May 6, 2025 • 52 mins
Joel Palathinkal welcomes Bibash Mukhopadhai to discuss the significance of market cycles in venture capital. Bibash shares his journey, highlighting the role of mentorship and the impact of his upbringing and education on his success. They delve into his early entrepreneurial experiences and transition to academia and venture investing. Bibash offers advice for PhD students, drawing parallels with venture capital, and shares insights from his time at NEA on raising capital. The conversation includes tips for new analysts and associates, fund differentiation strategies, and engaging LPs. They also discuss succession planning, compensation dynamics, GP stakes, and decision-making in venture capital. The episode concludes with closing remarks and appreciation.
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(00:00):
Are that's a very good indicator whether you'llmake money in the future, whether you have
lived through the market cycles that you aredoing right now.
I've never seen an LP invest in a group ofinvestors who hasn't lived through different
market cycles.
The the most, you know, underrated question, Ithink, is succession plan.
And and here's what to your prior question of,you know, how do you grow into a system?
(00:24):
How do you train yourself as a VC?
Especially knowing two things.
Right?
A VC is VC in general, venture in general, is along term game.
The funds are ten years.
Often, the outcomes that you see don't happenfor four, five, six, seven years.
Welcome to The Investor, a podcast where I,Joel Palothinkel, your host, dives deep into
(00:50):
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
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
So I'm excited for my episode today.
(01:11):
I've got Bibash Mukhopadhai.
He is at Sound Bio Ventures.
You know, got to know him a couple weeks ago,and, he's coming on here to talk about his
story of breaking into venture, being an expertin venture and now building a firm and and, you
know, appreciate people like Babash to come outand and tell their story because venture, as
(01:35):
everybody knows, is just a opaque industry.
There's no degree, right?
You can't go to college and study privateequity or venture.
You have to start out doing accounting.
I mean, a lot of the people on the valley aredoing deep tech or they're a software engineer,
and somehow they they find the way into thespace.
(01:55):
So for me, I just every day, I feel lucky to beinto in this industry and, have other people
that are like minded in the space.
So, Bhubash, welcome to the show.
Absolutely.
Delighted to be here, Joel.
Thank you for what you are building, as well,and, the engagement that you drive and and the
forward looking aspect of this, which isgetting people to tell their stories so that
(02:19):
people who aspire to do this get inspired to dothis, have some hard data points of people who
have been there, done that.
So delighted to be here.
Happy to tell my story, which is, here it goes.
So I run along with two of my partners a fundcalled Sound Bio Ventures.
We are exclusively investing in biotech,clinical, or almost clinical stage companies.
(02:45):
Biotech, as you know, is the art and science ofdrug development.
So something that's incredibly specialized thatyou have have to have done it with your own two
hands to fully appreciate.
And as investors, we take pride in the factthat all of us come from a scientific
background of some sort, leapfrogged into drugdevelopment, some kind of an operational role
(03:08):
before becoming investors.
We are a new fund, have been in existence sincethe beginning of 2022.
Incredibly lucky to be playing in this space.
I can give a little bit of a description.
Small fund, hundred and 20,000,000 first timefund.
Between the three general partners who run thefund, we have around seventy five years of
(03:29):
cumulative experience, both our, academicdegrees in drug development and investing.
And I'll tell you a little bit more about mybackground.
So prior to starting sound, I was with a largediversified global venture fund called NEA.
Incredible place to train.
(03:49):
So I sort of grew up the ranks there, focusedon biotech investments.
Was a part of a number of deals end to end,thanks to the mentorship of a couple of people
there.
And prior to that, was on the boards of anumber of private as well as public companies.
And prior to that, worked at AstraZeneca in acorporate development BD role.
(04:13):
Prior to that, worked at Johnson and Johnson,similar type of roles.
And then initially, prior to that, trained as ascientist.
I never ever got a degree in business formally.
And so one of the core tenets that I havelearned, that my mentors have taught me is the
only way to do this is through apprenticeship.
(04:36):
You can't learn this in university.
Yeah.
Run drug development in any university.
You have to shadow people who have been there,done that to learn things.
Mhmm.
So, yeah, that's been my journey over the last,two decades, three decades.
Well, just back can we back up a few more yearsbe you know, because you just said, look.
(04:58):
I started at NEA.
What what was kind of the earlier life ofBibosh?
Like, what did you do when you were in highschool?
Where'd you grow up?
And what did you think you wanted to do?
You know, because I mean, for me, I didn't evenknow what venture capital was.
I only found out about it when I startedgetting involved in, like, the entrepreneurial
ecosystem in my college.
(05:19):
But before that, I even I never even knew therewas a career path.
So, you know, tell me a little bit about whatyour beliefs were when you were growing up and
maybe what you thought the career path was.
And look.
You maybe you grew up in Silicon Valley, that'syou know, you you're you're a baby and you
already do about venture capital, but, but we'dlove to go a little deeper in terms of kinda,
like, the evolution.
Yeah.
(05:39):
Absolutely.
Look.
I grew up in India, literally in the middle ofnowhere.
Think of a place analogous to, you know,between Pittsburgh and Morgantown.
So cool country, very god fearing people, verysimple people.
So is there, like you know, because I know pitI've to Pittsburgh.
It's like a very steel, iron kinda give me soit's a very industrial city.
(06:02):
Very industrial city.
Yeah.
Very much sort of salt of the earth people.
Think Detroit.
Think Pittsburgh.
Exactly same mindset.
If I did something in school, the town was sosmall where I grew up that things would get
reported back to my mom before I came home fromschool.
Yeah.
So what in retrospect, what I think is veryimportant is when you grow up in such a place,
(06:27):
in order to achieve escape velocity, 90% of thepeople stay there.
In order to achieve escape velocity, you needtwo things.
You a, in my instance, I was very fortunate togo to a high school where I had very good
mentors who opened the world for me.
This was before, you know, access to Internetand democratization of information.
(06:47):
So having access to information, having to lookup to someone was very critical.
And that formed the basis of me startingcollege in Delhi, the capital city of India,
and the the the impetus for that was educationis a means towards achieving that escape
(07:09):
velocity.
Mhmm.
Education was the ticket.
I knew that if I have to you know, there wasalways a, quote, unquote, comfortable life,
then you go to the the you know, work in thesame my dad worked in.
Sure.
You you you work there.
You have a fairly comfortable middle classsolid life.
But for some people who are, I guess the rightword is itchy Mhmm.
(07:34):
Who itch to go and do something else, having,you know, the the the the crutch of education,
if you will, the enablement of education is theway to achieve escape velocity, and that's
precisely I did.
Many people in my cohort, couple of yearsolder, couple of years younger, have done
exactly the same thing.
So they land in a place, in a college, and thatopens up their eyes.
(07:57):
I was like a kid in a candy store when I wentto Delhi.
I apart from education, I paid for my, expensesalone, became financially independent at 18,
which is something once again in retrospect I'mvery proud of.
I started working at a place called UNDP,United Nations Development Program, did a
couple of programs there, you know, which hadsolid impact in terms of overall thinking and
(08:22):
very importantly entrepreneurial mindset thatyou can build something from ground up without
the need for, enormous capital participation,and that impacts very importantly, a million
people.
So that was my stepping stone.
And
I would say too, you know, I've seen differentI mean, just growing up in, you know, in
(08:45):
Florida, I would just see different outcomes ofpeople that came from different styles of
upbringing.
So I had friends that, you know, grew up in thechurch, you know, super sheltered and super you
know, the parents just were super strict.
And once they went to college, they just wentcrazy.
(09:06):
And like, just, they got out of college andthey just didn't, they found this newfound
freedom.
I feel like my parents, was kind of, and again,you know, that's not going to be the same
outcome for everybody.
There could be people that have very stringentparents that, and then they finally break out
and they're like, look, let me make somethingout of this.
But I just think sometimes, I've just seen thatsome people have just been so sheltered that
(09:28):
they just don't know what to do.
Like you said, when you went to Delhi, you feltlike a kid in a candy store, right?
You could literally do anything.
You don't have to ask your parents and you'renot worried about the whole town telling your
mom what happened.
But I felt like my parents, like when I was inhigh school, my parents really instilled the
fact of just being social.
(09:48):
They're like, look, know, definitely work hard,but, you know, don't be a bookworm, you know,
try to go out there and socialize, but don'tlose our trust.
Don't go out there, get a DUI and then now kindof ruin your future.
So they kind of like, I think that definitelyhelped me because when I went to college,
didn't go crazy because I was already kind oflike, you know, in high school kind of exposed
(10:10):
to, you know, hanging out with friends andpartying where other people that I knew, they
just you know?
Like, they would probably have to they probablylost maybe two semesters of college because,
because they were exploring life and maybeexploring themselves.
No.
Look.
That's that that self exploration is important.
Right?
But at the same time, in my instance, at least,I didn't even have a choice.
(10:33):
I had to go out and earn money concurrent tocollege.
Right?
Sure.
In order to, be financially independent.
It's so so all I took away from that from thethe the place where I was, the small town, and
then translocating, transposing myself into avibrant sort of intellectually engaging city
(10:59):
like Delhi is with all its distractions at thesame time.
Right?
That, you know, first time exposure to a bigcity.
All I took away was I have to survive.
And that, by the way, I think is very importantin a in in terms of a mindset, the resilience,
the self dependence.
Never realized this when I was 21.
And it's very easy to say this in retrospectafter you have contemplated about that for a
(11:22):
while.
But what was particularly, important in thatphase of life was having the discipline and
having a focus on things.
So, in in my instance, it was I was learningevery day from you know, both in college in
terms of the standard things that you need todo in college.
But beyond that Yeah.
(11:42):
Most importantly, how to interface with people.
Sure.
Because the job at UNDP essentially involved,they had grants.
I'll tell you a story here.
So and I'm particularly proud of this in someways.
Very big lesson.
So we were a group of four college kids, allbetween the age of 18 and 21.
(12:04):
We were given a grant with the intent that, youknow, with a very broad remit in mind, go
induce some form of a change in everydaypeople's lives.
There were some slums slum slums in in in DelhiMhmm.
Where the state of hygiene and the state ofsort of overall public health was abysmal.
(12:30):
So all we did, the four of us, all we did wassource what was a a bacteriostatic or
bactericidal chemical from one, chemical plant,convinced a small mom and pop manufacturer of
soap to add that into their system, sold it forcheap.
Their factory was going at half capacityanyways.
(12:52):
So we add a source from one of an ingredient,put it in, put it into a soap, and then go
distribute slums in those slums where, youknow, just washing your hands before eating
evidently resulted in an eighty percentdecrease.
And this is on maybe like a a two millionpeople population.
Eighty percent decrease in the incidence ofcommunicable gastroenteric diseases.
(13:17):
We never realized the impact of this when wewere actually doing it.
We were doing it for some good.
Right?
Here's here's some money from UNDP.
Do it for good.
But then five years down the line, I'm then agrad student doing my PhD in The United States.
Someone one of my friends calls me up and saysthat, look.
There's nothing to prove that there is youknow, correlation is not causation, but here's
(13:39):
the data from the local health centers whichshow this precipitous decrease in exactly the
years you you guys distributed soap andinstilled washing hands
Mhmm.
As a behavioral measure, decrease in choleraand other dysentery and other diseases.
So with what?
Thousand dollars worth of capital infusion, webuilt for four years something, which had a
(14:03):
very significant impact on a million lives.
Mhmm.
Per, you know, per capita impact, I've neverseen anything beyond that part.
Here's the other part.
No one told us, and we were not smart enough asa group to figure it out on our own to make
that business, make that a sustainablebusiness.
The money was gone.
(14:23):
The people moved on.
I for example, I went on to do my PhD, youknow, in a different country.
And the impetus for, you know, keeping thatbusiness, quote, unquote, or enterprise rather
going as a standalone entity was gone.
So big lessons learned there.
Right?
Enthusiasm is excellent.
Initial capital infusion is excellent, but youhave to make things sustainable.
(14:46):
Yeah.
So these are the lessons you pick up along theway.
The resilience piece, the fact that you have tobe independent, the fact that, you know, you
can be.
There's lots of opportunities that lay there,and you just have to find them and the part
that you have to make things sustainable.
So these are the lessons I picked up along theway once again.
(15:07):
Never realized that at that point of time.
Only looking back in the rearview mirror.
I figured this
and then tell me about just kind of your nextcareer step after that.
So you yeah.
So once again, it wasn't a planned trajectory.
Right?
So if you were good in studies and if you hadan academic mindset, you liked research, all of
(15:31):
which were checkboxes.
I landed initially in Germany and thereafter inThe United States to pursue the academic path,
which was do a master's, do a PhD.
I absolutely loved, research and the and thesort of the blue sky aspect of that.
Mhmm.
So doing a PhD was something that was both Iwanted to do Yeah.
(15:52):
Temperamentally perhaps suited to do and wasencouraged to do by Mhmm.
By mentors.
So one thing you will find as a theme in mycareer trajectory is I've had essentially the
blessings of around six people at differentpoints in my life.
I start example, I mentioned the high schoolteacher.
Right?
Mhmm.
Similarly, there was someone in in at UNDP.
(16:13):
Similarly, there was someone during my, PhDcareer.
All of these people served as very importantsounding boards, as very important, people who
I can lean in on to ask for advice.
And it that has been a very sort of cornerstoneof how I evolved, and how my thinking evolved.
(16:38):
So start doing my PhD, absolutely enjoyed theprocess of sort of the usual scientific aspect.
This is hard science in biomedical sciences.
Worked on retinal degeneration, something thatwould otherwise be considered very esoteric.
But there are a couple of very importantprinciples I learned along the way, which is
(16:58):
science is always about hard data, minimalemotion.
So I, to this day, use that objectivity andlaying out and understanding hard data in terms
of, investing.
Yeah.
Because at the end of the day, what am Iinvesting behind?
Will the drug work or not?
And if there the drug works, if you can provethat in a clinical trial or a scientific
(17:19):
experiment, you are sitting on a ton of valueMhmm.
That we as venture investors try to capture.
Right?
Yeah.
So that thought process becomes ingrained whenyou learn to do research with your own two
hands and with your own two neurons.
So that was the biggest takeaway with, youknow, for five four, five years.
(17:44):
And to your point, Joel, the way I encounteredventure investing was was quite a fluke.
It was I had no idea up until maybe I was 26,20 seven what investing was.
Sure.
And the way it came about was one of theprofessors, who has since passed away, Tom
Caskey, he called me into his office one dayand basically gave me a stack of papers and
(18:11):
said that, will this drug work?
What do you think?
Mhmm.
I had de minimis.
I had some idea of what GM CSF was.
It's a specific type of molecule that's,eventually, you know, became an approved
product.
But the the the the the open endedness of thatquestion was fascinating.
(18:35):
Will this drug Yeah.
So that put me in the stream of, you know, how,drugs are developed, what clinical trials are,
what statistics are, how you can prove acertain hypothesis in, in patients, whether the
science that you do on the bench translates tohumans
(18:55):
Mhmm.
When you run the trial.
So all those elements I learned in those sortof two and a half years of, interface that I
had during my PhD.
Yeah.
So every other PhD is normally very, you know,focused on one aspect.
I love that one aspect of getting my thesisdone, but in parallel, all these very
(19:16):
intellectually stimulating questions led me tounderstand the language.
I keep using this word, the language of drugdevelopment, which was very helpful.
So that was my first instance of, sort ofunderstanding drug development and whether one
should you know, the judgment call of whetherone should put $10.15, $20,000,000 of
(19:38):
investment behind the drug development process.
And, you know, I had you know, I also wasfortunate enough to earn a PhD, so happy to
meet another person who went through thatprocess.
One thing I'll ask you and I'll probably sharea few things too, is just like what's one of
the biggest things that you learned doing yourPhD and what advice would you have to people
(20:04):
that are trying to get their dissertation?
They have a saying, I think it's like ABD.
It's like all but dissertation.
So you got through all the coursework, butmaybe your course, maybe your advising
professor, your chair professor just never gotyou through the dissertation.
Right?
And that really makes a big difference.
Think who you have on your chair and who yourmain professor is that's on your, chair
(20:30):
committee, you know, the main point of contactthat you're working.
That makes a big difference.
I know people that some people that never gotthrough it and then some people that finish in,
like, seven years.
Yeah.
Look.
First of all, they are my lessons from my PhDthesis.
So first of all, it's intellectually, it can bea very engaging process.
Mhmm.
But it can be an incredibly frustrating processtoo.
(20:53):
So patience is the key, and consistency is thekey.
In retrospect, it's very easy for me to saythis.
Say this to a current PhD student, then he'lltell you.
So the big difference exactly as you pointedout, Joel, comes from your key adviser.
Mhmm.
They can become, you know, a a fuel boost.
(21:16):
They can draw you down depending on theirphilosophy of mentoring students.
My adviser I I lucked out totally in that game.
My adviser was someone who is of the principlethat, you know, here here's some mice.
Figure out what's wrong with with it, what thepathology of x y z disease is.
(21:38):
So in other words, they give you a sandbox toplay without artificially constraining it Mhmm.
And without artificially making it so big thatyou totally sink or swim.
Yeah.
So being tailoring, you know, your mentorshipto the person who is at the receiving end is
very important.
Sure.
My mentor was fantastic in that way.
(21:59):
Initially, he told me, you know, he he was moreprescriptive.
But as time went by, by the end of third year,I was totally independent in sort of designing,
executing experiments.
So so and and he was very, you know, bespoke todifferent PhD students that way.
So I think the single most important variablein your success as a PhD student is your
(22:22):
mentor, period.
Yeah.
Doesn't matter whether that mentor is at, youknow, Johns Hopkins University or Woodunktown
University.
If the mentor is good, it doesn't matter whereyou are.
Resources might be different in those two.
But right?
So I totally lucked out there.
I was very, very fortunate to have a mentor whowho did that.
And my main takeaway was resilience, you know,consistency, and and just being being open to
(22:50):
ideas and and things.
So it was a I I really loved it.
But at the same time, in retrospect, I actuallydid the math.
I I it took me probably four and a half yearsto go from initial, you know, dissertation.
The coursework part was easy part.
Right?
It's Yeah.
Yeah.
It's the research part, original research.
That's that's the hard part.
(23:11):
Sure.
And right?
And, one lesson I took away from that was in myspan of four and a half years, there were
exactly three periods of three to four monthseach when I generated novel knowledge, novel
data that could go into a currency.
(23:31):
Currency of a PhD is always publications,original publications.
Right?
So if if you think about that, right, it's it'sactually quite a profound realization that you
are not generating data all along that four anda half years.
Mhmm.
You're productive in batches Yeah.
Or, you know, small periods of time in whichthings just happen.
(23:52):
Experiments read out positively.
You get good output.
You publish papers.
And that was exactly the case in in well,exactly in my case, what happened.
So the rest of the time, you probably are very,you know, grumpy and frustrated that your
experiments are failing and things are notworking.
Your papers are getting rejected, which alsoprepares you for real life.
(24:13):
Sure.
And I think part of a PhD, you know, hasparallels to venture because you have to really
come up with an idea that's never been donebefore and you have prove it.
So I mean, what are you doing?
Right?
You're investing in outliers.
You're always poking holes in a company thatyou're about to invest in and just making sure
that it's doing something that's different.
(24:34):
So that really helped me have the framework forVC.
You'll be surprised some of the skills that youbuild in your earlier life, some of them shape
you as an investor too, right?
So if you're really good at, I mean, obviously,if you have an industry focus like you do, you
know, in the healthcare space, that definitelyshapes you as a healthcare investor.
Just the soft skills and just kind of the hardskills that you develop doing a PhD and also
(25:00):
you're going through rejection, right?
I mean, maybe your first few chapters are nothitting the mark, you got to rewrite them.
Same thing if you're writing a memo, right?
An investment memo for, for NEA.
Right?
Yeah.
Look.
At that at the end of the day, the critical bitthere, exactly as you point, the hard and the
soft.
Because the hard skills comes from science.
You do that for five, six, seven years.
(25:21):
Right?
As a as a, PhD student during your undergrad,whatnot.
If if you get exposed to that thinking process
Mhmm.
Of of how do you create hypotheses, test themout?
What does data mean?
What are the tools for analyzing andinterpreting data?
Those are very hard skills.
(25:42):
You you can't replace them by, you know, by ashortcut.
You have to do them on your own.
So that's
the hard
part.
The soft skills actually, I think, boils downto, basically convincing people.
I mean, think about it.
What does a VC do?
It does he does he or she does three things.
Raise money.
Mhmm.
Deploy money, and then gets returns.
(26:04):
Those are the three pillars.
Yeah.
If you can do all of the three successfully.
In the first part, how many times do you getrejected from prospective capital providers
saying that, you know, it is not right?
And we do the same to companies.
Right?
Mhmm.
It's the same thing.
Sure.
So it's incredibly humbling, actually, to goout and raise money.
(26:24):
And having done that once now, right, unlessyou are an entrepreneur, it's very difficult to
live through that through, you know, quote,unquote, secondhand, passive, learning.
You have to live through that.
You gotta really go through it.
Yeah.
Exactly.
And that's the biggest thing I think thatpeople underestimate in in in venture.
(26:46):
I think the easy part there is finding theinvestment, to be very honest.
I'll be sort of counterintuitive there.
People lay a lot of importance in finding andselecting the right investment.
Yeah.
The job begins afterwards.
Yeah.
Because if you don't have any capital, there'ssomething you can do with those investments
that you find.
Exactly.
(27:06):
So raise the capital, which is humbling.
And after you do the investment, shepherd thosecompanies to a point where they have created
value.
This is the difference, I think, between youknow, that second part is the difference
between a traditional venture investor, whichis hands on active, etcetera, versus a passive
investor.
(27:27):
If I play the stock market, identifying theright stock is the be all end all.
When when to get in, when to get out.
Yeah.
But as a venture investor, the path in betweenis equally, if not more important.
Sure.
I totally agree with that.
What do you what are some things that youlearned at NEA?
So NEA was a fantastic place.
It's it was a perfect stepping stone job, so tosay, because, you know, the firm has been
(27:53):
around for forty years.
There was you know, the it had a history of,you know, long term mindset for investments.
So I basically learned investing there byshadowing the partners who used to be there.
Yeah.
So the you know, how you think about not onlywhat's a good company, what's a good
(28:14):
investment, but very importantly, someone toldme that it's the time point at which you invest
in a company, in a company's trajectory is veryimportant.
Mhmm.
Someone taught me never take compounding risks.
Always take isolate the risk.
It's hard enough to do drug development.
If you keep moving the goalposts, it becomesvery difficult for you to realize return.
(28:38):
So be focused on your end goal.
All of which, by the way, we apply at soundevery day.
The the difference, I would say, between NEAand sound is NEA was a large firm with a large
multibillion dollar, you know, multi assetclass.
We, on the other hand, are very, very focusedon one thing, one sector, one approach.
(28:59):
Mhmm.
And there is you know, part of this is if youlook at the legacy of the industry.
Right?
You have firms like the NEA, Sequoia, a 16 z'sof the world, which are sector agnostic.
There are people who are sector specific, butthe overall fund and fund return and portfolio
construction, etcetera, are sector agnostic.
And then there are specialist funds.
(29:20):
There
is
always a debate on, you know, whether, what isthe right approach.
It all depends ultimately on your capitalraised and the people selecting and deploying
that capital.
I feel very comfortable with a biotech onlyportfolio because that's what I understand.
There are other firms like NEA, like, you know,Sequoia, etcetera, very storied history, which
(29:47):
are more generalist forms and to each theirown.
Right?
It's just Yeah.
Function of size and style.
Mhmm.
Sure.
Yeah.
That makes sense.
And then, you know, what would be some advicethat you would give to maybe new analysts and
associates trying to build these skills?
I'm sure you learned a lot as you kind oflooked at a lot of deals, you know, passed on
(30:10):
deals, and then, you know, obviously took dealsall the way to investment committee.
So in this market, what should people thinkabout in terms of valuation, in terms of, how
they're sourcing, picking, winning?
Yeah.
Look.
The the basics remain the same.
And and and I I restrict this to biotech onlybecause that's the sector I understand.
(30:32):
At the end of the day, there are two thingsthat matter.
One, will the drug work?
And two, if the drug works, will I make moneyout of it?
Mhmm.
Right?
Those are the two very basic questions.
Will the drug work is a scientific questionbased on the science, the clinical development
plan, the risk that you are underwriting as aninvestor primarily has to do with either of
them.
If the science doesn't quite work out inhumans, what's the point?
(30:55):
If you can't prove that a drug works out inhumans in the way you design and execute
clinical trials, what's the point?
If the market is not big enough for that drug,it's a me too drug, no one will come and buy
that, and therefore, you as an investor won'tget liquidity out of it or won't make money out
of it.
What's the point?
So that's one piece.
(31:16):
The other piece, you know, that is isimportant, I think, is, you know, I I I'm a
very big believer in stay in your lane as aninvestor.
Do what you do.
Do it very, very well.
Because at the end of the day, I mean, thinkabout it.
This is a someone once again, one of my mentorstold me this.
What does a VC do?
(31:36):
The VC is a matchmaker.
Right?
It's not their money that they're investing.
It's not their personal money.
They raise money from institutional pensionfunds, etcetera.
Yeah.
And they deploy that capital in someone else'sideas.
Mhmm.
So in effect, you are taking you are amatchmaker between someone else's money and
someone else's, ideas.
(31:58):
Yeah.
So you have to play that role very well, and apart of that is frankly the humility to
understand what will work and what won't.
You are you are you are essentially providingthat value add in the process and shepherding
the companies that you invest into a certainvalue.
Right?
Yeah.
So my my only, you know, advice is a, be verythoughtful about what to invest in and when to
(32:25):
invest in.
Mhmm.
And when do you do that investment, right, inthe company?
There are lots of examples where it was afantastic company to begin with, but if you
came in at too high of a value at the top of abubble, right, you'll never make money off
that.
You won't you know, investment outcome will notbe optimal.
So those are my two key takeaways.
(32:48):
Sure.
No.
That's amazing.
And what would you advise people you know, onething that I think I probably joked around with
you on is, know, when you said your fund issmall, you know, your fund in my experience
for, you know, early investment managers kindof building their firm, you know, your fund
size is pretty, pretty large comparatively inthe venture space.
(33:11):
It may not be comparatively in the biotechspace.
However, when you think about other assetclasses outside of venture, a lot of people are
thinking about venture and the opportunitiesthat venture provides.
But when you think about the allocatorecosystem, there's there's venture, which is
just a small sliver of private equity.
And then allocators are also investing in fundsthat do private credit.
(33:35):
They're looking at private equity.
They're looking at hedge funds.
They're looking at long short equities.
So looking at all these different types ofstrategies, and I know hedge funds, like an
emerging manager that's a hedge fund is like a$400,000,000 fund, that's considered emerging.
So as funds are kind of thinking about tellingtheir story, differentiating, and also kind of
(33:58):
building an engaged LP ecosystem, we all knowit's a long term strategy, it takes
relationship building.
So what are some of the learnings that you haveacquired over the last couple years building
this firm and also just, you know, trying toconnect with LPs and have them understand your
vision very, very briefly and and quickly?
(34:19):
So look.
I am and for for that matter, every manager,you are too, Joel, in this category.
Right?
Someone who's an entrepreneur, fundamentally.
I'm a financial entrepreneur in that way.
It's just that the the the the the currency ofthat entrepreneurship, in my instance, is a
fund.
Similarly, someone might have a company.
Yeah.
It's a product, essentially.
(34:40):
Right?
Product.
Exactly.
Mhmm.
So that's the exactly right, Joel.
So the financial product that Sound BioVentures offers to LPs is basically venture
like returns through the means of a of a of asector in which we have specialist knowledge.
That's what it boils down to.
(35:01):
So being able the most important thing I'velearned in sort of raising as we build this
farm, deploying the fund and Mhmm.
Making investments is, at the end of the day,you have to be able to differentiate yourself.
You have to offer something to the LPs thatothers don't.
(35:22):
And you are exactly right.
Sitting in a venture fund without raisingmoney, I don't think anyone I mean, people are
not necessarily fully cognizant of the choicesallocators have.
Mhmm.
In the current context, say high market riskinterest environment.
Right?
Unless I'm able to give a 20% IRR threshold.
(35:45):
Right?
Some form of return that is way above what thefixed income market or even the other
alternatives or private debt is offering anallocator, why will someone invest capital and
pay me a management fee to run that?
Yeah.
So positioning the story relative to who youhave, relative to the choices LP's have, I
(36:10):
think, absolutely critical.
And Mhmm.
As always, right, put yourself in their shoesand the type of decisions they allocation
decisions they are trying to make.
And what's considered good portfolioconstruction from their end.
And this to me, it's very obvious inretrospect.
But truth be told, I didn't fully appreciatethis three, four, five years ago.
(36:31):
Mhmm.
The choices that LPs have in terms of backingof venture manager, backing that asset class,
backing that sector, and so on.
So all of these elements actually becomecritical once you start appreciating them.
You try to tell the story to an LP.
Yeah.
Let's say, in our instance, a believer inhealth care, a believer in the biotech sector.
(36:52):
Mhmm.
They are okay with the fact that we are anemerging manager.
And that's a double edged sword because we arenot first time investors.
As I said, between the three of us who startedthe fund, we have seventy years of doing this
cumulatively.
Sure.
But at the same time, we are doing this for thefirst time as a fund.
Mhmm.
And therefore, there are intrinsic risks there,which the LPs want to make sure are mitigated
(37:18):
or addressed.
So we have to give them as emerging managers,we have to give them the confidence that all
those sort of systemic risks are minimized ordon't exist or are minimized with emerging
managers as we are running this for the firsttime fund.
Now Yeah.
The best proof of the pudding always is givethem returns
(37:39):
Mhmm.
Which is what they hired you to do anyways.
Right?
LPs hired you.
If you can give them because, you know, thatthat proves the proof in the pudding proof of
the pudding.
Right?
I think you will be in the the the best shapepossible.
Sure.
What are some tough questions that fundmanagers should be prepared for when it comes
(38:01):
to LPs that maybe were not obvious?
So obviously, when it comes to track record orjust things in the data room, you know, there's
the standard things that you need to definitelyhave as table stakes.
But what are some things that are maybeunexpected that, you know, maybe LPs are
starting to ask for more?
Look.
It's a so you can take when LPs do diligence onus, like we do diligence on companies.
(38:24):
Right?
There is a tendency to have a very checkboxlike approach.
What's your track record?
What have you done?
Does your strategy align with the people thatare on board?
Right?
The same skill set.
Have you deployed similar amount of money andmade money previously?
Chances are that's a very good indicatorwhether you'll make money in the future,
whether you have lived through the marketcycles that you are doing right now.
(38:45):
I've never seen an LP invest in a group ofinvestors who hasn't lived through different
market cycles.
The the most, you know, underrated question, Ithink, is succession plan.
And and here's what to your prior question of,you know, how do you grow into a system?
How do you train yourself as a VC?
Especially knowing two things.
(39:06):
Right?
A VC is VC in general, venture in general, is along term game.
The funds are ten years.
Often, the outcomes that you see don't happenfor four, five, six, seven years.
Mhmm.
We are an exception in some ways.
Right?
We say we are venture asset class.
We have three to five year hold period, so wecan give you returns on the back end of that.
(39:27):
But this is, I think, both a proactive choicein our instance, in Sound's instance, a
proactive choice of the type of investmentsthat we do.
For a more blue sky fund, which is alsoventure, more early stage, you take six, seven,
eight, ten years sometimes to get to anoutcome.
Yeah.
So how does an LP evaluate whether this fund orform is successful or not?
(39:48):
And by the time ten years goes by, the two,three people who started the fund, one of them
is getting to an age where, you know, they theywon't be able to do a second fund or
a third fund or a fourth
fund.
So intrinsic into the system, I think thereshould be a way of bringing up people through
mentorship.
As I've told you, this is the only way to learnthis is mentorship.
(40:09):
So and at the same time, if you are, say, 35,you have been doing this for five years, you
just don't have a track record to go out andraise money.
It's not long enough, you know, in in biotechat least.
So similarly, if you are 65, you're too late.
So there is a window in which Mhmm.
You know, there is an optimal balance betweenthis and this team or this group has enough
(40:32):
experience to be able to you know, I can trustthem with our capital.
The LP is thinking this way.
I can trust them with our capital, and yet Ican back them for three, four funds so that
they are not too old that, you know, by thetime fund number three ends, you are 85 years
old.
Yeah.
Right?
So it's a very delicate balance in in in thatend.
(40:55):
And the only way I think you can skin the catis if funds very proactively think through
their succession plan.
Who comes after I'm gone?
Mhmm.
And I have hardly seen, to be very candid,hardly seen any entity do this well.
Because, intrinsically,
(41:15):
against how you navigate that because, I mean,if there's a couple general I mean, there's
usually, if there you know, if it's a solo GP,you gotta figure out how Yeah.
That's gonna happen.
But, I mean, I usually, if you have a coupleGPs, right, and say something happens to one of
them, at least the other GP should be still comanaging the entire fund.
So they should be able to handle, you know,most of the succession.
(41:36):
Correct.
Correct.
Exactly.
And there should be, in my mind, there shouldbe.
And we do this at sound very proactivelybecause once again, I realize that this is a
very, very big gap in the venture.
People go from associate to principal topartner, and then they are given the
appropriate economics.
Right?
What often ends up happening is the principalends up working for six years to make the
(41:59):
retiring general partner rich.
Because the retiring general partner haseconomics in a fund in which the principal
actually works to return capital.
Mhmm.
Right?
Yeah.
So you this intrinsic into the system is thistime lag.
It's this time hysteresis.
Mhmm.
So there has to be a good solution for that.
Otherwise, what happens is people stay on,learn at a place, and then they leave to
(42:24):
capture the economics if they can raise moneythemselves.
Yeah.
Historically, that's what has
happened.
Mhmm.
It's good in a way because it spawns newmanagers.
Yeah.
But it's not so good in the in that originalforms, you know, where that principal trained
for Mhmm.
Whatever associate or principal trained forfive, six, eight years.
Yeah.
If I'm training someone, right, for five, six,eight years, I want them to be a part of my
(42:48):
firm for the long run.
Sure.
And that's something I think we should be morecognizant and more deliberate about as fund
managers.
Yeah.
And I think just as a leader and a talentacquirer, I mean, you you really need to think
about the the economics of just compensation.
So, I mean, I think if you and I've seen thisin, you know, my previous life before I got
(43:12):
into venture, and it was a pretty interestinglearning.
So what some organizations would do, I thinkthe smart ones, they will give a hefty raise to
people so that they just can't leave.
They already know the teams, they're alreadycomfortable in the job.
And then, know, before, especially in New York,and it's probably the same thing in San
(43:35):
Francisco, but before people can think aboutchecking out the market, maybe finding a better
job somewhere that's gonna pay them better, thefirm will actually give them a pretty generous
increase and even a title bump.
So there's just no reason, there's no upside togoing across the street.
And then what happens is you're a new personacross the street.
I think that people definitely leave whenthere's not a financial incentive.
(44:01):
There's really more of a systemic issue withthe firm where they're just having problems
getting to where they need to be.
Then that's when they leave.
It doesn't matter about the money.
Right?
But I think when it comes to, like,compensation, if you can just pay pay in and
just pay a little bit upfront to kinda keepthat talent, you're saving a lot more money
(44:22):
down the road.
Because if you skim on the compensation, youkind of underpay somebody.
Now you're kind of stuck if that person leaves,and now you're just kinda trying to find
someone to backfill, and the quality still maynot be there.
Look.
To to your point, I mean, I'll go even one stepfurther.
I I, well, I I think I got most of you, but youcut out there for a second Mhmm.
There.
Sure.
But but here's the point.
(44:45):
As a GP and sort of owner of a farm.
Right?
Mhmm.
You are owning a business.
At some point, your most talented investors
Mhmm.
Need to be transitioned from being an employeeto being to owning that business like you are
right now.
Yeah.
And this goes beyond comp I would even ventureto say Mhmm.
(45:08):
That at some point of time in small firms, thisis not applicable necessarily to BlackRock, but
the compensation structures are different or orlarge, you know, $3,000,000,000 funds.
But for smaller funds, may have you know,mentor someone to get to a point where they are
a good investor, have confidence in them sothat they can essentially take over running
(45:31):
your business and making money not only foryou, but also for themselves.
This is the where most of these, you know,transitions in big venture firms don't happen
well.
Yeah.
The the older partners still hold on to theirequity in the business.
I would say that if you were to able totransition that appropriately to the people who
(45:53):
are working hard, and then they're making theirmoney Mhmm.
Those people will never leave.
So there comes a transition for all employeeswhere you have to make a choice.
Do I be an employee, do I be an equity owner?
Mhmm.
I'm a big proponent for be an equity owner.
If you mess up, it's on you.
It's on the accountability.
You have been given a platform which othershave built, so be very humble and respectful of
(46:15):
that.
Right?
And then go out and build.
That's what you're trained to do.
Be a good investor.
So it's a it's a two way street.
The junior pays in with loyalty to the, youknow, senior partners.
And the senior partners are not greedy so thatthey are basically doing a piggybacking of, you
know, parasiting of the of the younger partnersso that they work hard and yet you get to make
(46:38):
money.
Yeah.
So it's a balance.
And very, very few firms.
And this is true of all partnerships, notnecessarily venture firms.
Mhmm.
So you you have to uplift people and give themthe incentive.
Yeah.
No.
I totally agree.
So we got about ten minutes left.
One more thing I wanna talk about, and I have afew short form posts that I'm gonna put out
(46:58):
later today on this because I've been hearingabout it so much.
There's been a slew of managers that have beentalking to GP stakes LPs.
And I have not been hearing about this probablyin the last, you know, probably two, three
years.
So I'm not sure what that means.
But, you know, I've been hearing and I've met afew GP stakes LPs.
(47:21):
They have a unique take on it too.
So I'm gonna summarize it later.
But wanted to just, you know, just talk aboutGP stakes.
Your thoughts on the LP side and, you know, abusiness as you're an institutional LP going
after just an LP stake strategy.
Sorry, a GP stake strategy and then, you know,kinda things that managers need to think about
(47:42):
on both sides and maybe the pros and cons.
So look.
From our vantage point as a new fund with a newGP stake, we are what's most important to us is
autonomy.
Mhmm.
And autonomy in decision making, the theadvantage of a GP stake strategy from a GP
vantage point is you get the platform of aknown form, which can infuse capital in your
(48:08):
fund or your form.
Right?
Operating capital or it comes in differentflavors.
Right?
But at the end of the day, it's that capital.
What are you giving up as with every equitydecision making?
What are you giving up?
Yeah.
So what's sacrosanct to sound very importantlyis the ability to make decisions because once
again, it's the same the two sides of the samecoin.
(48:30):
We take responsibility for managing our LPcapital.
Mhmm.
It's good.
We get paid.
If it's not good in terms of being an goodinvestor, we are you know, we take
accountability for that.
So the GP, from an LP vantage point, I thinkit's fantastic because effectively what you're
doing is you're spreading out the risk involved
(48:50):
Mhmm.
In what would otherwise be a very concentratedrisk in a few managers.
You're distributing that.
Right?
And you're getting you're getting essentially,it depends on how it's structured.
But if you're getting annuity or of, you know,cash flow out of it, why not?
Yeah.
So so, you know, I can understand therationale, but the receptivity of that should
(49:14):
be dependent on you know, it is very wide interms of variability.
The most important thing to us and mepersonally and at Sound in general, the
philosophy is, fantastic.
We would love to partner with entities, but thecritical aspect of the decision making on where
(49:37):
we take the farm Mhmm.
Should lie with the business owners.
Yeah.
Bigger firms with much more, you know, capitalneed or maybe the need to, you know, quote,
unquote, retire or buy out a couple of olderpartners might be another rationale.
I don't know that because I haven't livedthrough it yet.
(49:57):
Yeah.
No.
Absolutely.
And I think look.
I mean, I think if you are tied down, you know,that's that's almost ten years of, I mean,
seven to ten years, right, that you're dealingwith this person anytime you have an investment
committee, they want to chime in.
So I think if you have the I think the peoplethat I've been speaking to, the autonomy is
(50:17):
there.
They're just looking for the revenue share,right?
And the revenue share seems pretty reasonable.
So, my perspective, you know, the two framesthat you're thinking about is, hey, you know
what?
Are you willing to give up a little, you know,some percentage of your GP and your management
fee to be done with fundraising maybe for theentire vintage or or good amount of it?
Or are you going to preserve that betting onyourself knowing that you can, you know, close,
(50:43):
the entire fund in your, you know, in yourpurse you know, and really just try to close on
your own in this market.
And then I've seen some GP stakes firms, youknow, also start thinking about fund two as
well.
So they're like, look.
You know what?
If we did fund one, this is what it would be.
And then if it's fund two, this is kinda whatthe economics, you know, would be as well.
(51:07):
You know?
Yeah.
Very very well summarized.
That's that's exactly the calculus.
Yeah.
And it I think all a lot of that depends verycandidly.
It's very bespoke situation to individual, GPgroups or management company decisions.
Right?
But at the end of the day, it boils down tothat control question.
(51:28):
And what are you giving up by taking in thecapital that's needed.
Yeah.
No.
Absolutely.
Well, Dabash, really appreciate you coming on.
You know, I learned a lot and, you know, so didthe community.
So thank you for being generous with your timeand sharing all these great stories.
I think definitely now the audience has, muchmore deeper knowledge on just kinda what it
(51:50):
takes to be institutional and also justnavigate the LP landscape.
So thank you again, and excited to, interactwith you more in the couple coming weeks.
Absolutely, Joel.
Pleasure.
Hope everyone got something.
Yeah.
Take care, guys.
Absolutely.
Take care.
Bye.
Yeah.
Bye.
Are that's a very good indicator whether you'llmake money in the future, whether you have
lived through the market cycles that you aredoing right now.
I've never seen an LP invest in a group ofinvestors who hasn't lived through different
market cycles.
The the most, you know, underrated question, Ithink, is succession plan.
And and here's what to your prior question of,you know, how do you grow into a system?
(00:24):
How do you train yourself as a VC?
Especially knowing two things.
Right?
A VC is VC in general, venture in general, is along term game.
The funds are ten years.
Often, the outcomes that you see don't happenfor four, five, six, seven years.
Welcome to The Investor, a podcast where I,Joel Palothinkel, your host, dives deep into
(00:50):
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
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
So I'm excited for my episode today.
(01:11):
I've got Bibash Mukhopadhai.
He is at Sound Bio Ventures.
You know, got to know him a couple weeks ago,and, he's coming on here to talk about his
story of breaking into venture, being an expertin venture and now building a firm and and, you
know, appreciate people like Babash to come outand and tell their story because venture, as
(01:35):
everybody knows, is just a opaque industry.
There's no degree, right?
You can't go to college and study privateequity or venture.
You have to start out doing accounting.
I mean, a lot of the people on the valley aredoing deep tech or they're a software engineer,
and somehow they they find the way into thespace.
(01:55):
So for me, I just every day, I feel lucky to beinto in this industry and, have other people
that are like minded in the space.
So, Bhubash, welcome to the show.
Absolutely.
Delighted to be here, Joel.
Thank you for what you are building, as well,and, the engagement that you drive and and the
forward looking aspect of this, which isgetting people to tell their stories so that
(02:19):
people who aspire to do this get inspired to dothis, have some hard data points of people who
have been there, done that.
So delighted to be here.
Happy to tell my story, which is, here it goes.
So I run along with two of my partners a fundcalled Sound Bio Ventures.
We are exclusively investing in biotech,clinical, or almost clinical stage companies.
(02:45):
Biotech, as you know, is the art and science ofdrug development.
So something that's incredibly specialized thatyou have have to have done it with your own two
hands to fully appreciate.
And as investors, we take pride in the factthat all of us come from a scientific
background of some sort, leapfrogged into drugdevelopment, some kind of an operational role
(03:08):
before becoming investors.
We are a new fund, have been in existence sincethe beginning of 2022.
Incredibly lucky to be playing in this space.
I can give a little bit of a description.
Small fund, hundred and 20,000,000 first timefund.
Between the three general partners who run thefund, we have around seventy five years of
(03:29):
cumulative experience, both our, academicdegrees in drug development and investing.
And I'll tell you a little bit more about mybackground.
So prior to starting sound, I was with a largediversified global venture fund called NEA.
Incredible place to train.
(03:49):
So I sort of grew up the ranks there, focusedon biotech investments.
Was a part of a number of deals end to end,thanks to the mentorship of a couple of people
there.
And prior to that, was on the boards of anumber of private as well as public companies.
And prior to that, worked at AstraZeneca in acorporate development BD role.
(04:13):
Prior to that, worked at Johnson and Johnson,similar type of roles.
And then initially, prior to that, trained as ascientist.
I never ever got a degree in business formally.
And so one of the core tenets that I havelearned, that my mentors have taught me is the
only way to do this is through apprenticeship.
(04:36):
You can't learn this in university.
Yeah.
Run drug development in any university.
You have to shadow people who have been there,done that to learn things.
Mhmm.
So, yeah, that's been my journey over the last,two decades, three decades.
Well, just back can we back up a few more yearsbe you know, because you just said, look.
(04:58):
I started at NEA.
What what was kind of the earlier life ofBibosh?
Like, what did you do when you were in highschool?
Where'd you grow up?
And what did you think you wanted to do?
You know, because I mean, for me, I didn't evenknow what venture capital was.
I only found out about it when I startedgetting involved in, like, the entrepreneurial
ecosystem in my college.
(05:19):
But before that, I even I never even knew therewas a career path.
So, you know, tell me a little bit about whatyour beliefs were when you were growing up and
maybe what you thought the career path was.
And look.
You maybe you grew up in Silicon Valley, that'syou know, you you're you're a baby and you
already do about venture capital, but, but we'dlove to go a little deeper in terms of kinda,
like, the evolution.
Yeah.
(05:39):
Absolutely.
Look.
I grew up in India, literally in the middle ofnowhere.
Think of a place analogous to, you know,between Pittsburgh and Morgantown.
So cool country, very god fearing people, verysimple people.
So is there, like you know, because I know pitI've to Pittsburgh.
It's like a very steel, iron kinda give me soit's a very industrial city.
(06:02):
Very industrial city.
Yeah.
Very much sort of salt of the earth people.
Think Detroit.
Think Pittsburgh.
Exactly same mindset.
If I did something in school, the town was sosmall where I grew up that things would get
reported back to my mom before I came home fromschool.
Yeah.
So what in retrospect, what I think is veryimportant is when you grow up in such a place,
(06:27):
in order to achieve escape velocity, 90% of thepeople stay there.
In order to achieve escape velocity, you needtwo things.
You a, in my instance, I was very fortunate togo to a high school where I had very good
mentors who opened the world for me.
This was before, you know, access to Internetand democratization of information.
(06:47):
So having access to information, having to lookup to someone was very critical.
And that formed the basis of me startingcollege in Delhi, the capital city of India,
and the the the impetus for that was educationis a means towards achieving that escape
(07:09):
velocity.
Mhmm.
Education was the ticket.
I knew that if I have to you know, there wasalways a, quote, unquote, comfortable life,
then you go to the the you know, work in thesame my dad worked in.
Sure.
You you you work there.
You have a fairly comfortable middle classsolid life.
But for some people who are, I guess the rightword is itchy Mhmm.
(07:34):
Who itch to go and do something else, having,you know, the the the the crutch of education,
if you will, the enablement of education is theway to achieve escape velocity, and that's
precisely I did.
Many people in my cohort, couple of yearsolder, couple of years younger, have done
exactly the same thing.
So they land in a place, in a college, and thatopens up their eyes.
(07:57):
I was like a kid in a candy store when I wentto Delhi.
I apart from education, I paid for my, expensesalone, became financially independent at 18,
which is something once again in retrospect I'mvery proud of.
I started working at a place called UNDP,United Nations Development Program, did a
couple of programs there, you know, which hadsolid impact in terms of overall thinking and
(08:22):
very importantly entrepreneurial mindset thatyou can build something from ground up without
the need for, enormous capital participation,and that impacts very importantly, a million
people.
So that was my stepping stone.
And
I would say too, you know, I've seen differentI mean, just growing up in, you know, in
(08:45):
Florida, I would just see different outcomes ofpeople that came from different styles of
upbringing.
So I had friends that, you know, grew up in thechurch, you know, super sheltered and super you
know, the parents just were super strict.
And once they went to college, they just wentcrazy.
(09:06):
And like, just, they got out of college andthey just didn't, they found this newfound
freedom.
I feel like my parents, was kind of, and again,you know, that's not going to be the same
outcome for everybody.
There could be people that have very stringentparents that, and then they finally break out
and they're like, look, let me make somethingout of this.
But I just think sometimes, I've just seen thatsome people have just been so sheltered that
(09:28):
they just don't know what to do.
Like you said, when you went to Delhi, you feltlike a kid in a candy store, right?
You could literally do anything.
You don't have to ask your parents and you'renot worried about the whole town telling your
mom what happened.
But I felt like my parents, like when I was inhigh school, my parents really instilled the
fact of just being social.
(09:48):
They're like, look, know, definitely work hard,but, you know, don't be a bookworm, you know,
try to go out there and socialize, but don'tlose our trust.
Don't go out there, get a DUI and then now kindof ruin your future.
So they kind of like, I think that definitelyhelped me because when I went to college,
didn't go crazy because I was already kind oflike, you know, in high school kind of exposed
(10:10):
to, you know, hanging out with friends andpartying where other people that I knew, they
just you know?
Like, they would probably have to they probablylost maybe two semesters of college because,
because they were exploring life and maybeexploring themselves.
No.
Look.
That's that that self exploration is important.
Right?
But at the same time, in my instance, at least,I didn't even have a choice.
(10:33):
I had to go out and earn money concurrent tocollege.
Right?
Sure.
In order to, be financially independent.
It's so so all I took away from that from thethe the place where I was, the small town, and
then translocating, transposing myself into avibrant sort of intellectually engaging city
(10:59):
like Delhi is with all its distractions at thesame time.
Right?
That, you know, first time exposure to a bigcity.
All I took away was I have to survive.
And that, by the way, I think is very importantin a in in terms of a mindset, the resilience,
the self dependence.
Never realized this when I was 21.
And it's very easy to say this in retrospectafter you have contemplated about that for a
(11:22):
while.
But what was particularly, important in thatphase of life was having the discipline and
having a focus on things.
So, in in my instance, it was I was learningevery day from you know, both in college in
terms of the standard things that you need todo in college.
But beyond that Yeah.
(11:42):
Most importantly, how to interface with people.
Sure.
Because the job at UNDP essentially involved,they had grants.
I'll tell you a story here.
So and I'm particularly proud of this in someways.
Very big lesson.
So we were a group of four college kids, allbetween the age of 18 and 21.
(12:04):
We were given a grant with the intent that, youknow, with a very broad remit in mind, go
induce some form of a change in everydaypeople's lives.
There were some slums slum slums in in in DelhiMhmm.
Where the state of hygiene and the state ofsort of overall public health was abysmal.
(12:30):
So all we did, the four of us, all we did wassource what was a a bacteriostatic or
bactericidal chemical from one, chemical plant,convinced a small mom and pop manufacturer of
soap to add that into their system, sold it forcheap.
Their factory was going at half capacityanyways.
(12:52):
So we add a source from one of an ingredient,put it in, put it into a soap, and then go
distribute slums in those slums where, youknow, just washing your hands before eating
evidently resulted in an eighty percentdecrease.
And this is on maybe like a a two millionpeople population.
Eighty percent decrease in the incidence ofcommunicable gastroenteric diseases.
(13:17):
We never realized the impact of this when wewere actually doing it.
We were doing it for some good.
Right?
Here's here's some money from UNDP.
Do it for good.
But then five years down the line, I'm then agrad student doing my PhD in The United States.
Someone one of my friends calls me up and saysthat, look.
There's nothing to prove that there is youknow, correlation is not causation, but here's
(13:39):
the data from the local health centers whichshow this precipitous decrease in exactly the
years you you guys distributed soap andinstilled washing hands
Mhmm.
As a behavioral measure, decrease in choleraand other dysentery and other diseases.
So with what?
Thousand dollars worth of capital infusion, webuilt for four years something, which had a
(14:03):
very significant impact on a million lives.
Mhmm.
Per, you know, per capita impact, I've neverseen anything beyond that part.
Here's the other part.
No one told us, and we were not smart enough asa group to figure it out on our own to make
that business, make that a sustainablebusiness.
The money was gone.
(14:23):
The people moved on.
I for example, I went on to do my PhD, youknow, in a different country.
And the impetus for, you know, keeping thatbusiness, quote, unquote, or enterprise rather
going as a standalone entity was gone.
So big lessons learned there.
Right?
Enthusiasm is excellent.
Initial capital infusion is excellent, but youhave to make things sustainable.
(14:46):
Yeah.
So these are the lessons you pick up along theway.
The resilience piece, the fact that you have tobe independent, the fact that, you know, you
can be.
There's lots of opportunities that lay there,and you just have to find them and the part
that you have to make things sustainable.
So these are the lessons I picked up along theway once again.
(15:07):
Never realized that at that point of time.
Only looking back in the rearview mirror.
I figured this
and then tell me about just kind of your nextcareer step after that.
So you yeah.
So once again, it wasn't a planned trajectory.
Right?
So if you were good in studies and if you hadan academic mindset, you liked research, all of
(15:31):
which were checkboxes.
I landed initially in Germany and thereafter inThe United States to pursue the academic path,
which was do a master's, do a PhD.
I absolutely loved, research and the and thesort of the blue sky aspect of that.
Mhmm.
So doing a PhD was something that was both Iwanted to do Yeah.
(15:52):
Temperamentally perhaps suited to do and wasencouraged to do by Mhmm.
By mentors.
So one thing you will find as a theme in mycareer trajectory is I've had essentially the
blessings of around six people at differentpoints in my life.
I start example, I mentioned the high schoolteacher.
Right?
Mhmm.
Similarly, there was someone in in at UNDP.
(16:13):
Similarly, there was someone during my, PhDcareer.
All of these people served as very importantsounding boards, as very important, people who
I can lean in on to ask for advice.
And it that has been a very sort of cornerstoneof how I evolved, and how my thinking evolved.
(16:38):
So start doing my PhD, absolutely enjoyed theprocess of sort of the usual scientific aspect.
This is hard science in biomedical sciences.
Worked on retinal degeneration, something thatwould otherwise be considered very esoteric.
But there are a couple of very importantprinciples I learned along the way, which is
(16:58):
science is always about hard data, minimalemotion.
So I, to this day, use that objectivity andlaying out and understanding hard data in terms
of, investing.
Yeah.
Because at the end of the day, what am Iinvesting behind?
Will the drug work or not?
And if there the drug works, if you can provethat in a clinical trial or a scientific
(17:19):
experiment, you are sitting on a ton of valueMhmm.
That we as venture investors try to capture.
Right?
Yeah.
So that thought process becomes ingrained whenyou learn to do research with your own two
hands and with your own two neurons.
So that was the biggest takeaway with, youknow, for five four, five years.
(17:44):
And to your point, Joel, the way I encounteredventure investing was was quite a fluke.
It was I had no idea up until maybe I was 26,20 seven what investing was.
Sure.
And the way it came about was one of theprofessors, who has since passed away, Tom
Caskey, he called me into his office one dayand basically gave me a stack of papers and
(18:11):
said that, will this drug work?
What do you think?
Mhmm.
I had de minimis.
I had some idea of what GM CSF was.
It's a specific type of molecule that's,eventually, you know, became an approved
product.
But the the the the the open endedness of thatquestion was fascinating.
(18:35):
Will this drug Yeah.
So that put me in the stream of, you know, how,drugs are developed, what clinical trials are,
what statistics are, how you can prove acertain hypothesis in, in patients, whether the
science that you do on the bench translates tohumans
(18:55):
Mhmm.
When you run the trial.
So all those elements I learned in those sortof two and a half years of, interface that I
had during my PhD.
Yeah.
So every other PhD is normally very, you know,focused on one aspect.
I love that one aspect of getting my thesisdone, but in parallel, all these very
(19:16):
intellectually stimulating questions led me tounderstand the language.
I keep using this word, the language of drugdevelopment, which was very helpful.
So that was my first instance of, sort ofunderstanding drug development and whether one
should you know, the judgment call of whetherone should put $10.15, $20,000,000 of
(19:38):
investment behind the drug development process.
And, you know, I had you know, I also wasfortunate enough to earn a PhD, so happy to
meet another person who went through thatprocess.
One thing I'll ask you and I'll probably sharea few things too, is just like what's one of
the biggest things that you learned doing yourPhD and what advice would you have to people
(20:04):
that are trying to get their dissertation?
They have a saying, I think it's like ABD.
It's like all but dissertation.
So you got through all the coursework, butmaybe your course, maybe your advising
professor, your chair professor just never gotyou through the dissertation.
Right?
And that really makes a big difference.
Think who you have on your chair and who yourmain professor is that's on your, chair
(20:30):
committee, you know, the main point of contactthat you're working.
That makes a big difference.
I know people that some people that never gotthrough it and then some people that finish in,
like, seven years.
Yeah.
Look.
First of all, they are my lessons from my PhDthesis.
So first of all, it's intellectually, it can bea very engaging process.
Mhmm.
But it can be an incredibly frustrating processtoo.
(20:53):
So patience is the key, and consistency is thekey.
In retrospect, it's very easy for me to saythis.
Say this to a current PhD student, then he'lltell you.
So the big difference exactly as you pointedout, Joel, comes from your key adviser.
Mhmm.
They can become, you know, a a fuel boost.
(21:16):
They can draw you down depending on theirphilosophy of mentoring students.
My adviser I I lucked out totally in that game.
My adviser was someone who is of the principlethat, you know, here here's some mice.
Figure out what's wrong with with it, what thepathology of x y z disease is.
(21:38):
So in other words, they give you a sandbox toplay without artificially constraining it Mhmm.
And without artificially making it so big thatyou totally sink or swim.
Yeah.
So being tailoring, you know, your mentorshipto the person who is at the receiving end is
very important.
Sure.
My mentor was fantastic in that way.
(21:59):
Initially, he told me, you know, he he was moreprescriptive.
But as time went by, by the end of third year,I was totally independent in sort of designing,
executing experiments.
So so and and he was very, you know, bespoke todifferent PhD students that way.
So I think the single most important variablein your success as a PhD student is your
(22:22):
mentor, period.
Yeah.
Doesn't matter whether that mentor is at, youknow, Johns Hopkins University or Woodunktown
University.
If the mentor is good, it doesn't matter whereyou are.
Resources might be different in those two.
But right?
So I totally lucked out there.
I was very, very fortunate to have a mentor whowho did that.
And my main takeaway was resilience, you know,consistency, and and just being being open to
(22:50):
ideas and and things.
So it was a I I really loved it.
But at the same time, in retrospect, I actuallydid the math.
I I it took me probably four and a half yearsto go from initial, you know, dissertation.
The coursework part was easy part.
Right?
It's Yeah.
Yeah.
It's the research part, original research.
That's that's the hard part.
(23:11):
Sure.
And right?
And, one lesson I took away from that was in myspan of four and a half years, there were
exactly three periods of three to four monthseach when I generated novel knowledge, novel
data that could go into a currency.
(23:31):
Currency of a PhD is always publications,original publications.
Right?
So if if you think about that, right, it's it'sactually quite a profound realization that you
are not generating data all along that four anda half years.
Mhmm.
You're productive in batches Yeah.
Or, you know, small periods of time in whichthings just happen.
(23:52):
Experiments read out positively.
You get good output.
You publish papers.
And that was exactly the case in in well,exactly in my case, what happened.
So the rest of the time, you probably are very,you know, grumpy and frustrated that your
experiments are failing and things are notworking.
Your papers are getting rejected, which alsoprepares you for real life.
(24:13):
Sure.
And I think part of a PhD, you know, hasparallels to venture because you have to really
come up with an idea that's never been donebefore and you have prove it.
So I mean, what are you doing?
Right?
You're investing in outliers.
You're always poking holes in a company thatyou're about to invest in and just making sure
that it's doing something that's different.
(24:34):
So that really helped me have the framework forVC.
You'll be surprised some of the skills that youbuild in your earlier life, some of them shape
you as an investor too, right?
So if you're really good at, I mean, obviously,if you have an industry focus like you do, you
know, in the healthcare space, that definitelyshapes you as a healthcare investor.
Just the soft skills and just kind of the hardskills that you develop doing a PhD and also
(25:00):
you're going through rejection, right?
I mean, maybe your first few chapters are nothitting the mark, you got to rewrite them.
Same thing if you're writing a memo, right?
An investment memo for, for NEA.
Right?
Yeah.
Look.
At that at the end of the day, the critical bitthere, exactly as you point, the hard and the
soft.
Because the hard skills comes from science.
You do that for five, six, seven years.
(25:21):
Right?
As a as a, PhD student during your undergrad,whatnot.
If if you get exposed to that thinking process
Mhmm.
Of of how do you create hypotheses, test themout?
What does data mean?
What are the tools for analyzing andinterpreting data?
Those are very hard skills.
(25:42):
You you can't replace them by, you know, by ashortcut.
You have to do them on your own.
So that's
the hard
part.
The soft skills actually, I think, boils downto, basically convincing people.
I mean, think about it.
What does a VC do?
It does he does he or she does three things.
Raise money.
Mhmm.
Deploy money, and then gets returns.
(26:04):
Those are the three pillars.
Yeah.
If you can do all of the three successfully.
In the first part, how many times do you getrejected from prospective capital providers
saying that, you know, it is not right?
And we do the same to companies.
Right?
Mhmm.
It's the same thing.
Sure.
So it's incredibly humbling, actually, to goout and raise money.
(26:24):
And having done that once now, right, unlessyou are an entrepreneur, it's very difficult to
live through that through, you know, quote,unquote, secondhand, passive, learning.
You have to live through that.
You gotta really go through it.
Yeah.
Exactly.
And that's the biggest thing I think thatpeople underestimate in in in venture.
(26:46):
I think the easy part there is finding theinvestment, to be very honest.
I'll be sort of counterintuitive there.
People lay a lot of importance in finding andselecting the right investment.
Yeah.
The job begins afterwards.
Yeah.
Because if you don't have any capital, there'ssomething you can do with those investments
that you find.
Exactly.
(27:06):
So raise the capital, which is humbling.
And after you do the investment, shepherd thosecompanies to a point where they have created
value.
This is the difference, I think, between youknow, that second part is the difference
between a traditional venture investor, whichis hands on active, etcetera, versus a passive
investor.
(27:27):
If I play the stock market, identifying theright stock is the be all end all.
When when to get in, when to get out.
Yeah.
But as a venture investor, the path in betweenis equally, if not more important.
Sure.
I totally agree with that.
What do you what are some things that youlearned at NEA?
So NEA was a fantastic place.
It's it was a perfect stepping stone job, so tosay, because, you know, the firm has been
(27:53):
around for forty years.
There was you know, the it had a history of,you know, long term mindset for investments.
So I basically learned investing there byshadowing the partners who used to be there.
Yeah.
So the you know, how you think about not onlywhat's a good company, what's a good
(28:14):
investment, but very importantly, someone toldme that it's the time point at which you invest
in a company, in a company's trajectory is veryimportant.
Mhmm.
Someone taught me never take compounding risks.
Always take isolate the risk.
It's hard enough to do drug development.
If you keep moving the goalposts, it becomesvery difficult for you to realize return.
(28:38):
So be focused on your end goal.
All of which, by the way, we apply at soundevery day.
The the difference, I would say, between NEAand sound is NEA was a large firm with a large
multibillion dollar, you know, multi assetclass.
We, on the other hand, are very, very focusedon one thing, one sector, one approach.
(28:59):
Mhmm.
And there is you know, part of this is if youlook at the legacy of the industry.
Right?
You have firms like the NEA, Sequoia, a 16 z'sof the world, which are sector agnostic.
There are people who are sector specific, butthe overall fund and fund return and portfolio
construction, etcetera, are sector agnostic.
And then there are specialist funds.
(29:20):
There
is
always a debate on, you know, whether, what isthe right approach.
It all depends ultimately on your capitalraised and the people selecting and deploying
that capital.
I feel very comfortable with a biotech onlyportfolio because that's what I understand.
There are other firms like NEA, like, you know,Sequoia, etcetera, very storied history, which
(29:47):
are more generalist forms and to each theirown.
Right?
It's just Yeah.
Function of size and style.
Mhmm.
Sure.
Yeah.
That makes sense.
And then, you know, what would be some advicethat you would give to maybe new analysts and
associates trying to build these skills?
I'm sure you learned a lot as you kind oflooked at a lot of deals, you know, passed on
(30:10):
deals, and then, you know, obviously took dealsall the way to investment committee.
So in this market, what should people thinkabout in terms of valuation, in terms of, how
they're sourcing, picking, winning?
Yeah.
Look.
The the basics remain the same.
And and and I I restrict this to biotech onlybecause that's the sector I understand.
(30:32):
At the end of the day, there are two thingsthat matter.
One, will the drug work?
And two, if the drug works, will I make moneyout of it?
Mhmm.
Right?
Those are the two very basic questions.
Will the drug work is a scientific questionbased on the science, the clinical development
plan, the risk that you are underwriting as aninvestor primarily has to do with either of
them.
If the science doesn't quite work out inhumans, what's the point?
(30:55):
If you can't prove that a drug works out inhumans in the way you design and execute
clinical trials, what's the point?
If the market is not big enough for that drug,it's a me too drug, no one will come and buy
that, and therefore, you as an investor won'tget liquidity out of it or won't make money out
of it.
What's the point?
So that's one piece.
(31:16):
The other piece, you know, that is isimportant, I think, is, you know, I I I'm a
very big believer in stay in your lane as aninvestor.
Do what you do.
Do it very, very well.
Because at the end of the day, I mean, thinkabout it.
This is a someone once again, one of my mentorstold me this.
What does a VC do?
(31:36):
The VC is a matchmaker.
Right?
It's not their money that they're investing.
It's not their personal money.
They raise money from institutional pensionfunds, etcetera.
Yeah.
And they deploy that capital in someone else'sideas.
Mhmm.
So in effect, you are taking you are amatchmaker between someone else's money and
someone else's, ideas.
(31:58):
Yeah.
So you have to play that role very well, and apart of that is frankly the humility to
understand what will work and what won't.
You are you are you are essentially providingthat value add in the process and shepherding
the companies that you invest into a certainvalue.
Right?
Yeah.
So my my only, you know, advice is a, be verythoughtful about what to invest in and when to
(32:25):
invest in.
Mhmm.
And when do you do that investment, right, inthe company?
There are lots of examples where it was afantastic company to begin with, but if you
came in at too high of a value at the top of abubble, right, you'll never make money off
that.
You won't you know, investment outcome will notbe optimal.
So those are my two key takeaways.
(32:48):
Sure.
No.
That's amazing.
And what would you advise people you know, onething that I think I probably joked around with
you on is, know, when you said your fund issmall, you know, your fund in my experience
for, you know, early investment managers kindof building their firm, you know, your fund
size is pretty, pretty large comparatively inthe venture space.
(33:11):
It may not be comparatively in the biotechspace.
However, when you think about other assetclasses outside of venture, a lot of people are
thinking about venture and the opportunitiesthat venture provides.
But when you think about the allocatorecosystem, there's there's venture, which is
just a small sliver of private equity.
And then allocators are also investing in fundsthat do private credit.
(33:35):
They're looking at private equity.
They're looking at hedge funds.
They're looking at long short equities.
So looking at all these different types ofstrategies, and I know hedge funds, like an
emerging manager that's a hedge fund is like a$400,000,000 fund, that's considered emerging.
So as funds are kind of thinking about tellingtheir story, differentiating, and also kind of
(33:58):
building an engaged LP ecosystem, we all knowit's a long term strategy, it takes
relationship building.
So what are some of the learnings that you haveacquired over the last couple years building
this firm and also just, you know, trying toconnect with LPs and have them understand your
vision very, very briefly and and quickly?
(34:19):
So look.
I am and for for that matter, every manager,you are too, Joel, in this category.
Right?
Someone who's an entrepreneur, fundamentally.
I'm a financial entrepreneur in that way.
It's just that the the the the the currency ofthat entrepreneurship, in my instance, is a
fund.
Similarly, someone might have a company.
Yeah.
It's a product, essentially.
(34:40):
Right?
Product.
Exactly.
Mhmm.
So that's the exactly right, Joel.
So the financial product that Sound BioVentures offers to LPs is basically venture
like returns through the means of a of a of asector in which we have specialist knowledge.
That's what it boils down to.
(35:01):
So being able the most important thing I'velearned in sort of raising as we build this
farm, deploying the fund and Mhmm.
Making investments is, at the end of the day,you have to be able to differentiate yourself.
You have to offer something to the LPs thatothers don't.
(35:22):
And you are exactly right.
Sitting in a venture fund without raisingmoney, I don't think anyone I mean, people are
not necessarily fully cognizant of the choicesallocators have.
Mhmm.
In the current context, say high market riskinterest environment.
Right?
Unless I'm able to give a 20% IRR threshold.
(35:45):
Right?
Some form of return that is way above what thefixed income market or even the other
alternatives or private debt is offering anallocator, why will someone invest capital and
pay me a management fee to run that?
Yeah.
So positioning the story relative to who youhave, relative to the choices LP's have, I
(36:10):
think, absolutely critical.
And Mhmm.
As always, right, put yourself in their shoesand the type of decisions they allocation
decisions they are trying to make.
And what's considered good portfolioconstruction from their end.
And this to me, it's very obvious inretrospect.
But truth be told, I didn't fully appreciatethis three, four, five years ago.
(36:31):
Mhmm.
The choices that LPs have in terms of backingof venture manager, backing that asset class,
backing that sector, and so on.
So all of these elements actually becomecritical once you start appreciating them.
You try to tell the story to an LP.
Yeah.
Let's say, in our instance, a believer inhealth care, a believer in the biotech sector.
(36:52):
Mhmm.
They are okay with the fact that we are anemerging manager.
And that's a double edged sword because we arenot first time investors.
As I said, between the three of us who startedthe fund, we have seventy years of doing this
cumulatively.
Sure.
But at the same time, we are doing this for thefirst time as a fund.
Mhmm.
And therefore, there are intrinsic risks there,which the LPs want to make sure are mitigated
(37:18):
or addressed.
So we have to give them as emerging managers,we have to give them the confidence that all
those sort of systemic risks are minimized ordon't exist or are minimized with emerging
managers as we are running this for the firsttime fund.
Now Yeah.
The best proof of the pudding always is givethem returns
(37:39):
Mhmm.
Which is what they hired you to do anyways.
Right?
LPs hired you.
If you can give them because, you know, thatthat proves the proof in the pudding proof of
the pudding.
Right?
I think you will be in the the the best shapepossible.
Sure.
What are some tough questions that fundmanagers should be prepared for when it comes
(38:01):
to LPs that maybe were not obvious?
So obviously, when it comes to track record orjust things in the data room, you know, there's
the standard things that you need to definitelyhave as table stakes.
But what are some things that are maybeunexpected that, you know, maybe LPs are
starting to ask for more?
Look.
It's a so you can take when LPs do diligence onus, like we do diligence on companies.
(38:24):
Right?
There is a tendency to have a very checkboxlike approach.
What's your track record?
What have you done?
Does your strategy align with the people thatare on board?
Right?
The same skill set.
Have you deployed similar amount of money andmade money previously?
Chances are that's a very good indicatorwhether you'll make money in the future,
whether you have lived through the marketcycles that you are doing right now.
(38:45):
I've never seen an LP invest in a group ofinvestors who hasn't lived through different
market cycles.
The the most, you know, underrated question, Ithink, is succession plan.
And and here's what to your prior question of,you know, how do you grow into a system?
How do you train yourself as a VC?
Especially knowing two things.
(39:06):
Right?
A VC is VC in general, venture in general, is along term game.
The funds are ten years.
Often, the outcomes that you see don't happenfor four, five, six, seven years.
Mhmm.
We are an exception in some ways.
Right?
We say we are venture asset class.
We have three to five year hold period, so wecan give you returns on the back end of that.
(39:27):
But this is, I think, both a proactive choicein our instance, in Sound's instance, a
proactive choice of the type of investmentsthat we do.
For a more blue sky fund, which is alsoventure, more early stage, you take six, seven,
eight, ten years sometimes to get to anoutcome.
Yeah.
So how does an LP evaluate whether this fund orform is successful or not?
(39:48):
And by the time ten years goes by, the two,three people who started the fund, one of them
is getting to an age where, you know, they theywon't be able to do a second fund or
a third fund or a fourth
fund.
So intrinsic into the system, I think thereshould be a way of bringing up people through
mentorship.
As I've told you, this is the only way to learnthis is mentorship.
(40:09):
So and at the same time, if you are, say, 35,you have been doing this for five years, you
just don't have a track record to go out andraise money.
It's not long enough, you know, in in biotechat least.
So similarly, if you are 65, you're too late.
So there is a window in which Mhmm.
You know, there is an optimal balance betweenthis and this team or this group has enough
(40:32):
experience to be able to you know, I can trustthem with our capital.
The LP is thinking this way.
I can trust them with our capital, and yet Ican back them for three, four funds so that
they are not too old that, you know, by thetime fund number three ends, you are 85 years
old.
Yeah.
Right?
So it's a very delicate balance in in in thatend.
(40:55):
And the only way I think you can skin the catis if funds very proactively think through
their succession plan.
Who comes after I'm gone?
Mhmm.
And I have hardly seen, to be very candid,hardly seen any entity do this well.
Because, intrinsically,
(41:15):
against how you navigate that because, I mean,if there's a couple general I mean, there's
usually, if there you know, if it's a solo GP,you gotta figure out how Yeah.
That's gonna happen.
But, I mean, I usually, if you have a coupleGPs, right, and say something happens to one of
them, at least the other GP should be still comanaging the entire fund.
So they should be able to handle, you know,most of the succession.
(41:36):
Correct.
Correct.
Exactly.
And there should be, in my mind, there shouldbe.
And we do this at sound very proactivelybecause once again, I realize that this is a
very, very big gap in the venture.
People go from associate to principal topartner, and then they are given the
appropriate economics.
Right?
What often ends up happening is the principalends up working for six years to make the
(41:59):
retiring general partner rich.
Because the retiring general partner haseconomics in a fund in which the principal
actually works to return capital.
Mhmm.
Right?
Yeah.
So you this intrinsic into the system is thistime lag.
It's this time hysteresis.
Mhmm.
So there has to be a good solution for that.
Otherwise, what happens is people stay on,learn at a place, and then they leave to
(42:24):
capture the economics if they can raise moneythemselves.
Yeah.
Historically, that's what has
happened.
Mhmm.
It's good in a way because it spawns newmanagers.
Yeah.
But it's not so good in the in that originalforms, you know, where that principal trained
for Mhmm.
Whatever associate or principal trained forfive, six, eight years.
Yeah.
If I'm training someone, right, for five, six,eight years, I want them to be a part of my
(42:48):
firm for the long run.
Sure.
And that's something I think we should be morecognizant and more deliberate about as fund
managers.
Yeah.
And I think just as a leader and a talentacquirer, I mean, you you really need to think
about the the economics of just compensation.
So, I mean, I think if you and I've seen thisin, you know, my previous life before I got
(43:12):
into venture, and it was a pretty interestinglearning.
So what some organizations would do, I thinkthe smart ones, they will give a hefty raise to
people so that they just can't leave.
They already know the teams, they're alreadycomfortable in the job.
And then, know, before, especially in New York,and it's probably the same thing in San
(43:35):
Francisco, but before people can think aboutchecking out the market, maybe finding a better
job somewhere that's gonna pay them better, thefirm will actually give them a pretty generous
increase and even a title bump.
So there's just no reason, there's no upside togoing across the street.
And then what happens is you're a new personacross the street.
I think that people definitely leave whenthere's not a financial incentive.
(44:01):
There's really more of a systemic issue withthe firm where they're just having problems
getting to where they need to be.
Then that's when they leave.
It doesn't matter about the money.
Right?
But I think when it comes to, like,compensation, if you can just pay pay in and
just pay a little bit upfront to kinda keepthat talent, you're saving a lot more money
(44:22):
down the road.
Because if you skim on the compensation, youkind of underpay somebody.
Now you're kind of stuck if that person leaves,and now you're just kinda trying to find
someone to backfill, and the quality still maynot be there.
Look.
To to your point, I mean, I'll go even one stepfurther.
I I, well, I I think I got most of you, but youcut out there for a second Mhmm.
There.
Sure.
But but here's the point.
(44:45):
As a GP and sort of owner of a farm.
Right?
Mhmm.
You are owning a business.
At some point, your most talented investors
Mhmm.
Need to be transitioned from being an employeeto being to owning that business like you are
right now.
Yeah.
And this goes beyond comp I would even ventureto say Mhmm.
(45:08):
That at some point of time in small firms, thisis not applicable necessarily to BlackRock, but
the compensation structures are different or orlarge, you know, $3,000,000,000 funds.
But for smaller funds, may have you know,mentor someone to get to a point where they are
a good investor, have confidence in them sothat they can essentially take over running
(45:31):
your business and making money not only foryou, but also for themselves.
This is the where most of these, you know,transitions in big venture firms don't happen
well.
Yeah.
The the older partners still hold on to theirequity in the business.
I would say that if you were to able totransition that appropriately to the people who
(45:53):
are working hard, and then they're making theirmoney Mhmm.
Those people will never leave.
So there comes a transition for all employeeswhere you have to make a choice.
Do I be an employee, do I be an equity owner?
Mhmm.
I'm a big proponent for be an equity owner.
If you mess up, it's on you.
It's on the accountability.
You have been given a platform which othershave built, so be very humble and respectful of
(46:15):
that.
Right?
And then go out and build.
That's what you're trained to do.
Be a good investor.
So it's a it's a two way street.
The junior pays in with loyalty to the, youknow, senior partners.
And the senior partners are not greedy so thatthey are basically doing a piggybacking of, you
know, parasiting of the of the younger partnersso that they work hard and yet you get to make
(46:38):
money.
Yeah.
So it's a balance.
And very, very few firms.
And this is true of all partnerships, notnecessarily venture firms.
Mhmm.
So you you have to uplift people and give themthe incentive.
Yeah.
No.
I totally agree.
So we got about ten minutes left.
One more thing I wanna talk about, and I have afew short form posts that I'm gonna put out
(46:58):
later today on this because I've been hearingabout it so much.
There's been a slew of managers that have beentalking to GP stakes LPs.
And I have not been hearing about this probablyin the last, you know, probably two, three
years.
So I'm not sure what that means.
But, you know, I've been hearing and I've met afew GP stakes LPs.
(47:21):
They have a unique take on it too.
So I'm gonna summarize it later.
But wanted to just, you know, just talk aboutGP stakes.
Your thoughts on the LP side and, you know, abusiness as you're an institutional LP going
after just an LP stake strategy.
Sorry, a GP stake strategy and then, you know,kinda things that managers need to think about
(47:42):
on both sides and maybe the pros and cons.
So look.
From our vantage point as a new fund with a newGP stake, we are what's most important to us is
autonomy.
Mhmm.
And autonomy in decision making, the theadvantage of a GP stake strategy from a GP
vantage point is you get the platform of aknown form, which can infuse capital in your
(48:08):
fund or your form.
Right?
Operating capital or it comes in differentflavors.
Right?
But at the end of the day, it's that capital.
What are you giving up as with every equitydecision making?
What are you giving up?
Yeah.
So what's sacrosanct to sound very importantlyis the ability to make decisions because once
again, it's the same the two sides of the samecoin.
(48:30):
We take responsibility for managing our LPcapital.
Mhmm.
It's good.
We get paid.
If it's not good in terms of being an goodinvestor, we are you know, we take
accountability for that.
So the GP, from an LP vantage point, I thinkit's fantastic because effectively what you're
doing is you're spreading out the risk involved
(48:50):
Mhmm.
In what would otherwise be a very concentratedrisk in a few managers.
You're distributing that.
Right?
And you're getting you're getting essentially,it depends on how it's structured.
But if you're getting annuity or of, you know,cash flow out of it, why not?
Yeah.
So so, you know, I can understand therationale, but the receptivity of that should
(49:14):
be dependent on you know, it is very wide interms of variability.
The most important thing to us and mepersonally and at Sound in general, the
philosophy is, fantastic.
We would love to partner with entities, but thecritical aspect of the decision making on where
(49:37):
we take the farm Mhmm.
Should lie with the business owners.
Yeah.
Bigger firms with much more, you know, capitalneed or maybe the need to, you know, quote,
unquote, retire or buy out a couple of olderpartners might be another rationale.
I don't know that because I haven't livedthrough it yet.
(49:57):
Yeah.
No.
Absolutely.
And I think look.
I mean, I think if you are tied down, you know,that's that's almost ten years of, I mean,
seven to ten years, right, that you're dealingwith this person anytime you have an investment
committee, they want to chime in.
So I think if you have the I think the peoplethat I've been speaking to, the autonomy is
(50:17):
there.
They're just looking for the revenue share,right?
And the revenue share seems pretty reasonable.
So, my perspective, you know, the two framesthat you're thinking about is, hey, you know
what?
Are you willing to give up a little, you know,some percentage of your GP and your management
fee to be done with fundraising maybe for theentire vintage or or good amount of it?
Or are you going to preserve that betting onyourself knowing that you can, you know, close,
(50:43):
the entire fund in your, you know, in yourpurse you know, and really just try to close on
your own in this market.
And then I've seen some GP stakes firms, youknow, also start thinking about fund two as
well.
So they're like, look.
You know what?
If we did fund one, this is what it would be.
And then if it's fund two, this is kinda whatthe economics, you know, would be as well.
(51:07):
You know?
Yeah.
Very very well summarized.
That's that's exactly the calculus.
Yeah.
And it I think all a lot of that depends verycandidly.
It's very bespoke situation to individual, GPgroups or management company decisions.
Right?
But at the end of the day, it boils down tothat control question.
(51:28):
And what are you giving up by taking in thecapital that's needed.
Yeah.
No.
Absolutely.
Well, Dabash, really appreciate you coming on.
You know, I learned a lot and, you know, so didthe community.
So thank you for being generous with your timeand sharing all these great stories.
I think definitely now the audience has, muchmore deeper knowledge on just kinda what it
(51:50):
takes to be institutional and also justnavigate the LP landscape.
So thank you again, and excited to, interactwith you more in the couple coming weeks.
Absolutely, Joel.
Pleasure.
Hope everyone got something.
Yeah.
Take care, guys.
Absolutely.
Take care.
Bye.
Yeah.
Bye.
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