles
and lots of talented people from manyindustries, financial services included, were
going in and actually starting businesses,becoming investors.
And so that's how I initially got connected.
I became an angel investor.
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I started going to all sorts of industryevents, looking at pitches.
I was gonna say one more thing and so beforeyou jump on that, wanted to call out to I was
speaking with somebody about this thisafternoon.
It's, you know, obviously if you remember, youknow, you were you were here you and I were
both in New York but 2008 to I think, like02/2006, 02/2007.
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It was cool to be an investment banker and worklike ninety hour workweek.
So, was like, the lifestyle of like being inManhattan, right?
Like the, the workaholic, you know, work until9PM, then taking taking clients out for dinner.
So that was kind of like the cool hip thing todo.
I remember like, I had a roommate, and I justnever saw my roommate at all.
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I had a huge apartment.
And I literally had like would invite companyover and like people thought I like owned the
whole apartment because he was he was likealways at work.
Sometimes he would sleep at work.
Then I feel like 2,008.
It just all those people, a lot of them gotprobably laid off and then a lot of them just
got burned out.
And then I feel like that was a huge thing thatI saw with the fintech development and
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ecosystem evolving.
But I don't know if you felt the same or ifthat's kind of like the timing or inflection
points that you saw as well.
So I think for me, my personal experience wasmostly through Merrill.
Was, after having worked there for twelveyears, I just really felt I was part of the
firm.
And it was so disappointing to me that it hadthat kind of an end.
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And I think I was more wrapped up in that thankind of the overall maybe sentiment around
there.
Plus, I was also in the fixed income world, soless so maybe investment banking where your
friend was kind of living out.
Were long hours, but it was more, I'd say,markets driven.
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So there was definitely nobody sleeping in theoffice.
Like that was kind of maybe the one line Iwould draw.
I think the hours are a little better in fixedincome too, right?
My cousin actually works in fixed income for GEand he's got a family and his work life balance
is okay.
But I think the lifestyle I know, definitelypeople who are portfolio managers, they're
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definitely working at sometimes a little later,but there's still a good work life balance if
you're on the buy side.
I think on the buy side, sure.
I think it's different on the sell side.
I mean, if you were in trading, you definitelycome in very early and you're leaving at a
reasonable time, but then you probably haveclient events or you definitely continue on
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with sort of that work related activity, butmaybe just not in the office.
And sometimes you're obviously going home.
But in my function, there was definitely adynamic of working around a deal.
So if we were at one point mandated by one ofour issuers on a big transaction, we'd be
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working around the clock.
So this would be whatever it took.
Or if there was a really big pitch thatinvolved kind of a lot of different parties
within the firm, would also take kind of a lifeof its own.
Then you kind of worked on it.
So it was a little bit of a blend.
But I think in 02/2008, 02/2009, there wasdefinitely a lot of transition and movement,
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certainly out of some of the firms that failed,but to some degree into the up and coming
firms, like what I was describing withJefferies.
And in some cases, people were just leaving theindustry.
And what happened, I guess, to those people wasinteresting because some of them were really
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looking for another role within financialservices, trying to go to a smaller dealer,
trying to sort of find some application oftheir skill set at a large firm and bringing
those client relationships.
And others were really taking a more radicalapproach and maybe starting up a business.
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And some people who were successful on WallStreet previously and had the capital were
getting involved as investors.
So there were all kinds of people coming in andI guess trying different things around the
startup world.
But for me, I very quickly felt that this wassomething that I was passionate about.
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So I think a lot of people try different thingsand that may or may not meet their
expectations.
But in my case, I just struck a chord, I guess,with something that I was really interested in
and really excited about.
And the more I did it, the more excited Ibecame.
And so it was kind of an interesting discoverybecause previously I was in a career that was
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intellectually challenging.
And for a period of time, paid well, but it wasnot really a passion business for me.
But then when I came to Accenture and startedmeeting all these entrepreneurs and started
getting involved with these companies, whetherit was as an investor or advisor or mentor,
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that was a completely different experience.
And so I just could not ignore that.
For me, it was very, very telling because I'dnever felt that way before.
So how did you find out about, you startedtalking about like doing angel investing, who
told you about it?
Because you were kind of in this corporatebubble at Merrill, I doubt and I think we spoke
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about this a while back where you told me thestory and a lot of those people that culture,
they're not really into the startup ecosystem,They're more into hanging out with like Bear
Stearns employees and you know eating at knowFleming's or one of those big steak houses
right in Midtown.
So it's a different culture and you don't seethe Wall Street types really hanging out as
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much.
Mean they are now they're all at these quantknow FinTech events and these you know
financial services tech platform events now,but I feel like it's still a different culture.
So how did you find out about it?
Who told you to check out the startup event?
To be honest, it was somewhat random.
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I think I was just bored out of my mind one dayand I was just surfing on my computer and I saw
a little, in the corner of the page, a littlekind of informational box or ad, I don't know
what it was, but it was basically for one ofthe angel groups.
And I clicked on that and I said, what is thisangel investing?
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So I didn't really have much of a concept aboutthat.
And as I clicked through, I actually found someinformation about what angel investing was and
then about the fact that this group actuallyoffered a of a mini training program, if you
will, for aspiring or interested potentialangel investors.
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And so I literally just went on gut and I said,let me just check this out.
So I reached out and then I ended up joiningthe angel group.
That was my first entry into just kind oflearning what some events in the city were,
that related to the Singapore area.
And then I met a few very interesting peoplewho were either in the group or actually more
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around the group, I would say.
There were some, what I would call mentors orfriends of the program.
And so it kind of started that way.
And then I remember very clearly when I wentto, I think it was the first dinner or some
sort of event that we had, and there were acouple of people that came that I ended up
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talking to in-depth.
And one of those people was a wonderful superangel who unfortunately has passed away since.
But he and I had such a wonderful conversationand I walked away from there thinking, I want
to get to know this person.
It's on me to build this relationship becausethis was really great and I think I can learn
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an enormous amount.
And so that's how it started for me.
I reached out to him, his name was John, And Ijust said, I just met you at this dinner, so
I'd really love to get together.
And he was very receptive.
And that was an example of how I think thisindustry is very different from the traditional
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Wall Street environment where there's no ask,there's no gain for you to sort of respond.
I really, really took that to heart because Ithink that was very true to my nature to be
that way.
I felt that it was just amazing that I all of asudden discovered people who wanted to do that
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for me and wanted to meet me for coffee andactually talk to me about how they look at
things and start sharing deals with me.
And so he was one of those people who Iconsider a mentor to me in that transition.
And we ended up actually co investing a wholenumber of deals.
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I just think very fondly of this person.
And then, I think that was an example of whatwas possible.
And then I took that framework and basicallyapplied that to every other person that I met
where I thought this would be a greatrelationship to develop and for me to get to
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know this person and also to learn from them.
So it was really, really a very active efforton my part.
So naturally, my calendar filled up veryquickly because I was like, I want to go here.
I want to go there.
And the great thing about this is that as youget to know people and they realize you're
serious, they want to start getting youinvolved and they start sending you deals, they
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start inviting you to events.
So I ended up connecting with a number ofaccelerator programs here in the city where
I've been mentoring for many years now.
Then I also learned just this whole approach ofif someone calls you or someone wants you to
talk to someone, even if you don't see kind ofan immediate connection, you say yes, and you
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try to help that person.
And I think that's the mentality and theframework that really, I think helps you build
a personal brand and personal sort ofreputation of the kind of person that you are
in the community.
And yeah, so I just did a lot of that.
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When I left banking, I said to myself, I'mgoing to take a year and just do this 100% of
the time and see where it takes me.
So it was a somewhat uncomfortable year becauseI'm generally very results oriented.
Some would say type A, but I don't reallyconsider myself like super Taipei in terms of
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my But in terms of personal expectation, Idefinitely have that desire and drive for
myself.
And so it was tough at times because I felt,well, I've been doing this for six months and I
still don't have the next step planned out.
Have a structure.
And so that was interesting, but I reallystayed focused on just saying yes to more
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things.
Eventually what happened was I met my partnerfrom my last fund, Runway, through that very
approach.
And I, Mark was a venture capitalist at anotherfund previously.
We had connected, started exchanging ideas,started getting together periodically and just
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building that relationship.
And over time, it progressed into a scenariowhere we both saw an opportunity in the post
seed stage, which is what Runway was focusedon.
And we felt that we could maybe build somethingas a capital provider with a purpose to really
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help out at a stage that was relativelyunderserved by capital at the time.
So we did that, but that was really the outcomeof my saying yes and building those
relationships is that learned a lot.
I made a bunch of investments in twentyfourteen-fifteen, which turned out to be a very
successful angel portfolio.
Fast forward seven years and then met mypartner in the last funds.
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So those are kind of the good things that
What are some thoughts that people should thinkabout when they find a partner?
You know, what are the personality types tothink about?
Obviously, you want to find somebody that youcan partner with and, and build that
relationship long term.
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What were some things that were important toyou and was it was it Mark who was the partner
yeah so when you met Mark, you know how did youfirst meet were you guys doing just some co
investing in the beginning and then idea was itto start the fund?
So we were introduced by a common friend whowas an LP in his previous fund and I knew
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through the angel investing circles.
And we met actually way before I left banking.
Well, maybe not way before, but it was before Ileft banking.
And so we had been in touch throughout thattime.
So it was not under the premise that maybe youguys should start a fund together.
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It was not like that at all because neither oneof us was there yet.
It just evolved that way because we ended upforming a relationship that was, I think, very
mutually respectful and yet we could challengeeach other's views and kind of bring some
complimentary expertise.
And that's what was interesting.
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Over time, I think it was just getting to knoweach other.
We did co invest in the event, but it was overthe course of time as opposed to a one
instance.
And so by the time that Mark actually startedgetting the ball rolling on runway, we had had
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many conversations about what the opportunitywas.
And so I ended up joining very, very early,essentially the first couple of months of that
starting.
But yeah, the only advice I would give is ithas to be, I think, an over time sort of
relationship as opposed to let's start a funtogether.
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I just met you.
You meet kind of all these different criteria.
Because I think you have to get to know eachother as people and see if there's alignment in
just working style.
And I think if you are complementary, frankly,in some ways of thinking as well as expertise
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maybe and some other elements because you don'twant to be too similar and you also don't want
to be completely different that you're justconstantly at other's throats to get a decision
through.
So that's not going to work either.
So yeah, but I think in the end, so I guessfast forwarding a runway that we started at
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five years ago, runway is now fully deployed.
And I spent the last year thinking about wherethe next set of opportunity lay because I think
that the post seed observation that we had fiveyears ago is probably the same.
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At the time, there was no stage that was postseed.
It was basically a seed company that wasn'tgraduating to a series A.
And that was happening simply because series Arounds had ballooned in size disproportionately
versus seed rounds.
And nobody was prepared for that, especiallyfounders of companies.
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And so it took a few years for series Ainvestors to get more aggressive, to reach down
to kind of post seed for seed funds to capitalto be able to invest in that post seed round.
And then there were also funds that were multistage and kind of became more flexible away
from the name to do whatever, I guess, thatthey felt was compelling.
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And there were also post seed funds that poppedup.
So I feel like all of that created a verydifferent dynamic.
And my observation about the market next wasreally that the opportunity shifted earlier.
It was maybe going back to the experience thatI had as an angel investor, now that I had
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something to really talk about in terms of andsee, I guess, for myself of how that portfolio
did.
And thinking about the love of that stage thatI really had from the very beginning, I felt
that for me, the right combination was to lookat that pre seed to seed.
But even now I hesitate to put a specific nameon it because I do think the nomenclature of
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different stages is constantly shifting.
I agree.
It may mean something different a year from nowversus what it is today.
In spirit, it's that post product company atearlier stages of traction is what I find the
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most compelling and attractive for the reasonsthat are frankly numerous.
The price point and the ownership that you canget for a similar check size in an earlier
stage company versus a later stage company.
You may not even get in with that check sizeinto a deal if it's super high and in high
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demand and so on and so forth.
And so the counter argument to this is always,well, you're going to have so many more losses
in these earlier stage investments.
And it's a fair point.
And I always respond by saying, if I wasshowing you one super early company and one
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company that is further along, and I asked you,where are you more likely to lose all your
money?
It would be unquestionably in the earlier stagecompany.
But if you're looking at a portfolio basis, itis a very different picture because you have so
much more diversification, most likely withless capital at risk per company, yet the
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upside potential on the winners isdisproportionately more attractive.
And so when you look at this, you really haveto think about this as a portfolio.
And that's why I think most investors, whetheryou're kind of an angel investor, whether
you're a family office, whether you're anothermore institutional investor and you're
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investing in this stage, you really have tobuild out that portfolio.
You can't do a couple of deals and then waitfor them to sort of bear fruit because you may
be waiting for a long time and that may nothappen.
That's something that I think is really, reallyimportant to highlight when people talk about
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stages.
But I just find that the combination, the riskreward profile of an early portfolio is very
attractive, especially actually in theenvironment that we're heading into.
So, I get a lot of questions talking toprospective LPs as well.
What do you make of this uncertainty in themarket?
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The world is melting down.
And it is true, the public markets are meltingdown.
There's a lot of volatility and uncertainty.
But at the same time, if you have capital andyou are standing by to deploy into this kind of
environment that we're potentially heading intothat's a little bit less generous, let's say,
(30:27):
on both capital availability and I think justoverall kind of exuberance around what's
happening, I think, across asset classes, butalso across stages and valuations.
(30:47):
I
think it's really opportune.
The opportunity stems from a couple of factors.
One is, like I said, valuations are coming downand they're not crashing, but they're
correcting and adjusting and they would need todo so over time, which makes it much more
palatable for me as an investor to come in andmaybe own a little bit more of that company for
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a similar check size.
But the other thing that is really importantand I think sometimes gets overlooked is that
resources become more affordable for companies,for startups in these periods of time.
Coming out of a really hot job market whereit's impossible to find talent and you have to
pay just through the nose to get somebody onboard and then they may not even come over,
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even after you've made a ridiculous offer.
I think that's one example of something thatcan really normalize and it will be more
affordable and available to startups to getthose resources on board.
And they're also getting a lot more disciplinedaround spending capital.
So you're getting a company that is much morethoughtful and healthier financially as a
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result.
So that whole combination is as an investor,when I look at that environment, I feel I want
to be standing by with capital right now todeploy into these kinds of markets.
So I'd like to take a step back for theaudience to talk a little bit about the
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dynamics of the fund.
Right.
So maybe you can talk about a couple of waysthat you can partner with people.
So one is obviously from an externalstandpoint, you could be working at Merrill or
you could be working at Amazon, and you'reinterested in being part of a fund, you don't
want to commit because obviously a generalpartnership is a long term, you know,
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partnership and it's critical LDs look at that.
A lot of times you get punished if you if oneof the GPS leaves, because that could be that
could be a risk to performance indirectly.
Tell us a little more about the structure of afund right there's normally the the LLC,
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there's a general partnership.
So any advice you have in terms of structuringthat and best practices for how, how two GPs
can kind of collaborate together.
I've also seen, you know, unfortunately, withthe economic macro impacts, some of these teams
break up a little bit and some of the one ofthe GPs would actually step away and kind of be
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more of an advisor.
Because they I've actually seen some funds,reduce their AUM strategy.
So I've seen a handful of funds that we'relooking at raising 80,000,000 and then recently
they've kind of given an update saying look,because of the macro effects we're raising.
We're going to go down to raising 35,000,000.
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And by the way, one of our GPS is kind of begoing to be more of an external advisor now.
So, maybe some thoughts on that in terms oflike the structure.
And I think that's really important when youwork with some of these capital intro people
there are some companies that I mean, I thinkit's kind of an interesting model, but there
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are some companies and institutions that willgive you some initial capital for ownership of
the GP, right, which is essentially thebusiness that appreciate some of the carry and
the returns from the investments that you make.
So maybe you can just kind of give someinsights on that.
Yeah, so I'll hit a few of those points, justmaybe not in any particular order, but just as
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I thought of some perspective here.
So first I'll just talk about the downsizing infund sizes.
So that can happen for a couple of reasons.
Two factors that I'm thinking about arespecifically the amount of time that it takes
to raise a larger fund is obviouslymeaningfully greater than it takes to raise a
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smaller fund.
And it may not be sort of exactly linear orproportionate, everything that I'm referring
to, but it's definitely the generalrelationship.
So when somebody steps away from a business,then you basically have other people do more
heavy lifting and still trying to get to thatsame target.
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So it's just harder.
And the other part is the GPs make acontribution to the fund.
So if the GP contribution in total varies byfund and people structure it differently, but
it's typically quite meaningful in dollaramounts, especially as you get to the larger
fund sizes.
So if somebody steps away from the business,chances are they're also stepping away from
(35:44):
that responsibility and maybe they're getting alittle bit of carry, maybe they are investing
incrementally, but maybe not investing at all.
And so the burden of the GP contribution nowrests with the remaining partners or partner,
And that may just be too large a number tomanage for a larger fund.
(36:08):
So those are just some considerations.
So I don't know if it's an indication of likemarket so much.
I mean, it could be that the whole reason theperson is stepping away is because they feel
the market headwinds and they just don't feellike tackling that and want to spend their time
elsewhere.
But I think if the decision is genuinelypersonal, then these other factors are kind of
(36:33):
coming into play.
Now, as far as the general structure of thefund, I'm a solo GP.
My focus is on building out a network of, well,obviously limited partners, investors in my
(36:53):
fund who are also like minded in some ways, areexcited about the themes I'm investing in and
could also maybe contribute some expertise ifthey're interested in that.
I'm also looking to over time build out more ofa community of some venture partners and maybe
advisors to complement that.
(37:15):
But for now, I have a partnership with astartup advisory firm that is, in my mind, of
the extension of myself in an operatingcapacity.
So I will put my portfolio companies in frontof that group that has enormous expertise
across all functions of business and at variousstages.
(37:38):
And I think that that is kind of a nice way toround out the solo GP offering.
As far as the GP, LP and management company, soif you think of the hedge fund world, the
management company is where all the seeders putthe money because they Well, actually they put
(38:03):
the money in the fund, but they get a piece ofthe management company.
And the reason they do that and the reason it'sattractive is because basically hedge funds are
in the business of growing AUM.
So just growing perpetually.
So the bigger they are over, say, the course offive, ten years, the more fees are coming in.
(38:23):
So naturally the Cedar wants to share in thatventure is different because the management
company is not the moneymaker.
Just basically keeping the lights on, you know,it just kind of allows you to basically operate
and bring on board some basic talent, but it'snever sort of extensive and exuberant, like it
(38:46):
might be in other situations.
So then you're left with the GP and LP.
And in my experience, the more vanillastructures are always better.
I just learned that, I guess this is one otherlearning from my Wall Street days.
Anytime there's a lot of hair on a deal, morestructure, there's always just more complexity
(39:10):
and lack of transparency really.
So I think it's always easier.
I always vote for simplicity.
To me, what's important to remember is that thebiggest return comes to the LP.
Even if you talk about carry, it's 80 that goesto the LP.
The GP obviously gets a little bit, but ifyou're going to win in a fund as an LP is the
(39:36):
best way to really do so.
So what can you do if you're becoming an anchorinvestor?
If somebody came in and said, Well, I'll investhalf your fund, well, then of course you may
offer them preferential terms, for example, oncarry or fees.
But even the GP is not really a purposefulstructure.
(39:58):
It's more like a logistical structure that kindof passes through some of that carry, but it
doesn't really play an active role.
I just think that if somebody wants to getinvolved, the best way to do that would be to
invest as an LP in a substantial capacity.
And perhaps then if you're of an anchor level,then you maybe can get a little bit of a sort
(40:23):
of negotiate on the on the economics of thefund.
And I think that's the cleanest way to do it.
Yeah.
Everything else, you know, I think you get likeso many variations and just too many different
bells and whistles.
Yeah, and I think look, it's a combination, Youwant to be able to mitigate your risk, it's
much more overhead and risk to be a singlefamily office that is creating like their own
(40:46):
venture arm, right?
There's some of these family offices now thatare building their own venture team and they're
sourcing and screening and diligencing deals ontheir own, but they're not in the tech
ecosystem, but they're trying to build thisventure team.
And I think it's a lot more overhead to do thatwhen you can leave that to the experts
obviously you're not going to get the, you know1000x returns, investing in a fund right you
(41:11):
get the risk mitigated returns.
But I think if you can also co invest, then youget direct exposure to those hot deals as well
that you normally wouldn't get access to.
So I feel like a lot of people are reallyembracing that strategy.
There's one fund that was in one of our lastcohorts that has a really well known anchor
(41:35):
invest, not an anchor investor, but a reallywell known LP.
And that person has like almost kind ofindirectly taken the brand of the fund as well.
So that's created some of the appeal.
But their strategy is really, really leaninginto co investing.
And what they have is they have the network ofall the hot deals in Silicon Valley.
(41:55):
And their play is, hey, invest in our fund,we're giving you risk mitigated exposure to all
of these deals that are in Valley and from allthese top tier one funds.
But we also are carving out allocations, so youcan also directly co invest as well.
So I think if you can do that, you can reallyuse that as a sourcing strategy as well to be
(42:17):
able to
get access.
Co investment is something that we leaned intoheavily with our last fund and I plan to do so
with my new fund.
But co investment, there's two kinds, right?
So one is the deal that you're currently doingand then there's your pro rata rights for the
future for the follow on.
(42:38):
So for the follow on, it definitely makes senseto bring it to the LPs and that's definitely
the value prop to say, look, I'm not a largefund.
I'm going to be bringing that to my LPs tobasically help me fill out that pro rata.
In the current round, you may or may not havethe opportunity to offer a direct co investment
(43:00):
just depends on the dynamic of the roundbecause you may be kind of sliding into a slot
that is pretty much, you know, the round isdone and there's just not a lot of capacity.
If you are leading, which out of this fund,will not be leading at least for the
foreseeable future, maybe kind of at the tailend of this process, will change a little bit.
(43:23):
For my prior fund, we were leading.
So in that case, you maybe have a little bitmore influence on who can come in.
But at the same time, it's always up to thefounder and the founders who need to build a
syndicate structure that is most productive andvalue added for them.
So that is really the overarching theme.
(43:44):
So as an investor, I have some influence, let'ssay, but I don't have full control over who
gets in.
So I think there's a little bit of that dynamicthat needs to be not overlooked.
So for me, I'm investing in the things that Iknow best, B2B SaaS and B2B FinTech.
And within those sort of bigger buckets, I'minvesting or most excited about certain themes
(44:11):
that include capital markets and assetmanagement technology, all on institutional
side or B2B, where the fin is at least equallyvaluable and important as the tech piece, as
opposed to kind of maybe a little bit more B2Capplications where the tech maybe leads and
(44:31):
it's more about the user experience and thedata and engagement and less so about the deep
finance aspects of the industry.
So that's one piece I invest in pretty mucheverything that's data driven intelligence for
enterprise.
And so that can be as simple as generatingadditional data and then an analysis and
(44:59):
insight that comes from that.
It could be just something that previouslyexisted, but was locked up in the silo and is
now coming out to maybe interact with otherthings and other information to ultimately,
again, give intelligence to the business tobecome more efficient and maybe increase its
revenue, maybe reduce its expenses or whatnot.
(45:20):
I'm very interested in the CFO tech stack andthings like FinTech sort of extending into the
traditionally non financial sectors.
Sometimes you'll hear the reference to embeddedfinance.
So I guess it's part of it, but it's biggerthan that.
I think it's a bigger theme.
And the other theme that I think is reallyinteresting and that I'm really tied into and
(45:47):
watching very closely is the convergence of thecentralized and decentralized ecosystems and
infrastructures.
And the reason I mentioned the themes is thatthese are the areas where I know that I have a
brand name that I've built whether it's myselfpersonally or now I'm building it for my fund.
(46:08):
Because VCs just by definition are brandbuilding.
You have to deal flow.
You need to be out there with something thatyou're known for.
And with family offices, it's kind of theopposite because they want to be bespoke.
They want to be private too.
They want to be private.
So just that separation and distinction alone,I think, creates a very different deal flow.
(46:33):
So you do unfortunately suffer from the adverseselection if you're not out there kind of
building your brand.
And so I think that's something that getsoverlooked at times.
So when I talk about these themes and areasinterested in, I'm saying it with confidence
because I know I have access to those deals.
I know I've invested in these deals and thelonger I do it, the better my network becomes
(46:59):
at finding these opportunities and bringingthem to me and the better I am at, I guess,
figuring out what's investable and how to helpthem in many cases.
So there's a sequence here.
So what you were talking about just a minuteago about family offices maybe going out and
(47:20):
trying to build out their own venture arms,that just takes time.
It doesn't mean that they can't do it, butthey're going to be five, ten plus years behind
other people who've been doing this for anextended period of time and building that
brand.
And yes, you can attract maybe some of thebetter known investors, But I think that's
(47:42):
really hard and very expensive.
And some people may just not even want that.
They like where they are and they're just notgonna come over.
So what are you better off doing?
Are you better off really kind of pushing kindof that forward and saying, I'm just doing it
no matter what?
Or are you better off, like you said,partnering, investing in funds and then trying
(48:04):
to find that co investment opportunity andreally building that relationship that you will
be shown that co investment opportunity in mostinstances where it's available.
So, I think that's a very, very healthydynamic.
I think it just helps every side and actuallyis less expensive because the other cost that
(48:28):
is worth mentioning is that if you don't investin great deals because your network didn't
source them, then it's actually costing you allthat lost capital on top of the cost of
bringing people on board to do it in house.
So there's that, something to consider.
Not to say that some people don't do thingsvery successfully and it all works out, but I'd
(48:51):
say more often than not, these factors that I'mmentioning are very relevant.
Yeah, no, it's really helpful.
And I know we're at time and I know it's latefor you, but thought we would just end with a
couple of questions here.
One of them might be a loaded question, butlooks like Alice one of her questions was,
think you talked about the focus of your fund.
(49:11):
How can one start a fund?
I think, obviously that's a loaded question,right?
Because that's a whole process and a frameworkto really think through, but maybe in a one
liner, like what should someone be thinkingabout if they wanna start a fund?
(49:32):
I will qualify this answer because it's sort ofthrough my personal experience.
My personal experience was to start investing,find ways to start investing.
You can start investing as an angel.
You can invest in a fund.
When I was investing as an angel, I invested inthree funds because I was like, I can't
(49:53):
diversify fast enough.
There are some sectors I will never see a dealin unless I'm connected to somebody who is an
expert in that space, or maybe I want to learnsomething that I'd never seen before.
And so there's enormous value in doing that andaligning yourself because you see better deal
flow and you can learn.
(50:14):
If you don't have capital, then I guess tostart investing, then I think another
alternative would be to try and find someinteresting themes that you're very excited
about and something unique on the deal flowside.
(50:34):
So then you can kind of network your way intorelationships where people have access to
capital, and then you can bring them a dealthrough an SPV.
Some of the things that you and I, Joel, talkedabout before, some people do.
I didn't do it with this fund because I juststarted prefunding my own commitment, but
that's different because I've been kind of atthis for a period of time.
(50:55):
But I do think that the other sort of hustlepath of finding a deal and then maybe trying to
create a community around that.
Even if it's a small allocation, you kind ofstart with something small.
Process.
That's all I would say.
(51:16):
I think it's something that takes time and youhave to just expect that.
And then I think you just navigate as you getfeedback as you go along.
Yeah, I think one more thing I wanted to callout that we didn't mention just for the
education is, you know, just selling those prorata rights that are unused.
(51:37):
A lot of times you can use SPVs.
And that's just a great way to kind of deliversome of that upside to your LPs, know, so it's
just a great vehicle if you have access to it.
I've, I don't know if you've talked to some ofthese funds that only focus on that, but I've
seen some interesting fund models that onlyjust literally sell pro rata rights and they're
getting three to 5x just from kind of taking upthose pro rata rights, buying them and then
(52:01):
selling them, and repackaging them.
But there's been fun strategies around that.
So that tells me like, what's interesting isthere's just a lot of different strategies.
And you know there as an LP you're trying tofigure out which one is the best right
sometimes you think about just pure cash oncash returns and then there's so many different
ways to look at you know benchmarking andmetrics and return analysis from funds.
(52:26):
You know what, this brings up actually aninteresting point that I think is worth just
mentioning.
So what you're describing is that I guessthere's more and more avenues for an early
stage.
That's another reason why I really love earlystage.
(52:47):
More and more avenues for an early stagemanager to more dynamically manage their
portfolio.
So, yes, in many instances, in most cases,you're investing for the long haul.
You just want to get in and hold it until themassive outcome.
But thinking of how many secondary liquidityoptions there are available now between well,
(53:11):
maybe the market's a little bit less frothynow, so there's a little less competition at
those future rounds.
But still, successful executing companies,there will be that demand for future rounds
investors trying to buy out earlier investors.
So that's one opportunity.
You also have many more instances of these sortof future rights being sold and kind of have
(53:36):
hybrid strategies.
Maybe sometimes it's just pro rata rights.
Maybe they are also buying out some otherequity and packaging that into more creative
pieces.
There are some tech platforms that are emergingwhere you could do that.
And then not to sort of forget the mostimportant piece is that there's also M and A
that could occur at many of those points intime.
(54:00):
And so as an earlier stage manager, I think youactually have today a lot more options because
the markets developed in so many different waysto risk manage your portfolio because it's
always going to be a long term horizon, but youcan maybe navigate a little bit of that return
of capital a little bit more dynamically thanI'd say in the past.
(54:23):
Yeah, no, totally.
I totally agree.
I mean, they're calling it venture two pointzero, right?
Just finding a lot of new ways for VCs to havecreative products.
I'm seeing many VCs now in the later stages oftheir career have multiple funds, right?
So there's a couple funds that I know thatobviously are on there like fund five, but
(54:46):
they're raising like two funds at the sametime.
One is like an early stage strategy and thenone is a late stage strategy.
And then one I've actually seen that also has athird strategy, which is just capitalizing on
SPAC.
So there's just a lot of creative ways.
Know the conventional wisdom and thetraditional advice is, you know, just at the
(55:06):
end of the day, deliver returns to your LP,right?
So returns trumps all.
So that's kind of the main, you know,undisputable factor, right?
Did you return some capital back andperformance really trumps all?
So whatever strategy you use as long as it's aslong as it's working, but the good thing is you
have a long time horizon to to kind of harvestsome of those investments so that helps.
(55:31):
Cool.
Well, know it's late.
Know we're over so thanks for your time andreally great hearing about everything that
you're building and working on and excited forthe future.
What do you make of this uncertainty in themarket?
(00:03):
The world is melting down.
And is true, the public markets are meltingdown.
There's a lot of volatility and uncertainty.
But at the same time, if you have capital andyou are standing by to deploy into this kind of
environment that we're potentially headinginto, that's a little bit less generous, let's
(00:27):
say, on both capital availability and I thinkjust overall kind of exuberance around what's
happening, I think across asset classes, butalso across stages and valuations.
(00:47):
I
think it's really opportune.
Welcome to the investor, a podcast where I,Joel Palafinkel, your host, dives deep into the
minds of the world's most influentialinstitutional investors.
In each episode, we sit down with an investorto hear about their journeys and how global
(01:09):
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
It'll be fun.
Alright.
So I think we are live.
So excited to catch up with Hannah.
(01:31):
I've been talking to her a lot recently.
And it's great to reconnect.
It's been a few years since we met in personwhen we first met and then we got to hang out a
few times at a couple dinners and stuff whichhas been great.
But you know we met I think yeah at least threeyears ago And you're at another fun.
(01:53):
Yeah, was before the pandemic.
And, and you have a strong track record you'vebeen in venture for a long time but you came
from a traditional background as well right Ithink you came from a traditional banking
background.
So why don't we start with that?
Why don't we start with your career, yourfamily, know, where you grew up, and then how
(02:15):
you broke into your career, the changes in yourcareer?
We'd love to hear all that and then we'll divea little deeper into Altari Ventures.
Sounds great.
So really going all the way back.
Sure.
Well, I'm excited to be on.
I think it's definitely been an interestingjourney, certainly for me.
(02:37):
And my background's very international.
I'm Russian by birth.
I grew up in England and Denmark, and then myfamily moved to Montreal.
So that's where they live, as do my in laws.
My husband, I have a Spanish last name, andthat's because my husband is of Spanish origin.
And he grew up between Spain and Montreal.
(02:59):
And so we have a little mini United Nations inhouse.
I have two daughters who are teenagers, so thatis always exciting.
It's never, I guess, a dull day, but it's allgood.
And yeah, so my background in terms of myprofessional, I guess, history is that I went
(03:27):
to business school in Canada.
I got a job on Wall Street.
I worked at Merrill Lynch for most of mycareer, about twelve years.
And I went into fixed income trading andderivative sales originally, and then ended up
in debt capital markets and investment bankingkind of through the course of time.
But most of my career, I worked on a tradingfloor and that was a unique experience,
(03:54):
certainly a very interesting dynamic.
And sometimes people say to me, Well, it's sodifferent.
You worked for a large financial institutionand now you're doing venture.
And what's the connection personally?
And interestingly enough, I felt that I alwaysworked in a very entrepreneurial environment on
the trading floor for very different reasonsthan what I'm doing now and what the
(04:17):
entrepreneurs that I'm backing are doing.
But it was creative.
It was innovative.
Every day you came in and you had something newto work with in terms of market circumstances
and that kept it really exciting and fresh.
What made it entrepreneurial?
Was it that the traders were just everydaycompeting and trying to obviously generate
(04:40):
alpha and is that what kind of generated theentrepreneurial spirit or was there a fintech
kind of developing back then to
particular role?
It was about I was covering issuers of bonds.
And on the other hand, I had salespeople.
(05:00):
So I was working closely with the sales forcewho were selling to investors.
And so there was always a meeting of supply anddemand that I would find myself in the middle
of, where I was trying to create something thatthe investors wanted to buy.
And my users were frequent borrowers.
So they were essentially in the market issuingsomething every day as long as we could get to
(05:23):
their pricing levels.
And if I could structure something in betweenthat made sense for both parties, that was up
to me to figure out.
And that's what was entrepreneurial for me.
I think for traders, I don't know if it's somuch, I guess, creative or entrepreneurial.
If you're just a flow trader essentially doingbid ask when people are asking you for quotes,
(05:46):
maybe it's a little bit more entrepreneurial ifyou were actually trading proprietary
positions, which no longer really exist in thatform and in banking.
But there's always an element of surprise, Iguess.
You're always dealing with something that isgoing to be different than what was yesterday
(06:07):
and you have to adjust.
And I think that flexibility makes it probablymore entrepreneurial for most people on the
trading floor than not.
But for me, there was this creative element ofjust essentially working with different people
on both sides, my clients on the issuer sideand my peers on the sales side who were
covering investors, and just really trying tocreate something that would be interesting and
(06:33):
attractive and would fit the needs of bothsides.
And I think that was actually a great qualityto develop throughout my career, to work with
multiple stakeholders and try to, not everyonewas always happy.
So you kind of had to navigate a lot ofcircumstances.
And I think that I learned a lot of justprofessional and human skills how to work with
(06:57):
a lot of different kinds of people.
Also, I think gave me an opportunity to becomea better judge of character because you really
had to figure out how to navigate thesestressful situations at times and find a way to
connect with those people involved.
And so I think that was a valuable insight aswell.
(07:19):
But to go back to, I guess, my career is thejourney was really, I spent as long as I could
at Merrill Lynch until it got bought by BofA.
And then I think a lot of us who were reallythe Merrill Lynch crowd found it challenging to
adapt to change.
(07:42):
And I ended up going with a team of mycoworkers to Jefferies.
And we kind of transplanted.
That was happening a lot during that time.
Teams of people were sort of picking up andgoing somewhere else.
And so I went there in search of thatentrepreneurial connection again.
And actually the appeal there was that the firmwas growing very aggressively and they were
(08:07):
investing in teams of people.
And it felt like there could be an opportunityto break into the bulge bracket and maybe
rebuild a lot of the things that we had atMerrill Lynch.
And so it didn't pan out that way, but that wasthe idea.
And it was great to go and be with the peoplethat I enjoyed working with for many years.
And so that was exciting.
(08:28):
And then after Jefferies, I ended upattempting, I guess, a career change and going
into private banking at JPMorgan.
JPMorgan sits within the asset managementdivision.
I was very interested in learning kind of adifferent part of the financial services
(08:48):
industry and did it there.
But at the same time, I actually startedgetting involved in the startup community in
New York.
This was very coincidental that as thefinancial services industry was becoming, I'd
say less inspiring and maybe more complianceoriented and less creative.
(09:12):
There was this enormous energy that wasbubbling up through the entrepreneurial circles
and lots of talented people from manyindustries, financial services included, were
going in and actually starting businesses,becoming investors.
And so that's how I initially got connected.
I became an angel investor.
(09:34):
I started going to all sorts of industryevents, looking at pitches.
I was gonna say one more thing and so beforeyou jump on that, wanted to call out to I was
speaking with somebody about this thisafternoon.
It's, you know, obviously if you remember, youknow, you were you were here you and I were
both in New York but 2008 to I think, like02/2006, 02/2007.
(09:56):
It was cool to be an investment banker and worklike ninety hour workweek.
So, was like, the lifestyle of like being inManhattan, right?
Like the, the workaholic, you know, work until9PM, then taking taking clients out for dinner.
So that was kind of like the cool hip thing todo.
I remember like, I had a roommate, and I justnever saw my roommate at all.
(10:18):
I had a huge apartment.
And I literally had like would invite companyover and like people thought I like owned the
whole apartment because he was he was likealways at work.
Sometimes he would sleep at work.
Then I feel like 2,008.
It just all those people, a lot of them gotprobably laid off and then a lot of them just
got burned out.
And then I feel like that was a huge thing thatI saw with the fintech development and
(10:45):
ecosystem evolving.
But I don't know if you felt the same or ifthat's kind of like the timing or inflection
points that you saw as well.
So I think for me, my personal experience wasmostly through Merrill.
Was, after having worked there for twelveyears, I just really felt I was part of the
firm.
And it was so disappointing to me that it hadthat kind of an end.
(11:11):
And I think I was more wrapped up in that thankind of the overall maybe sentiment around
there.
Plus, I was also in the fixed income world, soless so maybe investment banking where your
friend was kind of living out.
Were long hours, but it was more, I'd say,markets driven.
(11:35):
So there was definitely nobody sleeping in theoffice.
Like that was kind of maybe the one line Iwould draw.
I think the hours are a little better in fixedincome too, right?
My cousin actually works in fixed income for GEand he's got a family and his work life balance
is okay.
But I think the lifestyle I know, definitelypeople who are portfolio managers, they're
(12:00):
definitely working at sometimes a little later,but there's still a good work life balance if
you're on the buy side.
I think on the buy side, sure.
I think it's different on the sell side.
I mean, if you were in trading, you definitelycome in very early and you're leaving at a
reasonable time, but then you probably haveclient events or you definitely continue on
(12:21):
with sort of that work related activity, butmaybe just not in the office.
And sometimes you're obviously going home.
But in my function, there was definitely adynamic of working around a deal.
So if we were at one point mandated by one ofour issuers on a big transaction, we'd be
(12:43):
working around the clock.
So this would be whatever it took.
Or if there was a really big pitch thatinvolved kind of a lot of different parties
within the firm, would also take kind of a lifeof its own.
Then you kind of worked on it.
So it was a little bit of a blend.
But I think in 02/2008, 02/2009, there wasdefinitely a lot of transition and movement,
(13:09):
certainly out of some of the firms that failed,but to some degree into the up and coming
firms, like what I was describing withJefferies.
And in some cases, people were just leaving theindustry.
And what happened, I guess, to those people wasinteresting because some of them were really
(13:29):
looking for another role within financialservices, trying to go to a smaller dealer,
trying to sort of find some application oftheir skill set at a large firm and bringing
those client relationships.
And others were really taking a more radicalapproach and maybe starting up a business.
(13:50):
And some people who were successful on WallStreet previously and had the capital were
getting involved as investors.
So there were all kinds of people coming in andI guess trying different things around the
startup world.
But for me, I very quickly felt that this wassomething that I was passionate about.
(14:14):
So I think a lot of people try different thingsand that may or may not meet their
expectations.
But in my case, I just struck a chord, I guess,with something that I was really interested in
and really excited about.
And the more I did it, the more excited Ibecame.
And so it was kind of an interesting discoverybecause previously I was in a career that was
(14:39):
intellectually challenging.
And for a period of time, paid well, but it wasnot really a passion business for me.
But then when I came to Accenture and startedmeeting all these entrepreneurs and started
getting involved with these companies, whetherit was as an investor or advisor or mentor,
(15:03):
that was a completely different experience.
And so I just could not ignore that.
For me, it was very, very telling because I'dnever felt that way before.
So how did you find out about, you startedtalking about like doing angel investing, who
told you about it?
Because you were kind of in this corporatebubble at Merrill, I doubt and I think we spoke
(15:27):
about this a while back where you told me thestory and a lot of those people that culture,
they're not really into the startup ecosystem,They're more into hanging out with like Bear
Stearns employees and you know eating at knowFleming's or one of those big steak houses
right in Midtown.
So it's a different culture and you don't seethe Wall Street types really hanging out as
(15:53):
much.
Mean they are now they're all at these quantknow FinTech events and these you know
financial services tech platform events now,but I feel like it's still a different culture.
So how did you find out about it?
Who told you to check out the startup event?
To be honest, it was somewhat random.
(16:13):
I think I was just bored out of my mind one dayand I was just surfing on my computer and I saw
a little, in the corner of the page, a littlekind of informational box or ad, I don't know
what it was, but it was basically for one ofthe angel groups.
And I clicked on that and I said, what is thisangel investing?
(16:37):
So I didn't really have much of a concept aboutthat.
And as I clicked through, I actually found someinformation about what angel investing was and
then about the fact that this group actuallyoffered a of a mini training program, if you
will, for aspiring or interested potentialangel investors.
(17:01):
And so I literally just went on gut and I said,let me just check this out.
So I reached out and then I ended up joiningthe angel group.
That was my first entry into just kind oflearning what some events in the city were,
that related to the Singapore area.
And then I met a few very interesting peoplewho were either in the group or actually more
(17:27):
around the group, I would say.
There were some, what I would call mentors orfriends of the program.
And so it kind of started that way.
And then I remember very clearly when I wentto, I think it was the first dinner or some
sort of event that we had, and there were acouple of people that came that I ended up
(17:47):
talking to in-depth.
And one of those people was a wonderful superangel who unfortunately has passed away since.
But he and I had such a wonderful conversationand I walked away from there thinking, I want
to get to know this person.
It's on me to build this relationship becausethis was really great and I think I can learn
(18:10):
an enormous amount.
And so that's how it started for me.
I reached out to him, his name was John, And Ijust said, I just met you at this dinner, so
I'd really love to get together.
And he was very receptive.
And that was an example of how I think thisindustry is very different from the traditional
(18:30):
Wall Street environment where there's no ask,there's no gain for you to sort of respond.
I really, really took that to heart because Ithink that was very true to my nature to be
that way.
I felt that it was just amazing that I all of asudden discovered people who wanted to do that
(18:52):
for me and wanted to meet me for coffee andactually talk to me about how they look at
things and start sharing deals with me.
And so he was one of those people who Iconsider a mentor to me in that transition.
And we ended up actually co investing a wholenumber of deals.
(19:12):
I just think very fondly of this person.
And then, I think that was an example of whatwas possible.
And then I took that framework and basicallyapplied that to every other person that I met
where I thought this would be a greatrelationship to develop and for me to get to
(19:33):
know this person and also to learn from them.
So it was really, really a very active efforton my part.
So naturally, my calendar filled up veryquickly because I was like, I want to go here.
I want to go there.
And the great thing about this is that as youget to know people and they realize you're
serious, they want to start getting youinvolved and they start sending you deals, they
(19:55):
start inviting you to events.
So I ended up connecting with a number ofaccelerator programs here in the city where
I've been mentoring for many years now.
Then I also learned just this whole approach ofif someone calls you or someone wants you to
talk to someone, even if you don't see kind ofan immediate connection, you say yes, and you
(20:20):
try to help that person.
And I think that's the mentality and theframework that really, I think helps you build
a personal brand and personal sort ofreputation of the kind of person that you are
in the community.
And yeah, so I just did a lot of that.
(20:40):
When I left banking, I said to myself, I'mgoing to take a year and just do this 100% of
the time and see where it takes me.
So it was a somewhat uncomfortable year becauseI'm generally very results oriented.
Some would say type A, but I don't reallyconsider myself like super Taipei in terms of
(21:03):
my But in terms of personal expectation, Idefinitely have that desire and drive for
myself.
And so it was tough at times because I felt,well, I've been doing this for six months and I
still don't have the next step planned out.
Have a structure.
And so that was interesting, but I reallystayed focused on just saying yes to more
(21:31):
things.
Eventually what happened was I met my partnerfrom my last fund, Runway, through that very
approach.
And I, Mark was a venture capitalist at anotherfund previously.
We had connected, started exchanging ideas,started getting together periodically and just
(21:52):
building that relationship.
And over time, it progressed into a scenariowhere we both saw an opportunity in the post
seed stage, which is what Runway was focusedon.
And we felt that we could maybe build somethingas a capital provider with a purpose to really
(22:19):
help out at a stage that was relativelyunderserved by capital at the time.
So we did that, but that was really the outcomeof my saying yes and building those
relationships is that learned a lot.
I made a bunch of investments in twentyfourteen-fifteen, which turned out to be a very
successful angel portfolio.
Fast forward seven years and then met mypartner in the last funds.
(22:43):
So those are kind of the good things that
What are some thoughts that people should thinkabout when they find a partner?
You know, what are the personality types tothink about?
Obviously, you want to find somebody that youcan partner with and, and build that
relationship long term.
(23:04):
What were some things that were important toyou and was it was it Mark who was the partner
yeah so when you met Mark, you know how did youfirst meet were you guys doing just some co
investing in the beginning and then idea was itto start the fund?
So we were introduced by a common friend whowas an LP in his previous fund and I knew
(23:30):
through the angel investing circles.
And we met actually way before I left banking.
Well, maybe not way before, but it was before Ileft banking.
And so we had been in touch throughout thattime.
So it was not under the premise that maybe youguys should start a fund together.
(23:51):
It was not like that at all because neither oneof us was there yet.
It just evolved that way because we ended upforming a relationship that was, I think, very
mutually respectful and yet we could challengeeach other's views and kind of bring some
complimentary expertise.
And that's what was interesting.
(24:12):
Over time, I think it was just getting to knoweach other.
We did co invest in the event, but it was overthe course of time as opposed to a one
instance.
And so by the time that Mark actually startedgetting the ball rolling on runway, we had had
(24:35):
many conversations about what the opportunitywas.
And so I ended up joining very, very early,essentially the first couple of months of that
starting.
But yeah, the only advice I would give is ithas to be, I think, an over time sort of
relationship as opposed to let's start a funtogether.
(24:59):
I just met you.
You meet kind of all these different criteria.
Because I think you have to get to know eachother as people and see if there's alignment in
just working style.
And I think if you are complementary, frankly,in some ways of thinking as well as expertise
(25:19):
maybe and some other elements because you don'twant to be too similar and you also don't want
to be completely different that you're justconstantly at other's throats to get a decision
through.
So that's not going to work either.
So yeah, but I think in the end, so I guessfast forwarding a runway that we started at
(25:41):
five years ago, runway is now fully deployed.
And I spent the last year thinking about wherethe next set of opportunity lay because I think
that the post seed observation that we had fiveyears ago is probably the same.
(26:01):
At the time, there was no stage that was postseed.
It was basically a seed company that wasn'tgraduating to a series A.
And that was happening simply because series Arounds had ballooned in size disproportionately
versus seed rounds.
And nobody was prepared for that, especiallyfounders of companies.
(26:22):
And so it took a few years for series Ainvestors to get more aggressive, to reach down
to kind of post seed for seed funds to capitalto be able to invest in that post seed round.
And then there were also funds that were multistage and kind of became more flexible away
from the name to do whatever, I guess, thatthey felt was compelling.
(26:46):
And there were also post seed funds that poppedup.
So I feel like all of that created a verydifferent dynamic.
And my observation about the market next wasreally that the opportunity shifted earlier.
It was maybe going back to the experience thatI had as an angel investor, now that I had
(27:07):
something to really talk about in terms of andsee, I guess, for myself of how that portfolio
did.
And thinking about the love of that stage thatI really had from the very beginning, I felt
that for me, the right combination was to lookat that pre seed to seed.
But even now I hesitate to put a specific nameon it because I do think the nomenclature of
(27:32):
different stages is constantly shifting.
I agree.
It may mean something different a year from nowversus what it is today.
In spirit, it's that post product company atearlier stages of traction is what I find the
(27:53):
most compelling and attractive for the reasonsthat are frankly numerous.
The price point and the ownership that you canget for a similar check size in an earlier
stage company versus a later stage company.
You may not even get in with that check sizeinto a deal if it's super high and in high
(28:17):
demand and so on and so forth.
And so the counter argument to this is always,well, you're going to have so many more losses
in these earlier stage investments.
And it's a fair point.
And I always respond by saying, if I wasshowing you one super early company and one
(28:38):
company that is further along, and I asked you,where are you more likely to lose all your
money?
It would be unquestionably in the earlier stagecompany.
But if you're looking at a portfolio basis, itis a very different picture because you have so
much more diversification, most likely withless capital at risk per company, yet the
(29:00):
upside potential on the winners isdisproportionately more attractive.
And so when you look at this, you really haveto think about this as a portfolio.
And that's why I think most investors, whetheryou're kind of an angel investor, whether
you're a family office, whether you're anothermore institutional investor and you're
(29:21):
investing in this stage, you really have tobuild out that portfolio.
You can't do a couple of deals and then waitfor them to sort of bear fruit because you may
be waiting for a long time and that may nothappen.
That's something that I think is really, reallyimportant to highlight when people talk about
(29:42):
stages.
But I just find that the combination, the riskreward profile of an early portfolio is very
attractive, especially actually in theenvironment that we're heading into.
So, I get a lot of questions talking toprospective LPs as well.
What do you make of this uncertainty in themarket?
(30:03):
The world is melting down.
And it is true, the public markets are meltingdown.
There's a lot of volatility and uncertainty.
But at the same time, if you have capital andyou are standing by to deploy into this kind of
environment that we're potentially heading intothat's a little bit less generous, let's say,
(30:27):
on both capital availability and I think justoverall kind of exuberance around what's
happening, I think, across asset classes, butalso across stages and valuations.
(30:47):
I
think it's really opportune.
The opportunity stems from a couple of factors.
One is, like I said, valuations are coming downand they're not crashing, but they're
correcting and adjusting and they would need todo so over time, which makes it much more
palatable for me as an investor to come in andmaybe own a little bit more of that company for
(31:11):
a similar check size.
But the other thing that is really importantand I think sometimes gets overlooked is that
resources become more affordable for companies,for startups in these periods of time.
Coming out of a really hot job market whereit's impossible to find talent and you have to
pay just through the nose to get somebody onboard and then they may not even come over,
(31:39):
even after you've made a ridiculous offer.
I think that's one example of something thatcan really normalize and it will be more
affordable and available to startups to getthose resources on board.
And they're also getting a lot more disciplinedaround spending capital.
So you're getting a company that is much morethoughtful and healthier financially as a
(32:02):
result.
So that whole combination is as an investor,when I look at that environment, I feel I want
to be standing by with capital right now todeploy into these kinds of markets.
So I'd like to take a step back for theaudience to talk a little bit about the
(32:24):
dynamics of the fund.
Right.
So maybe you can talk about a couple of waysthat you can partner with people.
So one is obviously from an externalstandpoint, you could be working at Merrill or
you could be working at Amazon, and you'reinterested in being part of a fund, you don't
want to commit because obviously a generalpartnership is a long term, you know,
(32:44):
partnership and it's critical LDs look at that.
A lot of times you get punished if you if oneof the GPS leaves, because that could be that
could be a risk to performance indirectly.
Tell us a little more about the structure of afund right there's normally the the LLC,
(33:05):
there's a general partnership.
So any advice you have in terms of structuringthat and best practices for how, how two GPs
can kind of collaborate together.
I've also seen, you know, unfortunately, withthe economic macro impacts, some of these teams
break up a little bit and some of the one ofthe GPs would actually step away and kind of be
(33:30):
more of an advisor.
Because they I've actually seen some funds,reduce their AUM strategy.
So I've seen a handful of funds that we'relooking at raising 80,000,000 and then recently
they've kind of given an update saying look,because of the macro effects we're raising.
We're going to go down to raising 35,000,000.
(33:51):
And by the way, one of our GPS is kind of begoing to be more of an external advisor now.
So, maybe some thoughts on that in terms oflike the structure.
And I think that's really important when youwork with some of these capital intro people
there are some companies that I mean, I thinkit's kind of an interesting model, but there
(34:13):
are some companies and institutions that willgive you some initial capital for ownership of
the GP, right, which is essentially thebusiness that appreciate some of the carry and
the returns from the investments that you make.
So maybe you can just kind of give someinsights on that.
Yeah, so I'll hit a few of those points, justmaybe not in any particular order, but just as
(34:38):
I thought of some perspective here.
So first I'll just talk about the downsizing infund sizes.
So that can happen for a couple of reasons.
Two factors that I'm thinking about arespecifically the amount of time that it takes
to raise a larger fund is obviouslymeaningfully greater than it takes to raise a
(35:00):
smaller fund.
And it may not be sort of exactly linear orproportionate, everything that I'm referring
to, but it's definitely the generalrelationship.
So when somebody steps away from a business,then you basically have other people do more
heavy lifting and still trying to get to thatsame target.
(35:21):
So it's just harder.
And the other part is the GPs make acontribution to the fund.
So if the GP contribution in total varies byfund and people structure it differently, but
it's typically quite meaningful in dollaramounts, especially as you get to the larger
fund sizes.
So if somebody steps away from the business,chances are they're also stepping away from
(35:44):
that responsibility and maybe they're getting alittle bit of carry, maybe they are investing
incrementally, but maybe not investing at all.
And so the burden of the GP contribution nowrests with the remaining partners or partner,
And that may just be too large a number tomanage for a larger fund.
(36:08):
So those are just some considerations.
So I don't know if it's an indication of likemarket so much.
I mean, it could be that the whole reason theperson is stepping away is because they feel
the market headwinds and they just don't feellike tackling that and want to spend their time
elsewhere.
But I think if the decision is genuinelypersonal, then these other factors are kind of
(36:33):
coming into play.
Now, as far as the general structure of thefund, I'm a solo GP.
My focus is on building out a network of, well,obviously limited partners, investors in my
(36:53):
fund who are also like minded in some ways, areexcited about the themes I'm investing in and
could also maybe contribute some expertise ifthey're interested in that.
I'm also looking to over time build out more ofa community of some venture partners and maybe
advisors to complement that.
(37:15):
But for now, I have a partnership with astartup advisory firm that is, in my mind, of
the extension of myself in an operatingcapacity.
So I will put my portfolio companies in frontof that group that has enormous expertise
across all functions of business and at variousstages.
(37:38):
And I think that that is kind of a nice way toround out the solo GP offering.
As far as the GP, LP and management company, soif you think of the hedge fund world, the
management company is where all the seeders putthe money because they Well, actually they put
(38:03):
the money in the fund, but they get a piece ofthe management company.
And the reason they do that and the reason it'sattractive is because basically hedge funds are
in the business of growing AUM.
So just growing perpetually.
So the bigger they are over, say, the course offive, ten years, the more fees are coming in.
(38:23):
So naturally the Cedar wants to share in thatventure is different because the management
company is not the moneymaker.
Just basically keeping the lights on, you know,it just kind of allows you to basically operate
and bring on board some basic talent, but it'snever sort of extensive and exuberant, like it
(38:46):
might be in other situations.
So then you're left with the GP and LP.
And in my experience, the more vanillastructures are always better.
I just learned that, I guess this is one otherlearning from my Wall Street days.
Anytime there's a lot of hair on a deal, morestructure, there's always just more complexity
(39:10):
and lack of transparency really.
So I think it's always easier.
I always vote for simplicity.
To me, what's important to remember is that thebiggest return comes to the LP.
Even if you talk about carry, it's 80 that goesto the LP.
The GP obviously gets a little bit, but ifyou're going to win in a fund as an LP is the
(39:36):
best way to really do so.
So what can you do if you're becoming an anchorinvestor?
If somebody came in and said, Well, I'll investhalf your fund, well, then of course you may
offer them preferential terms, for example, oncarry or fees.
But even the GP is not really a purposefulstructure.
(39:58):
It's more like a logistical structure that kindof passes through some of that carry, but it
doesn't really play an active role.
I just think that if somebody wants to getinvolved, the best way to do that would be to
invest as an LP in a substantial capacity.
And perhaps then if you're of an anchor level,then you maybe can get a little bit of a sort
(40:23):
of negotiate on the on the economics of thefund.
And I think that's the cleanest way to do it.
Yeah.
Everything else, you know, I think you get likeso many variations and just too many different
bells and whistles.
Yeah, and I think look, it's a combination, Youwant to be able to mitigate your risk, it's
much more overhead and risk to be a singlefamily office that is creating like their own
(40:46):
venture arm, right?
There's some of these family offices now thatare building their own venture team and they're
sourcing and screening and diligencing deals ontheir own, but they're not in the tech
ecosystem, but they're trying to build thisventure team.
And I think it's a lot more overhead to do thatwhen you can leave that to the experts
obviously you're not going to get the, you know1000x returns, investing in a fund right you
(41:11):
get the risk mitigated returns.
But I think if you can also co invest, then youget direct exposure to those hot deals as well
that you normally wouldn't get access to.
So I feel like a lot of people are reallyembracing that strategy.
There's one fund that was in one of our lastcohorts that has a really well known anchor
(41:35):
invest, not an anchor investor, but a reallywell known LP.
And that person has like almost kind ofindirectly taken the brand of the fund as well.
So that's created some of the appeal.
But their strategy is really, really leaninginto co investing.
And what they have is they have the network ofall the hot deals in Silicon Valley.
(41:55):
And their play is, hey, invest in our fund,we're giving you risk mitigated exposure to all
of these deals that are in Valley and from allthese top tier one funds.
But we also are carving out allocations, so youcan also directly co invest as well.
So I think if you can do that, you can reallyuse that as a sourcing strategy as well to be
(42:17):
able to
get access.
Co investment is something that we leaned intoheavily with our last fund and I plan to do so
with my new fund.
But co investment, there's two kinds, right?
So one is the deal that you're currently doingand then there's your pro rata rights for the
future for the follow on.
(42:38):
So for the follow on, it definitely makes senseto bring it to the LPs and that's definitely
the value prop to say, look, I'm not a largefund.
I'm going to be bringing that to my LPs tobasically help me fill out that pro rata.
In the current round, you may or may not havethe opportunity to offer a direct co investment
(43:00):
just depends on the dynamic of the roundbecause you may be kind of sliding into a slot
that is pretty much, you know, the round isdone and there's just not a lot of capacity.
If you are leading, which out of this fund,will not be leading at least for the
foreseeable future, maybe kind of at the tailend of this process, will change a little bit.
(43:23):
For my prior fund, we were leading.
So in that case, you maybe have a little bitmore influence on who can come in.
But at the same time, it's always up to thefounder and the founders who need to build a
syndicate structure that is most productive andvalue added for them.
So that is really the overarching theme.
(43:44):
So as an investor, I have some influence, let'ssay, but I don't have full control over who
gets in.
So I think there's a little bit of that dynamicthat needs to be not overlooked.
So for me, I'm investing in the things that Iknow best, B2B SaaS and B2B FinTech.
And within those sort of bigger buckets, I'minvesting or most excited about certain themes
(44:11):
that include capital markets and assetmanagement technology, all on institutional
side or B2B, where the fin is at least equallyvaluable and important as the tech piece, as
opposed to kind of maybe a little bit more B2Capplications where the tech maybe leads and
(44:31):
it's more about the user experience and thedata and engagement and less so about the deep
finance aspects of the industry.
So that's one piece I invest in pretty mucheverything that's data driven intelligence for
enterprise.
And so that can be as simple as generatingadditional data and then an analysis and
(44:59):
insight that comes from that.
It could be just something that previouslyexisted, but was locked up in the silo and is
now coming out to maybe interact with otherthings and other information to ultimately,
again, give intelligence to the business tobecome more efficient and maybe increase its
revenue, maybe reduce its expenses or whatnot.
(45:20):
I'm very interested in the CFO tech stack andthings like FinTech sort of extending into the
traditionally non financial sectors.
Sometimes you'll hear the reference to embeddedfinance.
So I guess it's part of it, but it's biggerthan that.
I think it's a bigger theme.
And the other theme that I think is reallyinteresting and that I'm really tied into and
(45:47):
watching very closely is the convergence of thecentralized and decentralized ecosystems and
infrastructures.
And the reason I mentioned the themes is thatthese are the areas where I know that I have a
brand name that I've built whether it's myselfpersonally or now I'm building it for my fund.
(46:08):
Because VCs just by definition are brandbuilding.
You have to deal flow.
You need to be out there with something thatyou're known for.
And with family offices, it's kind of theopposite because they want to be bespoke.
They want to be private too.
They want to be private.
So just that separation and distinction alone,I think, creates a very different deal flow.
(46:33):
So you do unfortunately suffer from the adverseselection if you're not out there kind of
building your brand.
And so I think that's something that getsoverlooked at times.
So when I talk about these themes and areasinterested in, I'm saying it with confidence
because I know I have access to those deals.
I know I've invested in these deals and thelonger I do it, the better my network becomes
(46:59):
at finding these opportunities and bringingthem to me and the better I am at, I guess,
figuring out what's investable and how to helpthem in many cases.
So there's a sequence here.
So what you were talking about just a minuteago about family offices maybe going out and
(47:20):
trying to build out their own venture arms,that just takes time.
It doesn't mean that they can't do it, butthey're going to be five, ten plus years behind
other people who've been doing this for anextended period of time and building that
brand.
And yes, you can attract maybe some of thebetter known investors, But I think that's
(47:42):
really hard and very expensive.
And some people may just not even want that.
They like where they are and they're just notgonna come over.
So what are you better off doing?
Are you better off really kind of pushing kindof that forward and saying, I'm just doing it
no matter what?
Or are you better off, like you said,partnering, investing in funds and then trying
(48:04):
to find that co investment opportunity andreally building that relationship that you will
be shown that co investment opportunity in mostinstances where it's available.
So, I think that's a very, very healthydynamic.
I think it just helps every side and actuallyis less expensive because the other cost that
(48:28):
is worth mentioning is that if you don't investin great deals because your network didn't
source them, then it's actually costing you allthat lost capital on top of the cost of
bringing people on board to do it in house.
So there's that, something to consider.
Not to say that some people don't do thingsvery successfully and it all works out, but I'd
(48:51):
say more often than not, these factors that I'mmentioning are very relevant.
Yeah, no, it's really helpful.
And I know we're at time and I know it's latefor you, but thought we would just end with a
couple of questions here.
One of them might be a loaded question, butlooks like Alice one of her questions was,
think you talked about the focus of your fund.
(49:11):
How can one start a fund?
I think, obviously that's a loaded question,right?
Because that's a whole process and a frameworkto really think through, but maybe in a one
liner, like what should someone be thinkingabout if they wanna start a fund?
(49:32):
I will qualify this answer because it's sort ofthrough my personal experience.
My personal experience was to start investing,find ways to start investing.
You can start investing as an angel.
You can invest in a fund.
When I was investing as an angel, I invested inthree funds because I was like, I can't
(49:53):
diversify fast enough.
There are some sectors I will never see a dealin unless I'm connected to somebody who is an
expert in that space, or maybe I want to learnsomething that I'd never seen before.
And so there's enormous value in doing that andaligning yourself because you see better deal
flow and you can learn.
(50:14):
If you don't have capital, then I guess tostart investing, then I think another
alternative would be to try and find someinteresting themes that you're very excited
about and something unique on the deal flowside.
(50:34):
So then you can kind of network your way intorelationships where people have access to
capital, and then you can bring them a dealthrough an SPV.
Some of the things that you and I, Joel, talkedabout before, some people do.
I didn't do it with this fund because I juststarted prefunding my own commitment, but
that's different because I've been kind of atthis for a period of time.
(50:55):
But I do think that the other sort of hustlepath of finding a deal and then maybe trying to
create a community around that.
Even if it's a small allocation, you kind ofstart with something small.
Process.
That's all I would say.
(51:16):
I think it's something that takes time and youhave to just expect that.
And then I think you just navigate as you getfeedback as you go along.
Yeah, I think one more thing I wanted to callout that we didn't mention just for the
education is, you know, just selling those prorata rights that are unused.
(51:37):
A lot of times you can use SPVs.
And that's just a great way to kind of deliversome of that upside to your LPs, know, so it's
just a great vehicle if you have access to it.
I've, I don't know if you've talked to some ofthese funds that only focus on that, but I've
seen some interesting fund models that onlyjust literally sell pro rata rights and they're
getting three to 5x just from kind of taking upthose pro rata rights, buying them and then
(52:01):
selling them, and repackaging them.
But there's been fun strategies around that.
So that tells me like, what's interesting isthere's just a lot of different strategies.
And you know there as an LP you're trying tofigure out which one is the best right
sometimes you think about just pure cash oncash returns and then there's so many different
ways to look at you know benchmarking andmetrics and return analysis from funds.
(52:26):
You know what, this brings up actually aninteresting point that I think is worth just
mentioning.
So what you're describing is that I guessthere's more and more avenues for an early
stage.
That's another reason why I really love earlystage.
(52:47):
More and more avenues for an early stagemanager to more dynamically manage their
portfolio.
So, yes, in many instances, in most cases,you're investing for the long haul.
You just want to get in and hold it until themassive outcome.
But thinking of how many secondary liquidityoptions there are available now between well,
(53:11):
maybe the market's a little bit less frothynow, so there's a little less competition at
those future rounds.
But still, successful executing companies,there will be that demand for future rounds
investors trying to buy out earlier investors.
So that's one opportunity.
You also have many more instances of these sortof future rights being sold and kind of have
(53:36):
hybrid strategies.
Maybe sometimes it's just pro rata rights.
Maybe they are also buying out some otherequity and packaging that into more creative
pieces.
There are some tech platforms that are emergingwhere you could do that.
And then not to sort of forget the mostimportant piece is that there's also M and A
that could occur at many of those points intime.
(54:00):
And so as an earlier stage manager, I think youactually have today a lot more options because
the markets developed in so many different waysto risk manage your portfolio because it's
always going to be a long term horizon, but youcan maybe navigate a little bit of that return
of capital a little bit more dynamically thanI'd say in the past.
(54:23):
Yeah, no, totally.
I totally agree.
I mean, they're calling it venture two pointzero, right?
Just finding a lot of new ways for VCs to havecreative products.
I'm seeing many VCs now in the later stages oftheir career have multiple funds, right?
So there's a couple funds that I know thatobviously are on there like fund five, but
(54:46):
they're raising like two funds at the sametime.
One is like an early stage strategy and thenone is a late stage strategy.
And then one I've actually seen that also has athird strategy, which is just capitalizing on
SPAC.
So there's just a lot of creative ways.
Know the conventional wisdom and thetraditional advice is, you know, just at the
(55:06):
end of the day, deliver returns to your LP,right?
So returns trumps all.
So that's kind of the main, you know,undisputable factor, right?
Did you return some capital back andperformance really trumps all?
So whatever strategy you use as long as it's aslong as it's working, but the good thing is you
have a long time horizon to to kind of harvestsome of those investments so that helps.
(55:31):
Cool.
Well, know it's late.
Know we're over so thanks for your time andreally great hearing about everything that
you're building and working on and excited forthe future.
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