April 25, 2025 • 53 mins
Joel Palathinkal introduces Ryan Else, discussing their journey and connection. They explore teaching entrepreneurship to kids and Ryan's role at Roadster Capital, emphasizing diverse backgrounds in venture capital. Key topics include fund modeling, portfolio construction, sticking to an investment thesis, and LP communication. Ryan shares insights on network support, confidence in fund models, and follow-on strategies. They also cover best practices for fund audits, challenges with fund admin solutions, and macro trends affecting consumer behavior. The episode concludes with insights on inflation, opportunities in AI, and the importance of proprietary technology.
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Episode Transcript
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(00:00):
And the these smaller emerging managers haveaccess and speed of execution that the larger
(00:07):
firms don't.
So I think you're gonna see really strongreturns coming out of a lot of these emerging
managers.
So don't look twice.
Look once and make a decision and invest inthese emerging managers.
To the investor, a podcast where I, JoelPalafinkel, your host, dives deep into the
(00:29):
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.
Okay.
So we are live here with, a good friend ofmine, Ryan Els.
(00:52):
I've known him for, a handful of years.
It's been been a couple months to almost a yearsince we met Ryan, but we keep in touch.
We text each other, and I always like to just,you know, get guests back on the show.
You know, Ryan was on the show couple yearsago.
Ryan was in our fund accelerator, a littlewhile back and, you know, just excited with
(01:12):
what he's doing.
You know, we've shared a lot of notes on ourmandates.
We've both invested in deep tech and high speedcomputing and software.
So there's always just been interest parallelin terms of investing.
We've also been in the same place in life.
We're both parents, so we've shared a lot ofstories, war stories about being parents.
(01:39):
I think that's an interesting place when youcan be in the same, same journey with other
people and, you know, have things to talkabout.
But anyways, Ryan, welcome back to the show.
Thanks for making time for me and thecommunity.
I know you're super busy, so you making timefor me means a lot.
Hey.
I'm glad to be here.
It's great to have you, have you along thisjourney with me.
(02:01):
As Joel said, we've been friends for a while.
Yeah.
We both have kids that are similar ages.
In fact, when I when my wife was pregnant withour very first kid, I got I was in New York on
a trip and found out, and I was so giddy aboutit.
Joel was the very first guy I told.
And, that was a it was a special moment for heand I, maybe for me more so.
(02:22):
I don't know.
But It was for me too.
We bought a Joel wrote a book.
If anyone knows, Joel has a book, that's akid's book.
You can buy it on Amazon.
It's a a shameless plug coming from a fan.
Thank you.
We gave that to our son, and he really enjoyedreading that.
I had a fun time reading it too.
Yeah.
So an update on that.
I just want to give you guys an update.
(02:44):
You know, my son has a talent show today.
And so I'm gonna actually just give a shamelessplug because we're all plugging here.
Why not?
You know, and we're live.
So my son has a talent show today.
And I was like, Hey man, you should write abook.
And he came up with this book about these twosnow leopards and they're building a tree
house.
(03:04):
So what we did was we just kind of came up withthe cover.
This is like entrepreneurship 101, right?
So we came up with a cover image and there's abarcode and the barcode you can actually pre
buy the book.
And I was like, hey man, if we get a sale, wecan use that to market the book, but he's gonna
be doing a reading and then I printed out Hereit is right here, actually.
(03:29):
This is called Jude's book.
I actually can't see it anyways, but I'll signit later.
But anyways, it's cool because he's learning,you know, he's kind of learning
entrepreneurship and, you know, the concept oflike marketing and pitching and stuff like
that.
So, so I'm really excited about that.
I think, you know, if you have kids, you know,teaching them entrepreneurship, because I mean,
(03:50):
when I was a kid, when I grew up, I justlearned about, you know, math and science and
hey, put your head down and get a job.
And then I think it's really as you meet otherpeople in the community and you see what
they're doing, you realize, hey, you know what,people can go out and launch a business, people
can go out and launch a fund.
The whole spirit of the Sutton CapitalAccelerator is really being a capital
(04:15):
entrepreneur, right?
So Ryan, maybe you can just give a quickoverview on, we sent the bio, but just kind of
a quick overview on your career and kind ofwhere you are with Roadster Capital.
And obviously no fundraising, no updates onfund, little updates or anything like that.
(04:35):
No general solicitation.
No general solicitation or anything, but justtrends on the fund and trends in the sector.
Then we'll cover and then we'll and we'reactually gonna have Ryan do a little academic
module on fun modeling, just best practices formodeling and fun.
(04:56):
Again, just for purposes of this presentation,all of this information is for educational
purposes only.
There's no purchasing or or selling securitieson the on the call.
So just wanna give that disclaimer to to makesure that everyone knows it's for, for
knowledge and, learning purposes only.
(05:17):
Yeah.
Thank you for for making that clear foreverybody.
Anything that I show everyone will just beexamples.
They're not direct reflections of ourparticular fund or our exact structure.
It's just gonna be a a broad scope of ways tothink about it when you're thinking about fund
construction and all of the facets that areassociated with it.
(05:37):
So my name is Ryan Ellis, as Joel said.
I'm the founder, managing partner of RoadsterCapital.
Roadster is a pre seed seed stage VC fund thatinvests in companies that are solving
challenges around automation, trust, andsustainability for the American industrial
base.
And we really want to, propel old line physicalindustries and help help digitize them with
(06:00):
things that we think are critical to, you know,achieving the next great milestones and
advances in business with with a real core lookat science and technology and, real hard facts.
So, yeah.
So our where our fund as a whole is doing well.
We have a lot of really strong interest fromfrom LPs.
(06:22):
We have a good LP community, and we continue tobuild that and build relationships with with
LPs as well as with founders.
We think they're kind of they're on similarlevels to us.
Although at the end of the day, our true firstcustomer is always going to be the LP, because
we're gonna be investing as a fiduciary for theon their behalf into these founding teams.
(06:44):
And, my background, I have an MBA in financefrom University of Notre Dame.
I started my career very early on at Oracle indifferent sales and marketing roles.
And throughout my career, worked at differentstartups and fortune 500 companies, eventually
led me to, leading a global turnaround,spending my time in, Hong Kong and North
(07:06):
America a lot on the manufacturing factory sidein electronics.
And then I started making some investmentsthrough special purpose vehicles, with roaster
capital and eventually formed a thesis aroundthat, that led to where I'm at today.
And, it's been a really great journey.
Like many will tell you, not every journey isthe same.
(07:28):
We all end up in life at different places atdifferent points in time.
And I really don't think there is a real properprogression into any role at any company or
becoming a VC.
You're gonna find people with a myriad ofbackgrounds from creators to entrepreneurs to
people who are just math whizzes that end up inthese different type of roles.
(07:52):
And with that comes number of nuances, and anumber of different personalities.
And I guess, Joel, the proper way to say itwould be a number of archetypes that are
associated with with both VCs, as well as withthe LPs that we reach out and speak to as
either high net wealth individuals or,institutions, foundations, family offices, and
(08:17):
the like.
So, it's a real, it's a real true mixed bagthat I believe is driven solely by
relationships as the core founding principle,and then you build upon those relationships to
to get where you're at.
And so that's kinda in a in a nutshell wherewe're at as a fund, how I'm approaching it as a
(08:39):
fund, I guess.
Yeah.
And then, Ryan, if you did whenever you'reready.
If you did wanna share your screen, I think youcan hit the present button and then just share
your desktop.
And then I think that should pull up overthere.
Here we go.
Alright.
Okay.
So you able to see if I I think I gotta see itin my system.
(09:01):
So, yeah, hit present and then I think just domaybe just do share screen and then it should
there we go.
Okay.
You got it.
Right?
Cool.
You able to control it?
Perfect.
Yeah.
I'm able to control.
So we're in I put some files into drive.
And so what we're gonna do is we're gonna talka little bit about fun modeling here.
And along the way, I'll talk to everybody aboutdifferent points of views and perspectives I
(09:25):
have.
You know, when Joel and I first met, this guywas starting a company called Tactic, which has
now been acquired by Carta.
Right?
Unabaugh.
Yeah.
So he and Carta have some very interestingtools that you can use around portfolio
construction.
(09:46):
When we think of portfolio construction andfund models, there are a lot of things that one
needs to consider and look at.
You have to ask yourself, what are the requiredmultiples that your LPs are going to be
expecting of you and what do you want to aimfor?
You really have to think about what's your fundhorizon.
Are you a what type of fund are you?
(10:06):
Are you an evergreen fund that has an endlesshorizon?
Are you a ten year fund?
Are you a twelve year fund?
Are you a ten year plus two year, two one yearextensions funds?
What do you want your fund size to be?
These are this is 10,000,000.
And then you have to start thinking aboutportfolio construction, but there's so much
more that comes beyond your portfolioconstruction, right?
(10:29):
You've got to look at what your initialinvestment check size is going to be, you have
to think about management fees and carriedinterest.
Are you going to have reserves?
Will you have fees and expenses?
Will you recycle?
After you think about all those things, youcome up with your actual investable capital
number.
So if you're a $10,000,000 fund, it doesn'tmean you have $10,000,000 to invest.
(10:52):
So that's one thing that always has to come tomind when you're thinking of portfolio
construction.
And then you start to plug in all thesedifferent figures, in tools that they have over
there around fees and expenses, what's impliedcarry and, p and l.
You gotta think about TVPI, POIC.
And there's a number of different things youwanna think about.
(11:13):
And then you kind of ask yourself, well, in a10,000,000 fund, how many investments do I
wanna make?
As an example, you might wanna make 25investments.
You might wanna make more than 25 investmentsor less than 25 investments.
And that's all gonna depend strictly on themodels that you put together.
So you can do back of the napkin scenarioswhere you kind of say to yourself, alright, in
(11:41):
my fantasy team, I'm gonna have I'm gonna thinkabout a $10,000,000 fund.
I'm gonna think about a $20,000,000 fund.
I'm gonna think about a $30,000,000 fund.
And when you're planning out fund constructionand building out your fund, if you're building
a fund that is built to last and scale over theyears, fund over fund over fund, you might
(12:03):
wanna think now about what the future mightlook like as you grow AUM, and then how that
would apply to portfolio construction, and howdo you want to do it?
Do you want to be a fund that that takes ashadow approach and shadows existing funds?
Or do you want to be a fund that is a trueoutlier and believes before others believe, and
(12:23):
just goes in there and finds the best possibleopportunities?
Or do you wanna be at a $35,000,000 fund thattakes huge swings at bat, where you're only
investing in 12 companies?
This is incredibly high risk because portfoliotheory kind of leads us all to believe that you
really need to have 20 to 25 investments, tohave any goods opportunity for outperforming
(12:48):
and getting like three x.
But some of the best of the best micro fundmanagers will follow like a founding investor
approach, which is modeled after Sequoia orKleiner Perkins back in the early nineties.
And they'll just kind of they're able to say,look, there's over a thousand companies that
are coming to market on a regular basis.
(13:10):
How do you approach these opportunities?
And how do you kind of say to yourself, whatmakes sense?
What doesn't make sense?
And how do we how do we filter the junk?
I mean, in in these notes of mine here, I'mkind of saying to myself, there's over a
hundred thousand startups that come to marketin any given year.
(13:30):
But from my perspective, the top 50 micro VCshave really filtered out the majority of those,
and they're looking at a thousand of them.
So then you got to ask yourself, do I want toalign with them?
Or do I just want to kind of look atopportunities that they're working towards?
So these are also questions and things thatyour LP base are going to be wondering about
(13:51):
you is how do you think about portfolioconstruction?
What type of thoughts do you put into portfolioconstruction?
And how do you how do you drive a fund?
I mean, you can do a fund that has fundassumptions with a reserves model with 24
companies or less, or you can do a fund modelthat's aiming for 40 companies.
(14:14):
And I believe a while back, ENIAC was sayingthat they believe the true sweet spot for a
portfolio size is actually 37.
Now that kind of falls more in line with theDave McClure five hundred VC approach of taking
multiple swings at bat as often as you can.
And I and and the the smaller your fund is, Ibelieve, the less reserves you wanna have.
(14:39):
That allows you to kind of aim for what Ibelieve would be the the best case scenario,
which is a maximizing your portfolio size whilealso maximizing ownership.
Kind of leaning into both fields as best as youcan, not being as concerned about reserves,
especially and and that's really pertaining toa fund size.
(15:00):
It's like anywhere from 2,000,000 to20,000,000, let's say.
Right?
Because you need more swings at bat in order tohave a higher probability of outsized returns
for your LPs.
And if you want to follow on to these companiesand you're doing a construction model that's
based on no reserves, then you really have toaim for getting pro rata.
(15:24):
And that pro rata has to either come from thecheck size that you write, or it's gonna have
to come in a side letter with the founderthat's that you can that will allow you to
offer the pro rata benefits to your LPs toinvest further into the fund.
Even though you know your fund isn't gonna beable to follow on.
Give your LPs that optionality to co invest andfollow on invest into these opportunities.
(15:50):
So these are the type of things that I thinkabout when I'm saying to myself, how do I build
a portfolio model that really rocks?
And I I'm personally in favor of of aiming highand having more swings at bat and going out to
drive those those big fund size returns for theLPs.
(16:12):
So this is kind of a look at a a $20,000,000fund, and whether or not you're gonna recycle
or not, what your management fees are top down.
You also have to look at your investmentperiod.
You've got to think about over what period oftime do I want to invest this capital?
And then you need to set a cadence, and try tohit a mark if you can if the market's allowing
(16:37):
you to and the valuations are right and you'reable to
Hey, Ryan.
I don't think I can see the, the actual model.
I just see the Google folder.
Oh.
So maybe it's easier if you just share yourentire screen.
Maybe that helps.
Share this tab instead.
Yeah.
(16:57):
There you go.
I can see it now.
Yep.
Oh my gosh.
So this whole time, I apologize.
That's okay.
Yeah.
So this is this is what it looks like.
Sorry, everybody.
I didn't realize that wasn't like that.
But you want to kind of say like, what type ofassumptions do you want for a fund of let's say
$20,000,000 fund, a $10,000,000 fund, and soforth.
(17:17):
Then you need to build in a lot of assumptions.
And and you have to try and stick to stick toyour assumptions when you're deploying the
capital.
You really have to have to stick to thoseassumptions as best as you can.
Now, thing that you've got to think about whenyou're looking at modeling your fund is, are
(17:40):
you are you thesis driven?
Or are you looking broadly across allindustries?
If you're thesis driven and you're you'reconcentrating, you have a focus in the core
industry, I think the general rule of thumbfrom my from my perspective would be, you know,
80 to 90% of your fund better be directly inthat category of investments.
(18:04):
But you do have room along the way, and yourLPs are not gonna budge on this much to go a
little bit off path, and you can find somethingthat you think is a really great opportunity
that's just a little bit off thesis, and youcan go ahead and invest there.
And some of the greatest fund managers of alltime will tell you that in some situations,
(18:26):
their highest net returner has been somethingthat's been directly off thesis.
So it's not a violation of the rules if you goa little bit off base for one or two of your
investments if you're a concentrated sectorfocused investor.
But you really do wanna stay focused on that onthat sector.
And the real reason you wanna stay focused onthat when thinking about portfolio construction
(18:50):
and fund construction is because you're goingto have to explain to all of your LPs down the
line, how did you get into deals one throughfive?
And they're gonna reference check you, andthey're gonna wanna talk to the founders.
They're gonna wanna understand how that isbefore they make a commitment to your fund.
And then they're gonna say to themselves, isthis is this fund manager?
(19:12):
Is this GP investing in a way that they tell methey're going to invest?
So and they're expecting the answer to be yes.
So for that reason alone, you really gottastick to your thesis and your fund construction
and the what your deployment.
And you have to stick to these numbers andthese cadences so that when you go out to raise
(19:32):
fund two and fund three and you build anenduring fund that raises AUM fund over fund
for a fund that's meant to last, well, you haveto have a good story to tell, and it it has to
really flow very well in the way you expresshow you came to the assumptions that you're at
today.
If you're starting out as a new fund manager,fund one, is not gonna be the biggest fund in
(20:00):
the world in most instances, especially foremerging managers like myself.
The fund size is going to dictate in many waysyour your strategy and how you put the capital
to work.
But at the same time, just getting the firstfund off the ground is the, yeah, I think the
biggest feat of all.
So don't be as concerned about having a 10 or$20,000,000 fund.
(20:24):
If you get a 1,000,000 or a $5,000,000 fund,you're doing better than most.
And go ahead, get out there and deploy thatcapital, build your story, build that track
record as a fund manager, not as an angelinvestor, and then carry that forward into
going out and raising your second fund.
And do not think that the institutions aregonna be your customer on fund one, because in
(20:49):
most cases they won't.
But do do know this.
Like we said earlier, it's about relationships.
So be open to building relationships withinstitutions along the way, but just don't
expect them to come into your fund.
Keep them updated.
Provide them updates, maybe a monthly orquarterly newsletters.
(21:11):
And if you're in town and there's a anallocator that you wanna meet with, let them
know you plan on being in town.
And if they respond or kind enough to respondto you and meet up for coffee or lunch, do it.
If not, you know, just don't worry about it.
Just keep pushing forward and focus on the endgoal, which is, building an enduring fund and
(21:34):
allocating in a way that that ensures you are agood fiduciary for your LPs and you drive the
the greatest returns.
You know, would be helpful, like, maybe justreal quick, just kind of like the layers of
messaging that you recommend for managers.
(21:54):
You know, know we went through a lot of theseexercises.
Right?
But there's like the first read, you know, likeif we think about the stack, there's emails and
then there's materials.
Right?
So there's like, obviously, the maybe the firstreach out when you met somebody at a cocktail
party, maybe you got their business card oremail, and then, you know, there's probably
like a a cadence for a reach out or afollow-up, like, a couple weeks later.
(22:18):
You know, so I don't know if there there's anyjust kinda words of wisdom in terms of, the
follow-up.
I'm I'm surprised we never talked about this,but, like, just kinda email communication and
cadence.
And one size doesn't fit all, but just ingeneral, like, you know, first reach out,
second reach out, third.
Yeah.
Do you add like more detailed materials eachtime or, you know, any just learnings would be
(22:40):
great.
Well, yeah, I I think if you're following thethe rule book and playing by the rules.
Mhmm.
The the best way to do it is I, know, you wannabe you wanna meet at a at a cocktail party or
at a sporting event, you know, at your kid's,you know, book reading.
It could be anywhere.
And at that point in time, it's just a simple,hey.
(23:03):
Hey.
I'm, you know, I'm Ryan.
Yeah.
Hey.
What do you do for work?
Well, you know, I I manage a a venture capitalfund.
You do not say I'm raising a venture capitalfund.
That's a that's a foul.
You can't say that.
Mhmm.
Especially if it's someone that you're meetingfor the first time and you just don't know
them.
What you wanna say is, yeah, I I work inventure capital and we make these type of
(23:24):
investments.
Let's keep in touch.
And then when that person decides to follow-upwith you again, it you have to wait for them in
theory.
You really need to wait for them to say, hey.
Can you tell me a bit more about what you do?
Mhmm.
And and then you have this you should be sayingto them, yeah.
Are you a accredited investor?
(23:45):
Is this something that is of really of interestto you, and would you be willing and or able to
invest in an asset class like this?
As soon as they answer that question and theanswer is yes, then, you know, it's free.
The the field is open.
You can approach them however you wish.
You can email them once a week.
(24:06):
You if they give you their email, you can callthem.
You can invite them to a a dinner or anetworking event, and you can build the
relationship.
But you you never ask you never say, I'mraising a fund.
Would you like to invest on the first time youmeet with them?
That's a a a pure violation of the SEC'sgeneral solicitation rules under if your fund
(24:30):
is registered as 506P.
If you're registered as 506C, it's a little bitit's a bit of a different game.
There's just a lot more hurdles that you haveto overcome in accrediting whether or not that
accredited status is as they tell you it is.
And it's a bit of a more cumbersome task.
(24:52):
Not everybody's doing it, but we do see peopledoing it.
Right, Joel?
Like, I like Dave McClure just announced theother day.
He's raising a new fund, which is a five zerosix c.
And after he after he spit it out on Twitter,he felt compelled to spit another tweet out,
which was a direct link to the SEC's guidelinesthat explain what the difference is between
(25:12):
those two classifications.
So Yeah.
It's it's sticky.
It's still new, but, there are ways you can, doit and get very close to buying billboards as I
these guys are kinda doing.
Jay Jay Cal is also raising his fund, underthat general solicitation rule.
(25:32):
So it's not a bad thing.
It's just not something that's like agenerally, used practice currently.
So you want to, you wanna walk a tightrope.
You wanna try to follow the rules because if ifyou are really brazen about it and you're not
following the rules, I don't think in mostsituations, especially under the current
administration, that you're gonna find yourselfin trouble.
(25:56):
However, if you did find yourself in trouble,they they can claw back all of the investments
that your LPs made in your fund.
So ask yourself, do you want that to happen?
My answer is no.
So I'm gonna follow the rules.
So when you meet potential investors or someoneyou that you believe might be of a high net
wealth, get to know them just like you wouldget to know somebody else.
(26:21):
It's it's like a business relationship date.
And by the second or third date, that's whenyou should know enough in conversation to know
if it's worth sending them some type ofmaterials on your fund.
I think the best way to proceed with sendingmaterials to anybody would be to high have them
(26:41):
sign, like, an informal pact that that's, like,nonbinding that just says, I'm interested in
investing in your fund.
If I did so, it would be at 25,000, 50thousand, a hundred thousand, 5 hundred
thousand, whatever their number might be.
And that that there alone is telling youdirectly from them, yeah, I'm I'm ready to go.
(27:05):
I'm interested.
Send me some more information.
And then it's and then you're very clear, andyou can then you can send them a fund deck.
But I don't think you should send anyone a funddeck unless they make it very explicitly clear
to you that they are either an existing LP andother funds, and they've done this before, or
they're exploring it, and they are anaccredited investor, and they they want to know
(27:26):
more.
Yep.
That makes sense.
Were there any other things that you wanted toshow on the the spreadsheets at all?
I guess since it wasn't showing, I'm I can openup again and show you a little bit more.
Sure.
But there isn't a whole lot more to really diveinto there.
(27:48):
Yeah.
I think the best thing you can do as a fundmanager is live inside of the live inside of
these Excel sheets and models and think ofevery possible scenario, so that you learn and
teach yourself along the way.
And then also lean into other people in yournetwork to help ensure that you're modeling
(28:09):
appropriately.
And then when you do actually launch a fund,you'll have here we go.
When you actually launch a fund, you'll have aback office and fund administrator that'll
ensure that you get everything set up properly.
So is this showing just this particular tab?
(28:31):
I see I see the 10,000,000 tab and then I seethe other two to the right of it.
So you might be able to zoom out a little bit,but this is good because you can see
everything.
So can you see all of this?
Mhmm.
Yep.
I could see the 20 companies, 1.6 per quarter.
(28:52):
So this is looking at like a three year.
So this is a three year deployment cycle.
Yeah.
This is saying like you want if you're if youwanna do if you're gonna do a $20,000,000 fund,
this is just back of the napkin math.
Mhmm.
Ask yourself a lot of questions and put thesenotes down and say, is this the type of fund I
wanna run?
For me personally, the more I've dug into itand put these scenarios down, this is not
(29:17):
exactly this is not the type of fund that Iwould actually run.
I think the problem, I think, with this type ofa fund is you're dependent on other people
going in first, and you're too dependent on onthem being a signal as to whether or not you
wanna invest in the fund.
For me, I think the best the best fund managersout there aren't waiting for that.
(29:39):
Yeah.
The best fund managers out there are gonna sayare gonna meet a founder, and they're gonna
know right away, out of the gate if this makessense.
Mhmm.
If you listen to some of the the people thatare in the Midas list, they're gonna they'll
tell you that you can just tell right awayafter you've looked at thousands of pitch decks
(30:00):
and met with several hundred founders time andtime again.
Your gut will tell you whether or not this issomething you should really be exploring.
Mhmm.
What what you have to do is be confident in thefund model that you've built and the
relationships you've built with your LPs andhow you're gonna allocate that capital so that
when the when the iron is hot and thatopportunity is in front of you, you're able to
(30:23):
move on that fast.
Yeah.
That makes sense.
But the only way you can feel really confidentin doing that is spending a good amount of time
thinking about fund models and and wherethey're gonna lie.
And when you're building your fund model, youneed to build your fund model out in a way that
aligns with the target fund size that you'rebuilding.
(30:45):
When you do a first close and you startdeploying capital, it's gonna depend how much
capital you deploy into your initial firstinvestments will depend on the size of the
first close.
Are you doing a first close on 25% or 20% ofyour fund target, or are you doing a first
close when you have 50% of that fund targetcircled?
(31:10):
Depending on how you do that, it will it willdo two things.
One, it will trigger to all of the LPs you'vebeen speaking about that a close is happening
and they should be watching closely, especiallyif they're not interested in investing until
after the first close, which is very common.
The other thing it will do is it will signal toa very sophisticated LP, whether or not they
(31:33):
have time.
Because very sophisticated LPs are looking at anumber of fund managers, a number of
opportunities.
And if it's a if it's a thesis that theybelieve has legs and makes sense, they're gonna
put you at a a higher mark of, of interest ontheir on their calendar.
(31:55):
If you come in and you tell them you did afirst close at 50% of your target fund size,
that tells them that you're raising money,you're doing really well, and they're gonna
have to move fast if they wanna get anallocation into this fund.
Not everybody is fortunate enough to be able tobe in those shoes.
And if you're closing on 50%, then you'reprobably gonna be able to write larger first
(32:20):
checks into the first, you know, couple ofinvestments you make in quarter one, two,
three, and four.
But if you're closing on 20% of your 10,000,000or $5,000,000,000 fund one target, you're not
gonna have as much capital deployed because youyou don't have 20% of 5,000,000 to put into
(32:40):
companies because you have setup costs, youhave fund administration costs, you have
operational costs.
So it's gonna actually net out to a bit less.
And your first couple of checks won't be thethe top mark of your, say, it's a 25 k say,
it's a 50 k to 250 k check size.
(33:02):
Your first checks into those first three orfour companies are probably gonna be 50 to
75,000, something like that.
They're certainly not gonna be 250,000 a piecebecause you're not gonna have that amount of
capital to deploy into three differentcompanies.
As your fund target gets closer to beingachieved and you have different closes along
(33:23):
the line, you're gonna have more capital thatyou can deploy and you can start to write those
larger checks.
But you have to you have to know that whenyou're doing it.
Otherwise, you'll deplete all of your resourcesreally quick and you'll you'll be caught
between a rock and a hard place.
And if you're if the FUD model that you've beenpitching to your LPs is deployed in a way that
(33:45):
is not sound, it's really gonna hurt you andput you in a lot of trouble.
So you have to you really have to be aware ofyou have to have strong situational awareness
of what's going on around you, what type ofcapital you actually have to deploy, and how
you're gonna deploy it.
And you need to do it in a way that allows youto be successful and allows you to tell a a
(34:09):
strong story of growth and allocation as a goodfiduciary to your LPs.
That's helpful.
When you guys are thinking about follow ons,what are some thoughts that you're hearing
from, maybe your peers, you know, as far asjust, you know, how they're thinking about
(34:30):
their follow on strategy?
I think a lot of people when they think aboutfollow on strategy, they're they're really
trying to follow on into the into the winnersthat are that are meeting metrics that are
aligned with with industry industry growth.
It's night it in theory, it it would be reallynice to have at least 20% reserves to follow
(34:54):
into those into those winners.
Mhmm.
But you you might have a multitude of companiesthat are follow on worthy, but you don't have
enough capital to actually follow on to everyone of them.
So that's when you have to sit around and maybemeet with your with your LPAQ, or with your
investment team and make hard decisions andsay, well, they're both on a really strong
(35:16):
trajectory.
They're they're both meeting our our goals andour objectives, but maybe we don't have the
capital to, you know, follow on in each ofthem.
Which one are we gonna do?
Mhmm.
And and that's when you have to have to voteand come to consents consensus and pound on the
table if you really want it to happen and doit.
(35:36):
And if you if there's other opportunities thatmaybe the fund can't get into, that's when you
lean into your pro rata, and start, you know,going into those LPs and giving them
opportunities to take that additional pro rataso that they can get the alpha that they're
looking for if they want it.
So you're kind of you have to play both ends ofthe table in that in that situation.
(36:00):
Any learnings?
We're actually gonna be doing a session on fundaudits.
So just any learnings or best practices forobviously tax season is around the corner.
Most people are taking the extension.
So just best practices for, reporting,performance reporting, giving updates to LPs,
(36:21):
you know, making sure the k ones are, you know,delivered in a timely manner, communication to
LPs, you know, really essentially the backoffice stuff, the less sexy stuff.
Biased now as it relates to back office.
I used to say, well, you have a number ofoptions.
(36:46):
You do, you have a number of options, but alsohave to look at those options and tie them to
your fund size.
If you have a hundred million dollar fund size,you really need to find a a really strong tier
one back office that is, you know, doing backoffice for funds anywhere from 30,000,000 to a
(37:06):
billion in AUM.
Right?
Because if you're at a hundred million in AUM,there's gonna be a number of LPs, a number of
docs that have to go out, a lot of a lot offinancial modeling and work that has to be done
and you as an individual can't do it all onyourself.
You have to be able and willing to dedicate itYou have to be willing and able to move move
(37:33):
these functions out into the hands of otherpeople and let them let them go with it.
So you you've gotta be a good delegator oftasks.
And if you have a strong partner for fundadmin, you're in a much better position than if
you're trying to do it on your own.
We we have an investment at Roadster in DecileGroup, which, you know, we were a very early
(37:56):
investor in that group, and they they manageall of our back office.
And we do everything through them now.
And it's proven to be a really strong solution,especially for emerging managers and for for
some that are more established.
But there are a number of options that you haveto do that.
I would just say, do do your homework, do a lotof diligence.
(38:18):
And before you say yes on anything, make surethat you're talking to a fund manager that has
used it in the past, or is currently using it,and ask them how things work.
Don't just take the their word for it.
Because in some cases, there might be hiddencosts that you're just not aware of or don't
come up in your initial discussion before youbring on that particular fund administrator.
(38:42):
I haven't run into this problem personally.
I've just heard about it happening.
So I would just caution that just like beforeyou make an investment, you do your diligence
on the founder and the team and whether or nottheir tech is their own tech, whether or not
it's proprietary, if there's a moat.
You wanna do the same when looking at providersfor your back office solutions.
(39:04):
Yeah, I always say, you know, one of myfavorite sayings is when you pay less, you pay
more, right?
So if you get a cheap attorney or you get acheap doctor or you get a cheap fund admin in
the future, you may just pay more.
Right?
Because there's just, you know, those harderproblems are probably not solved with the
cheaper solution.
And we saw a lot of this with, Assure.
(39:26):
Right?
I mean, kind of,
yeah,
I mean, they had, they were the, they were theloss leader and a lot of people had to eat a
lot of costs, and actually, you know, lostmoney, because they were still on the hook to
pay for all those admin fees.
So I think that was a whole
disaster.
Well, the word there's a lot of disastersaround every around Azure.
(39:50):
But I tell you that what was crazy about it isjust like the timing of it.
Like, they and the way that they announced thechange and said, hey, it's on you.
It happened like on it was like Thanksgivingeve or Thanksgiving morning.
Like, everyone is sitting down with friends andfamily here in North America
Mhmm.
To this big feast and all of a sudden if you'rea fund manager and you're relying on them for
(40:12):
an SPV or for fund admin, you're screwed.
Yeah.
And like, what in the hell do I do?
It was it was a whole another ball of wax,like, right on top of the Silicon Valley Bank
fiasco.
And that one was not I don't believe wasresolved as well as the SVB fiasco was
(40:36):
resolved.
So, yeah, Joel, you're right.
A lot of people got caught holding the bag, andit put a lot of people into a very precarious
precarious position that they shouldn't havebeen in otherwise.
But that's part of the challenge you run intowhen when working with less established firms.
Yeah.
(40:56):
No.
I totally agree.
Well, look, we got about ten minutes left.
I think one idea that I've wanted to kindaswitch up with these conversations is just
maybe talking about top level news headlines.
I'm I'm just looking at the news here.
I don't see anything that really piques myinterest except Doge needs Doge says that it
needs to know the government's most sensitivedata, but can't say why.
(41:20):
So that's just literally, I just googledgoogled news.
You know?
So that's just one top top line thing that thatmaybe gets a reaction out of you.
But, you know, what are you kinda thinkingright now in terms of just the venture market
and just kinda trends that you're seeing forjust managers?
You know, you've got a lot of peers and thenyou're also kind of investing in computing and
(41:43):
deep tech.
So any top level insights that you wanna shareor opinions?
Yeah.
I think top level insights without gettingpolitical, I would say, you know, in good in
good times and in bad times, there's oneconstant.
And that constant is there are always a lot ofunknowns and there's always instability.
(42:06):
So I think in order to be successful, have toyou have to maintain a positive focus, and you
have to stay positive, and you have to you haveto look forward.
In venture, we're not looking we're not lookingat today.
We're meeting people who are inventing andcreating for tomorrow.
We're meeting them today, but they're creatingit for tomorrow.
(42:27):
And tomorrow is not a four year presidentialterm.
Tomorrow is, eight to ten years from today.
So I I think, regardless of any any marketdownturns, tariff talks, or anything that might
be going on in the current administration andlandscape we have here in North America or
(42:47):
anything in any international market whereveryou're at politically, just know that it's
normal.
These things happen all the time.
There's always been unrest for the history oftime.
So you just got to push forward and movethrough it.
In North America, I think venture capital inparticular as an asset class is is primed for
(43:12):
for growth.
We have, a number of VCs in the in the WhiteHouse right now.
The VP is an ex, an ex VC, and they wanna seeinnovation drive and move forward.
I think some of the challenges with the thetariffs or the tariff bluffs, they're gonna
(43:32):
exist.
They might not go away right away, but they'rethere.
And you just have to find a way to to lookthrough it and keep moving forward.
I do think we will see more liquidity in themarkets coming up soon.
That will be good for LPs.
I do think LPs really need to say tothemselves, do we want to invest in the herd?
(43:53):
Or should we be investing in more of theseemerging managers?
And I think the best time to invest in emergingmanagers is before they have a track record.
So if you want to get in with some of the bestopportunities in and emerging managers, you
want to invest in that fund one of theirs andget them off the ground and make sure that new
(44:15):
voices that are driving innovation forward andinvestment forward in these categories are are
getting the capital they need in order todeploy it efficiently and be there for the long
run to build up new firms and new funds.
And the these smaller emerging managers haveaccess and speed of execution that the larger
(44:36):
firms don't.
I think you're gonna see really strong returnscoming out of a lot of these emerging managers.
So don't look twice.
Look once and make a decision and invest inthese emerging managers.
One one news article that I'm seeing right nowis, I don't know if you remember Dollar Tree,
but Dollar Tree is winning over high incomeshoppers, because of the tariffs and the price
(45:01):
hike.
So that's kind of interesting.
You know, when you think about, strengtheningbrands like Walmart, Dollar Tree, Payless,
right, those brands are, you know, possiblygonna attract, more people just because of the
the price hikes.
So I don't what your reaction is to that, but,there's also studies on just, you know, how
(45:22):
brands get branded, as a premium brand versusversus like a budget brand.
Right?
So the the color red normally means you're youknow, it's kind of a lower priced item.
Obviously, red all also means, like, emergency,but greens or blues are usually hinted to be
kind of, like, tied to a more premium brand.
(45:42):
But I don't know what your reaction is to that.
Just kind of some of these more lowerprominent, you know, reputed brands that are
known for discount or prices now now getting alittle more domination as a result of just kind
of the macro
trends?
I think it with macro trends, a lot of theseplayers will definitely see more in influxes of
(46:04):
spend.
Mhmm.
Consumer confidence is is down.
It's not as high as it once was.
I finally I was finally able to buy eggs atCostco two days ago.
I haven't been able to buy eggs in the last,I'd say six weeks at my Costco.
But
What what do they cost?
You're you're in Oregon.
Right?
Yeah.
(46:24):
I'm in Oregon.
I think it was a I think it's a pack of 20 Ithink it's two dozen.
So it's like 24.
Mhmm.
It was like 8 I wanna say it was $8.30.
Yeah.
That's like the price of the organic, you know,you you know, like, over here in New York.
I mean, the and I haven't checked the pricerecently because we buy stuff on Amazon.
(46:44):
But, yeah, I mean, the the more higher end youknow, this is in Manhattan.
Right?
The more higher end, you know, organ you know,they say farm raised, who knows?
But that's, like, just one dozen.
You know, they're usually around eight.
So I wouldn't be surprised if they're, like, 15to $20 now just for, a regular pack.
And this is for the standard pack of eggs?
Like, just the regular?
Yeah, this is like a like double double a extralarge egg.
(47:10):
Yeah.
Yeah.
So it used to be like $2 back in the day.
Yeah.
Was very 99¢.
For a dozen.
Yeah.
Mhmm.
You're dating yourself up.
For an 80 year old guy, you're really datingyourself.
I know.
But, I think, you know, we'll we'll see.
The things it's just that we're living in a newworld.
There's Yeah.
There's new things going on.
(47:31):
There's a lot of geo geopolitical unrest andchallenges in the world, but those things are
constant, and we just have to adjust to themand move forward with them.
But I I think venture as an asset class isgreat.
I believe that venture is countercyclical topublic markets.
Mhmm.
I also believe that, great companies arefounded during downturns.
(47:52):
Look at Google in particular.
I mean, look at other companies in around thattime right after 09/11 that were founded, and
others.
There's really good opportunity, you know, forgrowth right now.
And there's there are huge scientificbreakthroughs that are occurring in real time
right in front of us around everything from AIto to quantum and different datasets and just
(48:16):
the way people engage with one another insocial media, and the way consumer brands
connect, like you were speaking to earlier.
Right?
You know, b to c connections and brandidentity, brand values, associated value.
You know, you were talking about red versusgreen.
I think it's wild that Dollar Tree is green,and the the term dollar 99¢ or 5 and below,
(48:42):
like, that does not signal high value to me,but it's green.
TJ Maxx HomeGoods, they're red, but they're abit of a higher higher quality product.
So I do I think consumers are gonna find dealswhen they can find them.
I think as humans, it's it's in our nature towant to barter.
(49:04):
And in American culture, it's not as natural ofan instinct, unless you're into, you know,
going to garage sales and bartering.
But, it's become much more commonplace to wannafind a deal, especially when when the pennies
are getting pinched, costs are going up,tariffs are up, and things of that nature.
So I don't believe tariffs are going away willgo away anytime soon.
(49:28):
I don't think that costs will come downsignificantly anytime soon.
I think we're just we're kind of in it rightnow, and we're just gonna have to weather the
storm and look for ways to to outsmart it asfamilies and individuals and consumers.
And, you know, put your best foot forward and,you know, be positive because if you're if
(49:50):
you're not positive, it's gonna be really easyto kinda lose your breath.
You don't wanna do that.
Yeah.
Well, this is this is actually a really funexercise.
I'm literally just going through headlineswhile I'm having this this conversation.
But I got one more sound button and I knowwe're literally right at time, but this just
came out a couple hours ago.
Amazon is testing shopping health assistance,shopping and health agent assistance as it
(50:16):
pushes deeper into generative AI.
So I just think a lot of people are gonna belooking at agents as an opportunity.
My only is there was a lot of frothiness withAI copilots.
In the venture space, a lot of those companiesgot decimated.
So I feel like the agent space may be kind of asimilar trend.
And I think a lot of the bigger corporations,Fortune 500 incumbents are already kind of
(50:40):
building that natively within their systems.
If you think about Zoom and all these othertools like Canva, they already have kind of
like these little copilots and areas where youcan type in a prompt.
So you know, maybe just one sound bite on AI asyou guys are, you know, actively looking at,
you know, AI and computing deals.
Then I know I know we get a run.
(51:01):
I for for me, when I'm I'm excited about aboutagents and what they can do.
I think you're right.
I think the larger corporations are buildingit, natively into their into their product
offering.
So when you're looking at these type of,agents, you wanna I think the ones that are
gonna perform and do well are those that areincredibly niche, and really target a specific
(51:25):
niche industry or or opportunity, and reallydrill in really, really deep and do it better
than anybody else and have a lot of proprietarydatasets and customers behind them that are,
enabling them to be the best of what they do.
So that's where you really wanna kinda divedeep into into the agent space.
(51:47):
We're reviewing a company right now that'sdoing exactly that.
And the reason we're looking at them is becauseof how niche focused they are as well as, you
know, the strength of the team.
The team comes from a very strong industrialmanufacturer that's a that's very large on a
global scale.
So they have existing relationships within thatthat particular business and, strong knowledge
(52:12):
and know how of how that industry they'reapplying their agent to works.
So we think they have a high probability of ofsuccess and growth with customer acquisition
and a good GTM strategy, and they have a lot ofproprietary tech under the hood.
That's really important.
There needs to be proprietary tech.
We don't want them using off the shelfsolutions to get going today and then tell us
(52:35):
they're gonna build something proprietarytomorrow.
Like, if they say that, it's an automatic,we're out.
We want you to come into the table withsomething fresh and new right out of the gate.
Sure.
Well, hey, Ryan, this is amazing.
Good catching up.
Thanks for the lecture on how to launch a fund,and thanks for doing a news, a newscast with
me, talking about trends.
(52:57):
I get we gotta do more of this with, some othersome other people in the private equity space.
Alright.
Thank you, Joel.
I really appreciate it.
It's great to spend some time with you and youraudience today.
Likewise.
Thanks.
Take care.
Have a good one, everybody.
Bye.
And the these smaller emerging managers haveaccess and speed of execution that the larger
(00:07):
firms don't.
So I think you're gonna see really strongreturns coming out of a lot of these emerging
managers.
So don't look twice.
Look once and make a decision and invest inthese emerging managers.
To the investor, a podcast where I, JoelPalafinkel, your host, dives deep into the
(00:29):
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.
Okay.
So we are live here with, a good friend ofmine, Ryan Els.
(00:52):
I've known him for, a handful of years.
It's been been a couple months to almost a yearsince we met Ryan, but we keep in touch.
We text each other, and I always like to just,you know, get guests back on the show.
You know, Ryan was on the show couple yearsago.
Ryan was in our fund accelerator, a littlewhile back and, you know, just excited with
(01:12):
what he's doing.
You know, we've shared a lot of notes on ourmandates.
We've both invested in deep tech and high speedcomputing and software.
So there's always just been interest parallelin terms of investing.
We've also been in the same place in life.
We're both parents, so we've shared a lot ofstories, war stories about being parents.
(01:39):
I think that's an interesting place when youcan be in the same, same journey with other
people and, you know, have things to talkabout.
But anyways, Ryan, welcome back to the show.
Thanks for making time for me and thecommunity.
I know you're super busy, so you making timefor me means a lot.
Hey.
I'm glad to be here.
It's great to have you, have you along thisjourney with me.
(02:01):
As Joel said, we've been friends for a while.
Yeah.
We both have kids that are similar ages.
In fact, when I when my wife was pregnant withour very first kid, I got I was in New York on
a trip and found out, and I was so giddy aboutit.
Joel was the very first guy I told.
And, that was a it was a special moment for heand I, maybe for me more so.
(02:22):
I don't know.
But It was for me too.
We bought a Joel wrote a book.
If anyone knows, Joel has a book, that's akid's book.
You can buy it on Amazon.
It's a a shameless plug coming from a fan.
Thank you.
We gave that to our son, and he really enjoyedreading that.
I had a fun time reading it too.
Yeah.
So an update on that.
I just want to give you guys an update.
(02:44):
You know, my son has a talent show today.
And so I'm gonna actually just give a shamelessplug because we're all plugging here.
Why not?
You know, and we're live.
So my son has a talent show today.
And I was like, Hey man, you should write abook.
And he came up with this book about these twosnow leopards and they're building a tree
house.
(03:04):
So what we did was we just kind of came up withthe cover.
This is like entrepreneurship 101, right?
So we came up with a cover image and there's abarcode and the barcode you can actually pre
buy the book.
And I was like, hey man, if we get a sale, wecan use that to market the book, but he's gonna
be doing a reading and then I printed out Hereit is right here, actually.
(03:29):
This is called Jude's book.
I actually can't see it anyways, but I'll signit later.
But anyways, it's cool because he's learning,you know, he's kind of learning
entrepreneurship and, you know, the concept oflike marketing and pitching and stuff like
that.
So, so I'm really excited about that.
I think, you know, if you have kids, you know,teaching them entrepreneurship, because I mean,
(03:50):
when I was a kid, when I grew up, I justlearned about, you know, math and science and
hey, put your head down and get a job.
And then I think it's really as you meet otherpeople in the community and you see what
they're doing, you realize, hey, you know what,people can go out and launch a business, people
can go out and launch a fund.
The whole spirit of the Sutton CapitalAccelerator is really being a capital
(04:15):
entrepreneur, right?
So Ryan, maybe you can just give a quickoverview on, we sent the bio, but just kind of
a quick overview on your career and kind ofwhere you are with Roadster Capital.
And obviously no fundraising, no updates onfund, little updates or anything like that.
(04:35):
No general solicitation.
No general solicitation or anything, but justtrends on the fund and trends in the sector.
Then we'll cover and then we'll and we'reactually gonna have Ryan do a little academic
module on fun modeling, just best practices formodeling and fun.
(04:56):
Again, just for purposes of this presentation,all of this information is for educational
purposes only.
There's no purchasing or or selling securitieson the on the call.
So just wanna give that disclaimer to to makesure that everyone knows it's for, for
knowledge and, learning purposes only.
(05:17):
Yeah.
Thank you for for making that clear foreverybody.
Anything that I show everyone will just beexamples.
They're not direct reflections of ourparticular fund or our exact structure.
It's just gonna be a a broad scope of ways tothink about it when you're thinking about fund
construction and all of the facets that areassociated with it.
(05:37):
So my name is Ryan Ellis, as Joel said.
I'm the founder, managing partner of RoadsterCapital.
Roadster is a pre seed seed stage VC fund thatinvests in companies that are solving
challenges around automation, trust, andsustainability for the American industrial
base.
And we really want to, propel old line physicalindustries and help help digitize them with
(06:00):
things that we think are critical to, you know,achieving the next great milestones and
advances in business with with a real core lookat science and technology and, real hard facts.
So, yeah.
So our where our fund as a whole is doing well.
We have a lot of really strong interest fromfrom LPs.
(06:22):
We have a good LP community, and we continue tobuild that and build relationships with with
LPs as well as with founders.
We think they're kind of they're on similarlevels to us.
Although at the end of the day, our true firstcustomer is always going to be the LP, because
we're gonna be investing as a fiduciary for theon their behalf into these founding teams.
(06:44):
And, my background, I have an MBA in financefrom University of Notre Dame.
I started my career very early on at Oracle indifferent sales and marketing roles.
And throughout my career, worked at differentstartups and fortune 500 companies, eventually
led me to, leading a global turnaround,spending my time in, Hong Kong and North
(07:06):
America a lot on the manufacturing factory sidein electronics.
And then I started making some investmentsthrough special purpose vehicles, with roaster
capital and eventually formed a thesis aroundthat, that led to where I'm at today.
And, it's been a really great journey.
Like many will tell you, not every journey isthe same.
(07:28):
We all end up in life at different places atdifferent points in time.
And I really don't think there is a real properprogression into any role at any company or
becoming a VC.
You're gonna find people with a myriad ofbackgrounds from creators to entrepreneurs to
people who are just math whizzes that end up inthese different type of roles.
(07:52):
And with that comes number of nuances, and anumber of different personalities.
And I guess, Joel, the proper way to say itwould be a number of archetypes that are
associated with with both VCs, as well as withthe LPs that we reach out and speak to as
either high net wealth individuals or,institutions, foundations, family offices, and
(08:17):
the like.
So, it's a real, it's a real true mixed bagthat I believe is driven solely by
relationships as the core founding principle,and then you build upon those relationships to
to get where you're at.
And so that's kinda in a in a nutshell wherewe're at as a fund, how I'm approaching it as a
(08:39):
fund, I guess.
Yeah.
And then, Ryan, if you did whenever you'reready.
If you did wanna share your screen, I think youcan hit the present button and then just share
your desktop.
And then I think that should pull up overthere.
Here we go.
Alright.
Okay.
So you able to see if I I think I gotta see itin my system.
(09:01):
So, yeah, hit present and then I think just domaybe just do share screen and then it should
there we go.
Okay.
You got it.
Right?
Cool.
You able to control it?
Perfect.
Yeah.
I'm able to control.
So we're in I put some files into drive.
And so what we're gonna do is we're gonna talka little bit about fun modeling here.
And along the way, I'll talk to everybody aboutdifferent points of views and perspectives I
(09:25):
have.
You know, when Joel and I first met, this guywas starting a company called Tactic, which has
now been acquired by Carta.
Right?
Unabaugh.
Yeah.
So he and Carta have some very interestingtools that you can use around portfolio
construction.
(09:46):
When we think of portfolio construction andfund models, there are a lot of things that one
needs to consider and look at.
You have to ask yourself, what are the requiredmultiples that your LPs are going to be
expecting of you and what do you want to aimfor?
You really have to think about what's your fundhorizon.
Are you a what type of fund are you?
(10:06):
Are you an evergreen fund that has an endlesshorizon?
Are you a ten year fund?
Are you a twelve year fund?
Are you a ten year plus two year, two one yearextensions funds?
What do you want your fund size to be?
These are this is 10,000,000.
And then you have to start thinking aboutportfolio construction, but there's so much
more that comes beyond your portfolioconstruction, right?
(10:29):
You've got to look at what your initialinvestment check size is going to be, you have
to think about management fees and carriedinterest.
Are you going to have reserves?
Will you have fees and expenses?
Will you recycle?
After you think about all those things, youcome up with your actual investable capital
number.
So if you're a $10,000,000 fund, it doesn'tmean you have $10,000,000 to invest.
(10:52):
So that's one thing that always has to come tomind when you're thinking of portfolio
construction.
And then you start to plug in all thesedifferent figures, in tools that they have over
there around fees and expenses, what's impliedcarry and, p and l.
You gotta think about TVPI, POIC.
And there's a number of different things youwanna think about.
(11:13):
And then you kind of ask yourself, well, in a10,000,000 fund, how many investments do I
wanna make?
As an example, you might wanna make 25investments.
You might wanna make more than 25 investmentsor less than 25 investments.
And that's all gonna depend strictly on themodels that you put together.
So you can do back of the napkin scenarioswhere you kind of say to yourself, alright, in
(11:41):
my fantasy team, I'm gonna have I'm gonna thinkabout a $10,000,000 fund.
I'm gonna think about a $20,000,000 fund.
I'm gonna think about a $30,000,000 fund.
And when you're planning out fund constructionand building out your fund, if you're building
a fund that is built to last and scale over theyears, fund over fund over fund, you might
(12:03):
wanna think now about what the future mightlook like as you grow AUM, and then how that
would apply to portfolio construction, and howdo you want to do it?
Do you want to be a fund that that takes ashadow approach and shadows existing funds?
Or do you want to be a fund that is a trueoutlier and believes before others believe, and
(12:23):
just goes in there and finds the best possibleopportunities?
Or do you wanna be at a $35,000,000 fund thattakes huge swings at bat, where you're only
investing in 12 companies?
This is incredibly high risk because portfoliotheory kind of leads us all to believe that you
really need to have 20 to 25 investments, tohave any goods opportunity for outperforming
(12:48):
and getting like three x.
But some of the best of the best micro fundmanagers will follow like a founding investor
approach, which is modeled after Sequoia orKleiner Perkins back in the early nineties.
And they'll just kind of they're able to say,look, there's over a thousand companies that
are coming to market on a regular basis.
(13:10):
How do you approach these opportunities?
And how do you kind of say to yourself, whatmakes sense?
What doesn't make sense?
And how do we how do we filter the junk?
I mean, in in these notes of mine here, I'mkind of saying to myself, there's over a
hundred thousand startups that come to marketin any given year.
(13:30):
But from my perspective, the top 50 micro VCshave really filtered out the majority of those,
and they're looking at a thousand of them.
So then you got to ask yourself, do I want toalign with them?
Or do I just want to kind of look atopportunities that they're working towards?
So these are also questions and things thatyour LP base are going to be wondering about
(13:51):
you is how do you think about portfolioconstruction?
What type of thoughts do you put into portfolioconstruction?
And how do you how do you drive a fund?
I mean, you can do a fund that has fundassumptions with a reserves model with 24
companies or less, or you can do a fund modelthat's aiming for 40 companies.
(14:14):
And I believe a while back, ENIAC was sayingthat they believe the true sweet spot for a
portfolio size is actually 37.
Now that kind of falls more in line with theDave McClure five hundred VC approach of taking
multiple swings at bat as often as you can.
And I and and the the smaller your fund is, Ibelieve, the less reserves you wanna have.
(14:39):
That allows you to kind of aim for what Ibelieve would be the the best case scenario,
which is a maximizing your portfolio size whilealso maximizing ownership.
Kind of leaning into both fields as best as youcan, not being as concerned about reserves,
especially and and that's really pertaining toa fund size.
(15:00):
It's like anywhere from 2,000,000 to20,000,000, let's say.
Right?
Because you need more swings at bat in order tohave a higher probability of outsized returns
for your LPs.
And if you want to follow on to these companiesand you're doing a construction model that's
based on no reserves, then you really have toaim for getting pro rata.
(15:24):
And that pro rata has to either come from thecheck size that you write, or it's gonna have
to come in a side letter with the founderthat's that you can that will allow you to
offer the pro rata benefits to your LPs toinvest further into the fund.
Even though you know your fund isn't gonna beable to follow on.
Give your LPs that optionality to co invest andfollow on invest into these opportunities.
(15:50):
So these are the type of things that I thinkabout when I'm saying to myself, how do I build
a portfolio model that really rocks?
And I I'm personally in favor of of aiming highand having more swings at bat and going out to
drive those those big fund size returns for theLPs.
(16:12):
So this is kind of a look at a a $20,000,000fund, and whether or not you're gonna recycle
or not, what your management fees are top down.
You also have to look at your investmentperiod.
You've got to think about over what period oftime do I want to invest this capital?
And then you need to set a cadence, and try tohit a mark if you can if the market's allowing
(16:37):
you to and the valuations are right and you'reable to
Hey, Ryan.
I don't think I can see the, the actual model.
I just see the Google folder.
Oh.
So maybe it's easier if you just share yourentire screen.
Maybe that helps.
Share this tab instead.
Yeah.
(16:57):
There you go.
I can see it now.
Yep.
Oh my gosh.
So this whole time, I apologize.
That's okay.
Yeah.
So this is this is what it looks like.
Sorry, everybody.
I didn't realize that wasn't like that.
But you want to kind of say like, what type ofassumptions do you want for a fund of let's say
$20,000,000 fund, a $10,000,000 fund, and soforth.
(17:17):
Then you need to build in a lot of assumptions.
And and you have to try and stick to stick toyour assumptions when you're deploying the
capital.
You really have to have to stick to thoseassumptions as best as you can.
Now, thing that you've got to think about whenyou're looking at modeling your fund is, are
(17:40):
you are you thesis driven?
Or are you looking broadly across allindustries?
If you're thesis driven and you're you'reconcentrating, you have a focus in the core
industry, I think the general rule of thumbfrom my from my perspective would be, you know,
80 to 90% of your fund better be directly inthat category of investments.
(18:04):
But you do have room along the way, and yourLPs are not gonna budge on this much to go a
little bit off path, and you can find somethingthat you think is a really great opportunity
that's just a little bit off thesis, and youcan go ahead and invest there.
And some of the greatest fund managers of alltime will tell you that in some situations,
(18:26):
their highest net returner has been somethingthat's been directly off thesis.
So it's not a violation of the rules if you goa little bit off base for one or two of your
investments if you're a concentrated sectorfocused investor.
But you really do wanna stay focused on that onthat sector.
And the real reason you wanna stay focused onthat when thinking about portfolio construction
(18:50):
and fund construction is because you're goingto have to explain to all of your LPs down the
line, how did you get into deals one throughfive?
And they're gonna reference check you, andthey're gonna wanna talk to the founders.
They're gonna wanna understand how that isbefore they make a commitment to your fund.
And then they're gonna say to themselves, isthis is this fund manager?
(19:12):
Is this GP investing in a way that they tell methey're going to invest?
So and they're expecting the answer to be yes.
So for that reason alone, you really gottastick to your thesis and your fund construction
and the what your deployment.
And you have to stick to these numbers andthese cadences so that when you go out to raise
(19:32):
fund two and fund three and you build anenduring fund that raises AUM fund over fund
for a fund that's meant to last, well, you haveto have a good story to tell, and it it has to
really flow very well in the way you expresshow you came to the assumptions that you're at
today.
If you're starting out as a new fund manager,fund one, is not gonna be the biggest fund in
(20:00):
the world in most instances, especially foremerging managers like myself.
The fund size is going to dictate in many waysyour your strategy and how you put the capital
to work.
But at the same time, just getting the firstfund off the ground is the, yeah, I think the
biggest feat of all.
So don't be as concerned about having a 10 or$20,000,000 fund.
(20:24):
If you get a 1,000,000 or a $5,000,000 fund,you're doing better than most.
And go ahead, get out there and deploy thatcapital, build your story, build that track
record as a fund manager, not as an angelinvestor, and then carry that forward into
going out and raising your second fund.
And do not think that the institutions aregonna be your customer on fund one, because in
(20:49):
most cases they won't.
But do do know this.
Like we said earlier, it's about relationships.
So be open to building relationships withinstitutions along the way, but just don't
expect them to come into your fund.
Keep them updated.
Provide them updates, maybe a monthly orquarterly newsletters.
(21:11):
And if you're in town and there's a anallocator that you wanna meet with, let them
know you plan on being in town.
And if they respond or kind enough to respondto you and meet up for coffee or lunch, do it.
If not, you know, just don't worry about it.
Just keep pushing forward and focus on the endgoal, which is, building an enduring fund and
(21:34):
allocating in a way that that ensures you are agood fiduciary for your LPs and you drive the
the greatest returns.
You know, would be helpful, like, maybe justreal quick, just kind of like the layers of
messaging that you recommend for managers.
(21:54):
You know, know we went through a lot of theseexercises.
Right?
But there's like the first read, you know, likeif we think about the stack, there's emails and
then there's materials.
Right?
So there's like, obviously, the maybe the firstreach out when you met somebody at a cocktail
party, maybe you got their business card oremail, and then, you know, there's probably
like a a cadence for a reach out or afollow-up, like, a couple weeks later.
(22:18):
You know, so I don't know if there there's anyjust kinda words of wisdom in terms of, the
follow-up.
I'm I'm surprised we never talked about this,but, like, just kinda email communication and
cadence.
And one size doesn't fit all, but just ingeneral, like, you know, first reach out,
second reach out, third.
Yeah.
Do you add like more detailed materials eachtime or, you know, any just learnings would be
(22:40):
great.
Well, yeah, I I think if you're following thethe rule book and playing by the rules.
Mhmm.
The the best way to do it is I, know, you wannabe you wanna meet at a at a cocktail party or
at a sporting event, you know, at your kid's,you know, book reading.
It could be anywhere.
And at that point in time, it's just a simple,hey.
(23:03):
Hey.
I'm, you know, I'm Ryan.
Yeah.
Hey.
What do you do for work?
Well, you know, I I manage a a venture capitalfund.
You do not say I'm raising a venture capitalfund.
That's a that's a foul.
You can't say that.
Mhmm.
Especially if it's someone that you're meetingfor the first time and you just don't know
them.
What you wanna say is, yeah, I I work inventure capital and we make these type of
(23:24):
investments.
Let's keep in touch.
And then when that person decides to follow-upwith you again, it you have to wait for them in
theory.
You really need to wait for them to say, hey.
Can you tell me a bit more about what you do?
Mhmm.
And and then you have this you should be sayingto them, yeah.
Are you a accredited investor?
(23:45):
Is this something that is of really of interestto you, and would you be willing and or able to
invest in an asset class like this?
As soon as they answer that question and theanswer is yes, then, you know, it's free.
The the field is open.
You can approach them however you wish.
You can email them once a week.
(24:06):
You if they give you their email, you can callthem.
You can invite them to a a dinner or anetworking event, and you can build the
relationship.
But you you never ask you never say, I'mraising a fund.
Would you like to invest on the first time youmeet with them?
That's a a a pure violation of the SEC'sgeneral solicitation rules under if your fund
(24:30):
is registered as 506P.
If you're registered as 506C, it's a little bitit's a bit of a different game.
There's just a lot more hurdles that you haveto overcome in accrediting whether or not that
accredited status is as they tell you it is.
And it's a bit of a more cumbersome task.
(24:52):
Not everybody's doing it, but we do see peopledoing it.
Right, Joel?
Like, I like Dave McClure just announced theother day.
He's raising a new fund, which is a five zerosix c.
And after he after he spit it out on Twitter,he felt compelled to spit another tweet out,
which was a direct link to the SEC's guidelinesthat explain what the difference is between
(25:12):
those two classifications.
So Yeah.
It's it's sticky.
It's still new, but, there are ways you can, doit and get very close to buying billboards as I
these guys are kinda doing.
Jay Jay Cal is also raising his fund, underthat general solicitation rule.
(25:32):
So it's not a bad thing.
It's just not something that's like agenerally, used practice currently.
So you want to, you wanna walk a tightrope.
You wanna try to follow the rules because if ifyou are really brazen about it and you're not
following the rules, I don't think in mostsituations, especially under the current
administration, that you're gonna find yourselfin trouble.
(25:56):
However, if you did find yourself in trouble,they they can claw back all of the investments
that your LPs made in your fund.
So ask yourself, do you want that to happen?
My answer is no.
So I'm gonna follow the rules.
So when you meet potential investors or someoneyou that you believe might be of a high net
wealth, get to know them just like you wouldget to know somebody else.
(26:21):
It's it's like a business relationship date.
And by the second or third date, that's whenyou should know enough in conversation to know
if it's worth sending them some type ofmaterials on your fund.
I think the best way to proceed with sendingmaterials to anybody would be to high have them
(26:41):
sign, like, an informal pact that that's, like,nonbinding that just says, I'm interested in
investing in your fund.
If I did so, it would be at 25,000, 50thousand, a hundred thousand, 5 hundred
thousand, whatever their number might be.
And that that there alone is telling youdirectly from them, yeah, I'm I'm ready to go.
(27:05):
I'm interested.
Send me some more information.
And then it's and then you're very clear, andyou can then you can send them a fund deck.
But I don't think you should send anyone a funddeck unless they make it very explicitly clear
to you that they are either an existing LP andother funds, and they've done this before, or
they're exploring it, and they are anaccredited investor, and they they want to know
(27:26):
more.
Yep.
That makes sense.
Were there any other things that you wanted toshow on the the spreadsheets at all?
I guess since it wasn't showing, I'm I can openup again and show you a little bit more.
Sure.
But there isn't a whole lot more to really diveinto there.
(27:48):
Yeah.
I think the best thing you can do as a fundmanager is live inside of the live inside of
these Excel sheets and models and think ofevery possible scenario, so that you learn and
teach yourself along the way.
And then also lean into other people in yournetwork to help ensure that you're modeling
(28:09):
appropriately.
And then when you do actually launch a fund,you'll have here we go.
When you actually launch a fund, you'll have aback office and fund administrator that'll
ensure that you get everything set up properly.
So is this showing just this particular tab?
(28:31):
I see I see the 10,000,000 tab and then I seethe other two to the right of it.
So you might be able to zoom out a little bit,but this is good because you can see
everything.
So can you see all of this?
Mhmm.
Yep.
I could see the 20 companies, 1.6 per quarter.
(28:52):
So this is looking at like a three year.
So this is a three year deployment cycle.
Yeah.
This is saying like you want if you're if youwanna do if you're gonna do a $20,000,000 fund,
this is just back of the napkin math.
Mhmm.
Ask yourself a lot of questions and put thesenotes down and say, is this the type of fund I
wanna run?
For me personally, the more I've dug into itand put these scenarios down, this is not
(29:17):
exactly this is not the type of fund that Iwould actually run.
I think the problem, I think, with this type ofa fund is you're dependent on other people
going in first, and you're too dependent on onthem being a signal as to whether or not you
wanna invest in the fund.
For me, I think the best the best fund managersout there aren't waiting for that.
(29:39):
Yeah.
The best fund managers out there are gonna sayare gonna meet a founder, and they're gonna
know right away, out of the gate if this makessense.
Mhmm.
If you listen to some of the the people thatare in the Midas list, they're gonna they'll
tell you that you can just tell right awayafter you've looked at thousands of pitch decks
(30:00):
and met with several hundred founders time andtime again.
Your gut will tell you whether or not this issomething you should really be exploring.
Mhmm.
What what you have to do is be confident in thefund model that you've built and the
relationships you've built with your LPs andhow you're gonna allocate that capital so that
when the when the iron is hot and thatopportunity is in front of you, you're able to
(30:23):
move on that fast.
Yeah.
That makes sense.
But the only way you can feel really confidentin doing that is spending a good amount of time
thinking about fund models and and wherethey're gonna lie.
And when you're building your fund model, youneed to build your fund model out in a way that
aligns with the target fund size that you'rebuilding.
(30:45):
When you do a first close and you startdeploying capital, it's gonna depend how much
capital you deploy into your initial firstinvestments will depend on the size of the
first close.
Are you doing a first close on 25% or 20% ofyour fund target, or are you doing a first
close when you have 50% of that fund targetcircled?
(31:10):
Depending on how you do that, it will it willdo two things.
One, it will trigger to all of the LPs you'vebeen speaking about that a close is happening
and they should be watching closely, especiallyif they're not interested in investing until
after the first close, which is very common.
The other thing it will do is it will signal toa very sophisticated LP, whether or not they
(31:33):
have time.
Because very sophisticated LPs are looking at anumber of fund managers, a number of
opportunities.
And if it's a if it's a thesis that theybelieve has legs and makes sense, they're gonna
put you at a a higher mark of, of interest ontheir on their calendar.
(31:55):
If you come in and you tell them you did afirst close at 50% of your target fund size,
that tells them that you're raising money,you're doing really well, and they're gonna
have to move fast if they wanna get anallocation into this fund.
Not everybody is fortunate enough to be able tobe in those shoes.
And if you're closing on 50%, then you'reprobably gonna be able to write larger first
(32:20):
checks into the first, you know, couple ofinvestments you make in quarter one, two,
three, and four.
But if you're closing on 20% of your 10,000,000or $5,000,000,000 fund one target, you're not
gonna have as much capital deployed because youyou don't have 20% of 5,000,000 to put into
(32:40):
companies because you have setup costs, youhave fund administration costs, you have
operational costs.
So it's gonna actually net out to a bit less.
And your first couple of checks won't be thethe top mark of your, say, it's a 25 k say,
it's a 50 k to 250 k check size.
(33:02):
Your first checks into those first three orfour companies are probably gonna be 50 to
75,000, something like that.
They're certainly not gonna be 250,000 a piecebecause you're not gonna have that amount of
capital to deploy into three differentcompanies.
As your fund target gets closer to beingachieved and you have different closes along
(33:23):
the line, you're gonna have more capital thatyou can deploy and you can start to write those
larger checks.
But you have to you have to know that whenyou're doing it.
Otherwise, you'll deplete all of your resourcesreally quick and you'll you'll be caught
between a rock and a hard place.
And if you're if the FUD model that you've beenpitching to your LPs is deployed in a way that
(33:45):
is not sound, it's really gonna hurt you andput you in a lot of trouble.
So you have to you really have to be aware ofyou have to have strong situational awareness
of what's going on around you, what type ofcapital you actually have to deploy, and how
you're gonna deploy it.
And you need to do it in a way that allows youto be successful and allows you to tell a a
(34:09):
strong story of growth and allocation as a goodfiduciary to your LPs.
That's helpful.
When you guys are thinking about follow ons,what are some thoughts that you're hearing
from, maybe your peers, you know, as far asjust, you know, how they're thinking about
(34:30):
their follow on strategy?
I think a lot of people when they think aboutfollow on strategy, they're they're really
trying to follow on into the into the winnersthat are that are meeting metrics that are
aligned with with industry industry growth.
It's night it in theory, it it would be reallynice to have at least 20% reserves to follow
(34:54):
into those into those winners.
Mhmm.
But you you might have a multitude of companiesthat are follow on worthy, but you don't have
enough capital to actually follow on to everyone of them.
So that's when you have to sit around and maybemeet with your with your LPAQ, or with your
investment team and make hard decisions andsay, well, they're both on a really strong
(35:16):
trajectory.
They're they're both meeting our our goals andour objectives, but maybe we don't have the
capital to, you know, follow on in each ofthem.
Which one are we gonna do?
Mhmm.
And and that's when you have to have to voteand come to consents consensus and pound on the
table if you really want it to happen and doit.
(35:36):
And if you if there's other opportunities thatmaybe the fund can't get into, that's when you
lean into your pro rata, and start, you know,going into those LPs and giving them
opportunities to take that additional pro rataso that they can get the alpha that they're
looking for if they want it.
So you're kind of you have to play both ends ofthe table in that in that situation.
(36:00):
Any learnings?
We're actually gonna be doing a session on fundaudits.
So just any learnings or best practices forobviously tax season is around the corner.
Most people are taking the extension.
So just best practices for, reporting,performance reporting, giving updates to LPs,
(36:21):
you know, making sure the k ones are, you know,delivered in a timely manner, communication to
LPs, you know, really essentially the backoffice stuff, the less sexy stuff.
Biased now as it relates to back office.
I used to say, well, you have a number ofoptions.
(36:46):
You do, you have a number of options, but alsohave to look at those options and tie them to
your fund size.
If you have a hundred million dollar fund size,you really need to find a a really strong tier
one back office that is, you know, doing backoffice for funds anywhere from 30,000,000 to a
(37:06):
billion in AUM.
Right?
Because if you're at a hundred million in AUM,there's gonna be a number of LPs, a number of
docs that have to go out, a lot of a lot offinancial modeling and work that has to be done
and you as an individual can't do it all onyourself.
You have to be able and willing to dedicate itYou have to be willing and able to move move
(37:33):
these functions out into the hands of otherpeople and let them let them go with it.
So you you've gotta be a good delegator oftasks.
And if you have a strong partner for fundadmin, you're in a much better position than if
you're trying to do it on your own.
We we have an investment at Roadster in DecileGroup, which, you know, we were a very early
(37:56):
investor in that group, and they they manageall of our back office.
And we do everything through them now.
And it's proven to be a really strong solution,especially for emerging managers and for for
some that are more established.
But there are a number of options that you haveto do that.
I would just say, do do your homework, do a lotof diligence.
(38:18):
And before you say yes on anything, make surethat you're talking to a fund manager that has
used it in the past, or is currently using it,and ask them how things work.
Don't just take the their word for it.
Because in some cases, there might be hiddencosts that you're just not aware of or don't
come up in your initial discussion before youbring on that particular fund administrator.
(38:42):
I haven't run into this problem personally.
I've just heard about it happening.
So I would just caution that just like beforeyou make an investment, you do your diligence
on the founder and the team and whether or nottheir tech is their own tech, whether or not
it's proprietary, if there's a moat.
You wanna do the same when looking at providersfor your back office solutions.
(39:04):
Yeah, I always say, you know, one of myfavorite sayings is when you pay less, you pay
more, right?
So if you get a cheap attorney or you get acheap doctor or you get a cheap fund admin in
the future, you may just pay more.
Right?
Because there's just, you know, those harderproblems are probably not solved with the
cheaper solution.
And we saw a lot of this with, Assure.
(39:26):
Right?
I mean, kind of,
yeah,
I mean, they had, they were the, they were theloss leader and a lot of people had to eat a
lot of costs, and actually, you know, lostmoney, because they were still on the hook to
pay for all those admin fees.
So I think that was a whole
disaster.
Well, the word there's a lot of disastersaround every around Azure.
(39:50):
But I tell you that what was crazy about it isjust like the timing of it.
Like, they and the way that they announced thechange and said, hey, it's on you.
It happened like on it was like Thanksgivingeve or Thanksgiving morning.
Like, everyone is sitting down with friends andfamily here in North America
Mhmm.
To this big feast and all of a sudden if you'rea fund manager and you're relying on them for
(40:12):
an SPV or for fund admin, you're screwed.
Yeah.
And like, what in the hell do I do?
It was it was a whole another ball of wax,like, right on top of the Silicon Valley Bank
fiasco.
And that one was not I don't believe wasresolved as well as the SVB fiasco was
(40:36):
resolved.
So, yeah, Joel, you're right.
A lot of people got caught holding the bag, andit put a lot of people into a very precarious
precarious position that they shouldn't havebeen in otherwise.
But that's part of the challenge you run intowhen when working with less established firms.
Yeah.
(40:56):
No.
I totally agree.
Well, look, we got about ten minutes left.
I think one idea that I've wanted to kindaswitch up with these conversations is just
maybe talking about top level news headlines.
I'm I'm just looking at the news here.
I don't see anything that really piques myinterest except Doge needs Doge says that it
needs to know the government's most sensitivedata, but can't say why.
(41:20):
So that's just literally, I just googledgoogled news.
You know?
So that's just one top top line thing that thatmaybe gets a reaction out of you.
But, you know, what are you kinda thinkingright now in terms of just the venture market
and just kinda trends that you're seeing forjust managers?
You know, you've got a lot of peers and thenyou're also kind of investing in computing and
(41:43):
deep tech.
So any top level insights that you wanna shareor opinions?
Yeah.
I think top level insights without gettingpolitical, I would say, you know, in good in
good times and in bad times, there's oneconstant.
And that constant is there are always a lot ofunknowns and there's always instability.
(42:06):
So I think in order to be successful, have toyou have to maintain a positive focus, and you
have to stay positive, and you have to you haveto look forward.
In venture, we're not looking we're not lookingat today.
We're meeting people who are inventing andcreating for tomorrow.
We're meeting them today, but they're creatingit for tomorrow.
(42:27):
And tomorrow is not a four year presidentialterm.
Tomorrow is, eight to ten years from today.
So I I think, regardless of any any marketdownturns, tariff talks, or anything that might
be going on in the current administration andlandscape we have here in North America or
(42:47):
anything in any international market whereveryou're at politically, just know that it's
normal.
These things happen all the time.
There's always been unrest for the history oftime.
So you just got to push forward and movethrough it.
In North America, I think venture capital inparticular as an asset class is is primed for
(43:12):
for growth.
We have, a number of VCs in the in the WhiteHouse right now.
The VP is an ex, an ex VC, and they wanna seeinnovation drive and move forward.
I think some of the challenges with the thetariffs or the tariff bluffs, they're gonna
(43:32):
exist.
They might not go away right away, but they'rethere.
And you just have to find a way to to lookthrough it and keep moving forward.
I do think we will see more liquidity in themarkets coming up soon.
That will be good for LPs.
I do think LPs really need to say tothemselves, do we want to invest in the herd?
(43:53):
Or should we be investing in more of theseemerging managers?
And I think the best time to invest in emergingmanagers is before they have a track record.
So if you want to get in with some of the bestopportunities in and emerging managers, you
want to invest in that fund one of theirs andget them off the ground and make sure that new
(44:15):
voices that are driving innovation forward andinvestment forward in these categories are are
getting the capital they need in order todeploy it efficiently and be there for the long
run to build up new firms and new funds.
And the these smaller emerging managers haveaccess and speed of execution that the larger
(44:36):
firms don't.
I think you're gonna see really strong returnscoming out of a lot of these emerging managers.
So don't look twice.
Look once and make a decision and invest inthese emerging managers.
One one news article that I'm seeing right nowis, I don't know if you remember Dollar Tree,
but Dollar Tree is winning over high incomeshoppers, because of the tariffs and the price
(45:01):
hike.
So that's kind of interesting.
You know, when you think about, strengtheningbrands like Walmart, Dollar Tree, Payless,
right, those brands are, you know, possiblygonna attract, more people just because of the
the price hikes.
So I don't what your reaction is to that, but,there's also studies on just, you know, how
(45:22):
brands get branded, as a premium brand versusversus like a budget brand.
Right?
So the the color red normally means you're youknow, it's kind of a lower priced item.
Obviously, red all also means, like, emergency,but greens or blues are usually hinted to be
kind of, like, tied to a more premium brand.
(45:42):
But I don't know what your reaction is to that.
Just kind of some of these more lowerprominent, you know, reputed brands that are
known for discount or prices now now getting alittle more domination as a result of just kind
of the macro
trends?
I think it with macro trends, a lot of theseplayers will definitely see more in influxes of
(46:04):
spend.
Mhmm.
Consumer confidence is is down.
It's not as high as it once was.
I finally I was finally able to buy eggs atCostco two days ago.
I haven't been able to buy eggs in the last,I'd say six weeks at my Costco.
But
What what do they cost?
You're you're in Oregon.
Right?
Yeah.
(46:24):
I'm in Oregon.
I think it was a I think it's a pack of 20 Ithink it's two dozen.
So it's like 24.
Mhmm.
It was like 8 I wanna say it was $8.30.
Yeah.
That's like the price of the organic, you know,you you know, like, over here in New York.
I mean, the and I haven't checked the pricerecently because we buy stuff on Amazon.
(46:44):
But, yeah, I mean, the the more higher end youknow, this is in Manhattan.
Right?
The more higher end, you know, organ you know,they say farm raised, who knows?
But that's, like, just one dozen.
You know, they're usually around eight.
So I wouldn't be surprised if they're, like, 15to $20 now just for, a regular pack.
And this is for the standard pack of eggs?
Like, just the regular?
Yeah, this is like a like double double a extralarge egg.
(47:10):
Yeah.
Yeah.
So it used to be like $2 back in the day.
Yeah.
Was very 99¢.
For a dozen.
Yeah.
Mhmm.
You're dating yourself up.
For an 80 year old guy, you're really datingyourself.
I know.
But, I think, you know, we'll we'll see.
The things it's just that we're living in a newworld.
There's Yeah.
There's new things going on.
(47:31):
There's a lot of geo geopolitical unrest andchallenges in the world, but those things are
constant, and we just have to adjust to themand move forward with them.
But I I think venture as an asset class isgreat.
I believe that venture is countercyclical topublic markets.
Mhmm.
I also believe that, great companies arefounded during downturns.
(47:52):
Look at Google in particular.
I mean, look at other companies in around thattime right after 09/11 that were founded, and
others.
There's really good opportunity, you know, forgrowth right now.
And there's there are huge scientificbreakthroughs that are occurring in real time
right in front of us around everything from AIto to quantum and different datasets and just
(48:16):
the way people engage with one another insocial media, and the way consumer brands
connect, like you were speaking to earlier.
Right?
You know, b to c connections and brandidentity, brand values, associated value.
You know, you were talking about red versusgreen.
I think it's wild that Dollar Tree is green,and the the term dollar 99¢ or 5 and below,
(48:42):
like, that does not signal high value to me,but it's green.
TJ Maxx HomeGoods, they're red, but they're abit of a higher higher quality product.
So I do I think consumers are gonna find dealswhen they can find them.
I think as humans, it's it's in our nature towant to barter.
(49:04):
And in American culture, it's not as natural ofan instinct, unless you're into, you know,
going to garage sales and bartering.
But, it's become much more commonplace to wannafind a deal, especially when when the pennies
are getting pinched, costs are going up,tariffs are up, and things of that nature.
So I don't believe tariffs are going away willgo away anytime soon.
(49:28):
I don't think that costs will come downsignificantly anytime soon.
I think we're just we're kind of in it rightnow, and we're just gonna have to weather the
storm and look for ways to to outsmart it asfamilies and individuals and consumers.
And, you know, put your best foot forward and,you know, be positive because if you're if
(49:50):
you're not positive, it's gonna be really easyto kinda lose your breath.
You don't wanna do that.
Yeah.
Well, this is this is actually a really funexercise.
I'm literally just going through headlineswhile I'm having this this conversation.
But I got one more sound button and I knowwe're literally right at time, but this just
came out a couple hours ago.
Amazon is testing shopping health assistance,shopping and health agent assistance as it
(50:16):
pushes deeper into generative AI.
So I just think a lot of people are gonna belooking at agents as an opportunity.
My only is there was a lot of frothiness withAI copilots.
In the venture space, a lot of those companiesgot decimated.
So I feel like the agent space may be kind of asimilar trend.
And I think a lot of the bigger corporations,Fortune 500 incumbents are already kind of
(50:40):
building that natively within their systems.
If you think about Zoom and all these othertools like Canva, they already have kind of
like these little copilots and areas where youcan type in a prompt.
So you know, maybe just one sound bite on AI asyou guys are, you know, actively looking at,
you know, AI and computing deals.
Then I know I know we get a run.
(51:01):
I for for me, when I'm I'm excited about aboutagents and what they can do.
I think you're right.
I think the larger corporations are buildingit, natively into their into their product
offering.
So when you're looking at these type of,agents, you wanna I think the ones that are
gonna perform and do well are those that areincredibly niche, and really target a specific
(51:25):
niche industry or or opportunity, and reallydrill in really, really deep and do it better
than anybody else and have a lot of proprietarydatasets and customers behind them that are,
enabling them to be the best of what they do.
So that's where you really wanna kinda divedeep into into the agent space.
(51:47):
We're reviewing a company right now that'sdoing exactly that.
And the reason we're looking at them is becauseof how niche focused they are as well as, you
know, the strength of the team.
The team comes from a very strong industrialmanufacturer that's a that's very large on a
global scale.
So they have existing relationships within thatthat particular business and, strong knowledge
(52:12):
and know how of how that industry they'reapplying their agent to works.
So we think they have a high probability of ofsuccess and growth with customer acquisition
and a good GTM strategy, and they have a lot ofproprietary tech under the hood.
That's really important.
There needs to be proprietary tech.
We don't want them using off the shelfsolutions to get going today and then tell us
(52:35):
they're gonna build something proprietarytomorrow.
Like, if they say that, it's an automatic,we're out.
We want you to come into the table withsomething fresh and new right out of the gate.
Sure.
Well, hey, Ryan, this is amazing.
Good catching up.
Thanks for the lecture on how to launch a fund,and thanks for doing a news, a newscast with
me, talking about trends.
(52:57):
I get we gotta do more of this with, some othersome other people in the private equity space.
Alright.
Thank you, Joel.
I really appreciate it.
It's great to spend some time with you and youraudience today.
Likewise.
Thanks.
Take care.
Have a good one, everybody.
Bye.
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