Tracy Chadwell: 1843 Ventures

In this episode, Joel Palathinkal is joined by Tracy Chadwell of 1843 Ventures to explore the intersection of autonomous transportation and venture capital. Tracy shares her journey from law to finance, highlighting the significance of 1843 and Ada Lovelace. They discuss cross-border investments in Asia and the role of angel investing and venture partners. The conversation delves into aging tech, examining challenges, opportunities, and innovations in elderly care. Tracy emphasizes impact investing in mobility solutions and explores longevity finance strategies. They discuss venture capital fund strategy, the importance of relationships, and fund-raising tactics. The episode concludes with insights on SilverTech's market potential and Tracy's mentor advice.

Episode Transcript

(00:00):
So that right now it's just running oncircuits.

(00:02):
Okay.
So they're close speed, which is one of thereasons that they're able to be out there
functioning And, they they have a certain loopthat they do.
And you just it's like kinda like a bus.
You can check.
Yeah, kind of like a trolley kind of goesaround it, and then it has stops that they can
stop on.
Welcome to The Investor, a podcast where I,Joel Palafinkel, your host, dives deep into the

(00:25):
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.
That's actually a great thing for me to ask iswho the audience is so I can make sure I say

(00:51):
things that are interesting to
them, right?
I think.
It's not just interesting to me.
Yeah, absolutely.
Yeah.
Well, I'll try to keep this interactive sopeople can just chime in.
The people that I see here are people who areaspiring VCs.
So I think that's definitely a hot topic.
And then some of the people actually that I seehere have also shown an interest in starting

(01:14):
their own fund.
So I think some things that we can maybe tee upis, how did you transition into VC?
I think you had a legal background first,right?
Very first, yeah.
Yeah.
So that was your first background.
So maybe that's something that we can tee up,but let me formally introduce you.
We got Tracy Chadwell here with eighteen fortythree Ventures, right?

(01:36):
Yes, exactly.
And I was afraid for one second because I wasafraid that I messed up the number.
Oh,
know, does.
No worries.
So I had to like flip back and I actually didthat the other day.
Introduced somebody and it was like theopposite sequence of words.
But that's a good tee up.

(01:57):
So Tracy Chadwell, eighteen forty threeCapital, maybe we can start with just a brief
synopsis of yourself, but also what doeseighteen forty three stand for?
How did you guys come up with that branding andjust kind of the inception of the fun?
Yeah, and absolutely.
And you know, it's such a blessing and a curse,this name eighteen forty three.

(02:19):
One of the reasons we chose it is it'simpossible to trademark a name.
And you really need to trademark not so muchthat just so you can go after other people, but
so that someone doesn't come after you and giveyou a cease and desist letter that you have to
fight after you've invested a lot, you know, inbranding the name.
So we really worked hard to find out somethingthat we could trademark and every, anything

(02:42):
capital is already taken.
So we
said, you know, I think we have to
find a really meaningful number here andeighteen forty and also to numbers get you to
the top of the list.
So that's
kind interesting.
You mean for SEO?
So, so if, you know, for deal flow, if you'reat the list of all the woman funds or all the
VC funds or anything, is eighteen forty threeis going to be, if not the top at the near, you

(03:06):
know, near the top.
That's I did not know that.
So with fund databases, sometimes the numbersjust show up first.
Yes.
That's great.
Exactly.
So, so that's been really helpful and reallyside benefit of it.
But you're right that the numbers do getscrambled and people will sometimes say, oh,
Tracy, she's with eighteen twenty eightcapital.
I'm like, that's fine.

(03:28):
We'll figure it out.
But 1843 was the year that Ada Lovelace wrotethe first computer program.
And Ada is really interesting besides being awoman in the nineteenth century that was
interested in computing, she was also LordByron's only legitimate daughter.
So she had this sensibility of the beauty ofpoetry of numbers, then also the analytical

(03:51):
side.
And I don't know, maybe some people on the callare familiar with Charles Babbage, who started
the analytical engine, which is credited tobeing the forerunner to the computer.
She programmed that with punch cards that shehad seen Charles Jacquard use punch cards to
program looms to make his tapestries.
And she said, I think we can transfer this tothe analytical end.

(04:12):
Kind of exciting.
So at least to me.
Yeah, no, it's really interesting.
Yeah, I also appreciate ENIAC Ventures, right?
Because they're named after the ENIAC computersor any, I'm a little bit of a nerd.
Whenever anybody's kind of named after like amathematical algorithm or anything that's tied
to computing, hey, you had me at that word.

(04:33):
Exactly.
Well, I think it kind of suits how we look atcompanies too, because we love the analytical
side, but we also love the story.
So it's a nice combination.
And that's really what venture is, right?
It's storytelling.
Mean, way that you get into great deal flow,way that VC, I mean, the way that startups kind
of captivate you is really the story.
And then even as an emerging manager, as you'retrying to help LPs get to know who you are,

(04:57):
it's really the story.
Absolutely.
True.
Well, let's start from the beginning.
Maybe let's talk about your career Very, veryearly, you were in the And legal I've
interviewed so many VCs.
So I've seen so many of them start from a legalbackground.
And I can already see some of the superpowersthat kind of feed into your current role as a

(05:18):
venture fund.
But maybe talk about where you grew up, whereyou went to school, and then just your legal
career and how you pivoted into VC and why youeven pivoted.
Right.
I grew up in a small town in Illinois calledRockford, Illinois.
And my dad was an estates and trust lawyer.
And he used to always say, Tracy, the only surethings in life are death and taxes.

(05:39):
And so he really encouraged me from a young ageto go to law school.
I really did enjoy it, but I always say if Ihave had any regrets in life, it would have
been that instead of doing just a JD, I wouldhave done a JD MBA, which only would have taken
another year.
And would have been just a terrific backgroundbecause I really have always gravitated to the

(05:59):
finance side of things from my very first job,which I started out working at a merchant
banking firm.
Literally from day one, I said to them, this isgreat.
I'm happy to work on all the documents for youfor all the deals.
But what I really enjoy is the business sideand can I learn financial modeling?
And so they sent me to the University ofChicago for a short course business course on

(06:22):
finance.
I really, really got excited by that side andnever looked back.
Appreciate the education on the legal side, itreally helps for me reading documents.
And I think that a lot of, especially newerfunds, don't focus as much on the documents and
don't realize until it's too late, what they door don't have in their documents.

(06:45):
So, I mean, we look at everything holistically,right?
Is it a great market opportunity?
Is this a great team?
Is this right timing for this?
But then also too, how's the deal, right?
Is it the valuation crazy, but then also too,do we get preferences?
Are we getting locked out of the preferences?
That you don't realize at the end of the daycan make the difference between just getting
your money back or getting a multiple on yourAnd

(07:07):
I think that's a superpower that you would havethat I think others may not have just kind of
having a little bit of that legal background.
I mean, can kind of really read through thelines and maybe understand that terminology
where somebody else would probably have to hirea lawyer and get some extra expertise.
Well, do also have outside counsel because asgood as I am, I know that things change all the

(07:28):
time and I'd love to know what current termsare.
So it's nice to have that viewpoint of someonewho sees it all day long.
And I highly recommend that you hire outsidecounsel to review your documents, even if
you're not the lead.
The other thing is too, is that even it's, itis a superpower, but it's not because sometimes
it's also a blessing and a curse because maybeignorance is bliss and some of this stuff,

(07:53):
right?
A lot of times, sometimes I'll know going intoa deal, I'll go, okay, I know we're doing this
and I know that we don't have provider rights,you know, and that is because we're small, I
get really frustrated knowing that I don't havethem and it has come back to bite us.
Sure.
No, that's a good point.
And so let's keep going.
So, you know, you kind of studied thesebusiness classes, started kind of building more

(08:18):
of that skill set understanding finance and didsome And financial then what happened after
that?
Well, when I was working for this merchantbanking firm in Chicago, one of the things that
they did do is that they raised a fund to docross border work between The United States and
China.
So this was a I private equity had worked inJapan.

(08:39):
I'd worked for a law firm in Tokyo, so I spokeJapanese.
So that's why I was hired in the firm in thefirst place.
And that was my first introduction to the fundstructure.
And then when I worked at Robertson Stephens, Ihad a really nice introduction to both venture
capital and to technology.
And then I became a partner of a billion dollartelecom fund called Baker Capital.

(09:01):
That was worth capital.
So, I've seen this.
Yeah, that's great experience.
And what were some of the initial things thatyou've observed as far as just the dynamics
with China, Japan versus US as far as howbusiness is done, how funds are ran?
And how have you seen that evolve over the lastfew years as far as just cross border
transactions and how things are handled?

(09:23):
This has been a thirty year perspective for me,which is nothing in terms of Asian history.
But in that short time, I have seen some sortof love hate, love hate, and it's a very hot
and cold relationship that can kind of turn ona dime.

(09:44):
So, know, look, we have some great companiesthat are doing some really great things in
Japan right now.
And it's exciting.
But we, as a fund to date have only invested incompanies that are based in The United States.
Sure.
And then
They want to take a lot of that extra risk,right?
It's hard enough Absolutely.
To do

(10:04):
Yeah.
We co invest with a couple of funds in Japanand also in Far East Asia, China, Mainland
China and Hong Kong.
And there's been a big initiative for impactand deep tech.
That's kind of what I've been seeing with justspecifically the ones that we co invest with.
There's also a pretty big hot FinTechecosystem, especially like in Singapore and

(10:25):
Hong Kong.
Then they got some of those big accelerators aswell.
Then on the private equity side, how do theylike to think about portfolio construction?
Do they think about real estate?
Are they also thinking about public marketsbonds?
Or is it mainly just straight up PE deals wherethey're trying to take up 80% of the company

(10:46):
with debt?
Right.
I think it's everything just like we do ourportfolio construction as balanced as possible.
The only thing that I have seen in the there'stwo things.
The different mindset is that it's not shortterm thinking.
We think on a quarterly basis, right?
You know, where's the quarterly reporting?
How are we doing?

(11:07):
They think on a hundred year basis.
So when they're building positions insomething, it's not with short term thinking.
So that's number one.
And then number two is there's, there is acertain amount of being risk averse so that you
see them coming in sometimes a little too lateon things like in Japan, that people were

(11:29):
coming investing in real estate in The UnitedStates when it was too late, right?
And it
led to a lot of trouble in their economy thatstill persists today.
Yeah, no, that makes sense.
Yeah, because it's an interesting portfolioconstruction, right?
Because as a VC, you're thinking about how manydeals you're gonna be investing in every year
for seven to ten years.
And then here you go, you got like a Japaneseportfolio that's long term thinking.

(11:51):
It's like, how do you break that out into 30What's the IRR that you're expecting in 30 So
that could probably be kind of tricky and kindof a unique culture that you got to integrate
yourself with, right?
It's a very long game of chess.
Yeah, exactly.
So did the private equity game for some time,worked at some massive funds.
Yep.

(12:11):
And then is that kind of when you stepped intoventure?
So I took some time off.
I had two sons and I decided that I wanted toraise them and did everything that you should
try to do as a mom, work at the school, dofundraisers.
I raised money for an art museum that we had intown and played a little bit of tennis, but,

(12:38):
really lost my mind.
And so the way that I got back into work again,without having to sacrifice time with my family
was through, doing angel investing.
And, at the time, I was frustrated by that namebecause I thought I'm not an, I'm a real
investor.
I'm not just someone dabbling here.
But that created a portfolio.

(13:00):
And I was lucky enough, actually, just thisweek, it was announced that one of my portfolio
companies that I invested in personally had abillion dollar exit.
That's
beautiful.
Congratulations.
Thank you.
It's nice to be in the Unicorn Club finally.
I've had a lot of successes, but this is thefirst one, you know, I've had companies that
have exited with a greater multiples.

(13:21):
But this is the one that, you know, gets allthe attention as a unicorn,
so
it's great.
And then on the back of that portfolio that Iput together, I went and raised my own fund.
It was really great timing when we're gettingmore attention.
And for the first time, we actually could raisemoney.
So it was really exciting.
And I decided to throw my hat in the ring andit was successful.

(13:43):
Yeah, and you also selected a co founder aswell, right?
Didn't you have a partner that you collaboratedwith or were you a solo GP in the beginning?
So I started the fund by myself.
We have, I have venture partners,
and I
have someone who was a partner who's no longerwith the firm.
Sure.
Yeah, that's an interesting model too.

(14:05):
Because I think, you the whole venture partnermodel that helps just scale completely
globally, right?
If you don't have the reach of East Asia orEurope, being in New York or being in Montana,
having people support you as a community basedVC, I think is helpful.
And I think you've been really successful inbuilding that.

(14:26):
And then the community also would just dealflow sharing, Kind of having more of a
collaborative approach versus the sharp elbowapproach.
I mean, people have told me in New York,there's sharp elbows, but overall, I haven't
had too many issues.
So I don't know what you feel about the WestCoast versus New York or just in Canada or
internationally as far as just kind ofcollaborating on deal flow.

(14:48):
Listen, we are in a highly competitive businessand there are a lot of dollars at stake when
you're in a situation like that, yeah, sure.
Of course, you're going to see some sharpelbows, you know, whether getting cut out of
follow on funding and a deal or other things,it happens and you have to Again, one of the
good reasons it's good to pay attention to thedocuments, right?

(15:10):
Because everything will always come back to thedocuments.
I've had situations where I've raised my handto participate in deals and been cut out.
And it's really frustrating, but it's one ofthe reasons that we decided to have a thesis
around aging as well.
Because then when you develop an expertise andyou develop a real network in a space and
you're seeing everything, you become much morevalue add to companies.

(15:31):
And now that I've actually been able to slidein with a small check ahead of other people
because they want my industry knowledge, whichis great.
Yeah, I think that's a great, you know, andwhat you're referring to is getting access
directly with the founder due to yourrelationship and then kind of your strategic

(15:53):
credibility versus kind of the other VCs thatmight just be able to write a bigger check, but
they just aren't connected in the industry likeyou are, especially with like aging tech,
right?
True.
Yeah, absolutely.
And luckily for me, this space has just evolvedrecently.
We just recently started seeing companies thatweren't just all phone based or gadget based.

(16:17):
And so with the advent of technology into thespace, I've been able to get to know most of
the players participate and develop some nicerelationships.
So let's unpack aging tech for a second becausethere's mobility, there's longevity, there's
elderly care.
Look, I mean, I'll be honest, I didn'tfortunately have to deal with that yet.

(16:40):
But I have family members that it's justreally, really difficult on everybody, not even
just a person that has to deal with aging care,but you know, how can that be innovated on?
I mean, again, going back to the terms, whoknows like what coverage they have?
You know, you look at your insurance plan,like, do you really know, you know, when you

(17:01):
get older, like what treatment you're gonnaget?
I think you have a good idea and I think you'remore worried about it as you get closer to that
age.
But I'll be honest, I don't really know, whatmy parents, what the options are right now.
I'd have to start thinking about it much morecarefully, but do you feel that there's
innovation as far as just kind of betterknowledge on what your plan is?

(17:23):
Like when you get older and how do you takecare of your parents?
And is that kind of a subset of somethingyou're looking at as well?
I guess just kind of elderly care and makingsure that there's the right treatment and just
long term care for those people as well.
There's big insurance companies that aregetting innovated by FinTechs, I don't know if

(17:44):
that really covers everything, right?
I think there's some better billing platforms.
There's millennials that can buy life insurancethrough an app.
But again, you know, if aunt or your parentsare starting to get sick, it's like, how do you
get the right education as far as like what thebest treatment should be?
And I feel like for me, it's still kind ofscary.

(18:05):
Yep, no, absolutely.
And I think what you're talking about there, wetalked about three different things, which is
caregiving, innovative insurance products forwhen you do need care, and then also retirement
planning and saving.
And all of that stuff is really intimidating.
You're absolutely right.
But it's all incredibly necessary.
I feel like you just teed me up because weinvested in probably the greatest, not

(18:30):
probably, definitely the greatest company inthe space.
And it's called Carry Loop.
It's a company out of Dallas, and they aredoing a fantastic job providing for employers
the ability for their employees to offload allthese responsibilities.
Sure.
So, if you are, for an example, Procter andGamble is one of their clients.

(18:52):
If you work for Procter and Gamble, you areable to access carry loop and use their care
coaches to basically do everything for you.
If you have somebody that needs someextraordinary care, whether it's a child that
you had that was recently diagnosed with adisability, or whether it's your mom that has
Alzheimer's and all of a sudden you'reconfronted with this and you're trying to get

(19:12):
your head around, you know, getting your workdone and you've got a lot of distractions
otherwise.
And suddenly you have to decide.
Does mom, can mom still live at home?
If she does, are there sensors that we can putin?
If she doesn't, should we move her to memorycare?
And how expensive is that?
And how do we navigate Medicare and Medicaid?
And how do we get her transportation to andfrom the doctor?
And this is care coaches map out and help witheverything.

(19:35):
So it really keeps people productive at theirjob, which from a business standpoint, when we
were analyzing the investment possibility, welooked at there's such clear ROI here.
I mean, there's some people that have quittheir jobs to do this.
I mean, they've had to make this actionable.
Joel, there's 3,000,000 women that just quitjobs because of caregiving responsibilities.

(19:56):
I mean, it's an absolute epidemic out there.
And the more that we can help people all aroundthe better, I think.
Do you think also it's because people just,it's a sensitive topic to even talk about or
even face, right?
I mean, I think part of it is a logisticalpart, but it's just nobody wants to talk about
elderly care and how to take care of theirparents and then even just their finances.
Right?

(20:16):
So I think that's kind of a very
This is not a sexy space like drones.
So that's, I guess the good news and bad news,right?
Is that there's a lot of opportunity for me.
And I've been able to take advantage of thatbecause there aren't big, huge funds saying
this is the space we're going to be in.
Sure.
And it's also great when it's a win win, If youcan invest in companies that can help the world

(20:40):
also provide social impact, because normallywhen and I have talked about this, When you
think about impact investing, that's reallyhigh in the private equity space, but those
deals don't really make any money.
I mean, you get a great ESG score, but you'renot getting the venture type of returns.
So we can do both like you're doing
Beatty with some these Counter definitely did.
Beatty was both great for the world because itwas non toxic products.

(21:01):
But you're right that a lot of these, I'mconfronted very often too, with a lot of things
that, okay, this particular company combatsloneliness for the aging, which is fabulous and
something that really needs to happen.
And ironically, actually, there is a code nowin insurance for loneliness, they have the
insurance companies have quantified it.

(21:24):
But a lot of times you're right that there arebetter economic opportunities other than
solving for that problem.
Yeah.
And then I think another topic and theme andthesis that you guys focus on also, I think you
guys made some investments in this is themobility space.
Oh, yes.
So maybe you can unpack the opportunities withmobility beyond just picking your parents up,

(21:46):
right?
Where's the bigger future?
Is it autonomous driving that automaticallypicks them up?
I mean, how deep and far can we go maybe in thenext decade mobility for aging tech?
Yeah, absolutely.
When we looked at what the biggest problemswere, and we spent a lot of time talking to
people who run senior living facilities and thelike and analyzing the market before we even

(22:07):
made any investments in the space.
The large markets are mobility, caregiving,fall detection.
These spaces are huge.
And when you look at that, then coupled withwhat Joe Coughlin's doing at the MIT AgeLab, he
went right in and tried to tackle mobilityfirst too, because it's the largest and most

(22:29):
compelling problem.
So we took two investments in the space, onewhich is in a ride sharing company called hop
skip drive that's located in Los Angeles.
And they drive both for children and for theelderly.
And something that's kind of interesting isthat 90% of the drivers are women.
Now this is great from both the perspective ofthe, maybe the person might feel a little more

(22:50):
secure having a woman driver, then also downthe road, when we're talking about an exit, one
of the difficulties that Uber and Lyft have hadis acquiring women drivers, less than 20% of
their drivers are women.
And so it would be nice for them to be able toacquire all these female drivers because it's
50% of the population that they've missing,which is terrific.

(23:10):
So then the other one is a company called MayMobility, which is incredibly exciting.
And this is one of the ones that actually justlaunched in Hiroshima, Japan.
Being here in The United States in Indianapolisand Providence and Ann Arbor, Michigan,
actually started by Ed Olson, was a professorat the University of Michigan.
So it's really exciting to be in Ann Arbor too,But this company is an autonomous shuttle that

(23:35):
also has wheelchair accessibility, which wasreally important to me when we were analyzing
the deal.
But also too, it's one of the only autonomousdriving companies that actually has revenue.
Have paying clients in these cities.
And the hop skip drive offers you theopportunity to go point to point in a more
expensive manner with a private driver.
But the autonomous shuttles allow people tohave mobility within city centers when they

(24:01):
can't or maybe shouldn't be driving anymore.
Sure.
And they're probably generating revenue.
I think the opportunity is more of anenterprise play, I'm assuming, right?
They could probably provide transportation fora whole community of elderly people to kind of
get them from one place to another, take themto the mall or something like that.
Is that kind of the
You mean the main mobility or the hop skipdrive?

(24:22):
Because right now main mobility is just
running on circuits.
Okay, they're
close speed, which is one of the reasons thatthey're able to be out there functioning
safely.
And they they have a certain loop that they do.
You just it's like kind of like a bus you cancheck
kind of like a trolley kind of goes around itand then it has stops that they can stop on.
Right?
Yeah, that's great.

(24:43):
And then hop, skip, drive, it's more of a, isit kind of like a consumer marketplace as well?
Or do they also do like enterprise stuff forschools as well?
So they do, it's actually I hopped on boardwhen they flip to an enterprise model because
direct to consumer, you know, I mean, I thinkthat everybody today listening knows that the
direct to consumer customer acquisition costsare crazy.

(25:06):
Sure.
It doesn't matter what you're selling.
If you're trying to buy like the game of, youknow, dollar shave club, just buying all these
Facebook ads and becoming successful is over.
And so you really have to be creative andinnovative about how you acquire customers.
And so hop, skip, drive had trouble initially.
They had traction, but it was very, veryexpensive to acquire these clients

(25:28):
individually.
So they went headfirst into an enterprise gamewith schools.
So they are driving at risk kids and fosterchildren back and forth to school.
And they have these, that sort of baseline nowfor the company where they have a great revenue
source and then guarantees for their drivers.
So the drivers know that they're going to beworking.
And so this is how they've been able to scaleand have higher margins.

(25:50):
Sure.
Yeah.
It's repeatable too, if they can prove thatthey're repeatably just solving the problem
that the schools normally have to deal with.
I mean, they essentially are replacing theschool bus, I guess, right?
Yep.
And COVID obviously was tough for the company.
We have absolutely recovered and more than onehundred percent of their clients have renewed,

(26:11):
which is great.
A large, large number of them have renewed at ahigher value, which is fine.
What's your thesis?
So that's interesting.
So that was really helpful with mobility.
What's your thesis on people just living longerand their bank accounts lasting longer?
So some people have called that longevityfinance, right?
You're not gone at the age of 85 anymore.

(26:32):
People have like another fifteen years toaccumulate wealth, right?
So have you guys looked at the FinTech spacewhen it comes to longevity?
What do you see that's innovative on that side?
And where is that heading?
And that's one of the reasons we made theinvestment in FinAI, which is a natural
language processing company focusing on chatbottechnology, but it's also the underlying, all

(26:55):
the underlying analytics for using voicebecause I think eventually we're going to be as
demographic is aging, we're going to need to bedoing our banking by voice.
And this is one of the few companies that whichis really great.
And FinTech is definitely an area that we arevery interested in.
And we have some investments in, in terms ofretirement planning.

(27:16):
You know, I think in terms of just investingthe thing well, and I think I don't know if
everybody knows here, but people over 50control 83% of the wealth in the country.
So, it's a ridiculous amount.
It's almost all of it.
That is still in the hands of sort of eitherwealth managers or places like Schwab, which
I'm a big fan of, but they're not in thebetterments.

(27:39):
And they're not in a lot of some of these otherdigital banks.
So it's been a conundrum, and it's somethingthat we are spending a lot of time on and
trying to figure out maybe on the retirementplanning, although we have seen that it's been
really difficult to get traction and peoplespent a ton of money trying to solve this.

(27:59):
And
I call it spinach.
It's something that's absolutely necessary foryou, you really need it, you know, you need it,
but you're absolutely completely unwilling toupload all of your documents.
Yeah.
It's just not a high enough priority for peopleright now.
Another huge thing is decumulation, right?
So as you're getting older, you want to try totake money out, right?
Because you may not be earning.

(28:20):
So if you take the wrong amount of money, youjust get penalized on the tax strategy.
So I haven't seen too many companies reallytackle decumulation.
How do you pull out your money the most taxefficiently?
How do you donate to charities, kind of allthat stuff?
So I wonder if you've seen anything on thatfront, because that also kind of is the

(28:41):
compelling.
Not yet, but I think that we're definitelymoving towards that space.
I had a personal investment in a company calledSilver Nest, and this was kind of interesting
because it gave people the ability to have aroommate.
So they have their largest asset, as theirhouse.
And this gives them a way to monetize it whenthey no longer had income.
And it was really interesting because the largeinvestor who eventually became an acquirer was

(29:06):
a reverse mortgage company.
Interesting.
So, you know, people weren't, maybe they weredefaulting on the reverse mortgage because they
had taken money out and they said, okay, you'vedone this.
Guess what?
We have a good way for you to make some moniesto pay us here, take a roommate.
A great way to solve loneliness too.
So it was a good company all around.

(29:26):
And the population for this is people that are,may have lost their partner, I guess they're
later in their age and they're kind of livingon their own.
Absolutely.
So they want a companion.
Yeah.
I remember my wife and I, we would actually goto like an Airbnb and we would be at these, we
would pick a house that had some empty nestersand it felt like we were visiting our parents.

(29:47):
They would get so excited when we wake up.
So I feel like having some type of sense ofpurpose and having the ability to host guests
or even just have a roommate, I think it reallyboosts the morale for the people that are kind
of dealing with loneliness at that age.
And, you know, that's great.

(30:08):
So you guys are on you guys, we were discussingthis earlier, too.
So you're thinking about fun too, and kind ofon the on the road kind of, you know, working
on that.
Has your Has your thesis evolved from thecurrent thesis?
Have you expanded it?
Are you really staying laser focused on thesame focus of silver?
So it's silver tech and then any other themesthat you guys are really excited about as well?

(30:32):
So we are a generalist fund.
I don't believe in strategy taxes, but I dobelieve in investment thesis.
And those can change.
Those can change based on where the investmentappetite is.
Because also too, like I always say, anybodycan make an investment.
That's pretty darn easy.
Although it's hard to get into the good ones.

(30:54):
But it's really getting out, right?
Getting out of true art.
And so we keep tabs, we talk to a lot ofbankers, lot of strategic acquirers to keep
tabs on their appetite and who's buying what,where at what value, right?
Because that also can dictate to us where wecan invest in a company.

(31:15):
What's the right pricing, because where are wegoing to exit?
And I remember when we started the company, themedian exit price for venture backed deals was
$56,000,000 And so, you're seeing all thesedeals done with $80,000,000 or $100,000,000
valuation.
You better be darn sure that company is goingto exit for over 2,000,000,000 because
otherwise you're not going to be able to get agreat return for your investors.

(31:36):
And
so that was the strategy between behind seriesA series B also too, because 90% of seed stage
deals fail.
So even though we are small and are not thelead on seed stage deals, what we're trying to
achieve is the best above market returns wecan.
And so we have that in series A and series B,because it still allows you an early exit to do

(31:59):
well.
But it also gives you the runway, but the lowerrisk profile.
Yeah.
Have you guys entertained, you know, any of thesecondary opportunities?
And, do you see some of the emerging funds kindof get out quicker with the secondaries?
Because some of these founders, they want tobuy a house, some of the funds that were in

(32:20):
earlier, they want to cash out and provideliquidity.
So, are some secondary opportunities.
So, are you seeing some funds get out quickerleveraging that mechanism?
And then also, do you see that as an entrypoint as well using secondaries to get into
some really hot deals?
Look, I've personally gotten into a couple ofsecondaries that I've been excited about, but

(32:40):
we'd love to hear your thoughts on exit andentry with secondaries.
No, absolutely.
I think it is a great way to exit and wehaven't had that happen in our portfolio yet,
but it very well could.
In terms of as an entry point, actually, it'sironic that you bring this up because I'm

(33:01):
looking at two right now.
So my philosophy is it's not the calls youtake, it's the calls you make.
So, these are not opportunities that werebrought to us, but these were companies that I
really, really like and have said to them, we'dbe willing to do a secondary in your company
because we want to have a placeholder here.
I totally agree with that.

(33:22):
That's the best feeling for me, to be honest,Tracy.
So, I feel lucky that I was able to even getinto the deal, like for me, feels magical,
because I'm like, wow, you know, this is areally, really oversubscribed deal.
But if you feel that you're able to kind ofbuild that relationship and that trust with the
founder
and
add value in some way, and then you're in,you're like, wow, you know, like I and that's

(33:42):
that exactly kind of relates to the quote thatyou mentioned earlier.
It's like, you took that deal, you know, youtried to try to get access and you try to build
because a lot of times, right, it's the foundertrying to get you in.
And even if you're an emerging manager, a lotof times your check is the smallest on the cap
table, you know, so from an optics standpoint,it always doesn't look the greatest, right?

(34:05):
If you got the smallest check, but if you'reable to build that relationship and build
trust, then they bring you in.
It's like, wow, that's amazing that they let usin, you know?
So.
I know, but I think it's so competitive now.
Have so many new friends started.
I think you really have to build a reputationfor yourself.
I agree.
You know, there's something.
You and I talked about Twitter VC.

(34:25):
Let's talk about edge.
What do you think can help it?
Because these days just being FinTech, I mean,you and I are both generalist funds.
But the emerging manager program that I have, Ihave like, people were juggling me because I
got like five FinTech emerging managers.
So just being FinTech isn't enough.
So what is it?
What can you do to differentiate yourself?

(34:48):
And what are some of the things that you'velearned to do and which things don't matter?
Right.
Well, that's like, we're interested in FinTech,but I'm always more interested if it has an
aging angle, right?
And I chose the aging space because thereweren't a lot of people and I could have a
voice in this space.
And I think that you can differentiate yourselfby being on Twitter, creating content, by

(35:14):
creating things that are valuable.
Like doing podcasts, think is a great way todifferentiate yourself and to have access to
people.
But then also too, it's just, you just cansometimes just ask too.
You can just bring them up on either LinkedInor try to get their email address and say,

(35:35):
look, I've noticed something very importantabout what you're doing or about your
background.
This is why I'm interested.
And I think that first and foremost, founderswant to know that you care, right?
They understand their business and that youcare.
And that's a good way to differentiate yourselfbecause a lot of people don't take that extra
step.
Sure.
Yeah, I think it's on both sides.
I think it's with LPs and with founders.

(35:55):
They just like working with people that theylike working with, right?
So they, if they just like you, and they wantyou know, join the journey, take that journey
with you, then I think that's much more than,you know, posting on Twitter, you know,
regularly two to three times a day.
So I think it's just sometimes there's thoseintangibles that you really, really can't

(36:20):
explain, right?
It's just kind of, hey, they really love yourmission and your journey, and they're going to
take a bet on you and or they're going to takeyour money, right?
Yeah.
And building relationships is really important.
And that can be done at a cocktail party, or itcan be done over Zoom.
So as much as you want to build your externalprofile, I think what we're talking about is,
it's not necessarily just about you, make itabout them.

(36:43):
I remember Bill Clinton said, the second youforget that it's about them, you've lost the
election.
And I was just really, really lucky to be ableto invest in the founders of Teladoc have
started a new company that's Teladoc two pointzero called Recuro Health.
And this would never be a company that I wouldthink that I would have access to.

(37:04):
But I did because I'd gotten to know thefounder of Michael Gordon, because he was on
the board of another company I was invested in.
And I developed a relationship with him andwe're super excited to be a part of it now.
No, that's great.
And maybe you can tell us a little bit aboutyour sourcing and screening best practices and

(37:24):
any recommendations because we do have someaspiring and emerging managers in here.
What are some ways that have helped you interms of just finding great deals?
I think we talked about relationships andcollaboration, any tools beyond Crunchbase and
PitchBook and any other frameworks that havehelped you find great founders?

(37:46):
Oh, absolutely.
Well, I think first of all, it's a great ideato develop the thesis yourself.
So figure out where in FinTech, you think thereal opportunities are left.
If FinTech is something, you know, we're inhealthcare, we're in retail, where's the white
space.
So I think you need to instead of, you know,we're also flattered when so many people want

(38:09):
to talk to us and share their ideas and we getvery excited about what we hear.
But if you haven't canvassed the environmentyourself for that space, and that's one of the
reasons we became much more thesis driven isbecause if you don't know what's happening in
the space, you don't know whether it's reallytruly a good idea not.
So I would encourage everyone to step back andeven take two or three months and sit down and

(38:31):
really figure out where the white spaces arethat they want to attack.
And then go after the companies in that spaceand start even sometimes with the hottest
company in the space and call up the CEO andsay, do you have ten minutes?
I'm really looking for, I'm sure you get a lotof people pinging you because they do.
The famous CEOs will get a lot of new founderscoming to them, asking them to introduce them

(38:55):
to their VCs or other people that they know.
So those people are going be a great source ofdeal flow for you.
So that's that it's like I said before, it'sthe calls you make, not the calls you take,
right?
Yeah, no, really good advice.
Really helpful too.
I'll open it up for questions, see if anybodywants to rattle off any questions.
If not, I'll still try to bring up some helpfulquestions to tee up the discussion.

(39:17):
I guess anybody in the audience have anyquestions about Tracy and her background and
just breaking into VC?
Hi.
Hey Anu.
Hi Anu.
How are doing?
Tracy, it was so wonderful to hear a woman inVC and your journey really resonated with me

(39:39):
because I had a similar journey.
So I began in tech, run a company, we did anoverseas stint.
So kind of spent some time there, ran mycompany, but kind of my kids took front seat
and then came back, started doing angelinvesting.
And now I really want to get more into puttingVC at the forefront, right?

(40:00):
I've always been interested in startups.
So I'm in Houston, Texas.
So I look at a lot of companies and that's aninteresting space, but I'm a generalist, right?
So I kind of look at companies in the digitaland SaaS space.
And I was curious, talked about, Joel askedabout the two companies, I was very interested.

(40:21):
I looked at May Mobility, a very interestingplay, definitely going into the self driving
and supporting the older set of, as well as Ithink with working individuals, it is great to
have that support.
So I'm kind of curious, you don't have like avery tight thesis, which is great, I think, as

(40:46):
an investor, because then you can find wherethe opportunities are.
But when raising your first fund, how did yougo about and how did you convince your LPs and
what were some of the challenges?
What are some tips that you have in terms ofraising your first fund?
And then follow on what matters?
Is it how you did in that first one, it's areally short time because VC is really seven,

(41:09):
eight years or what matters?
So when you're fundraising and how did you goabout finding people to bring into your team?
So I'd love to hear your Sure.
1830
And it's 1843.
I know it closed it off though.
So anyway, those are all really, really greatquestions.

(41:32):
And I think that some of the things that wedon't think about when we're starting funds is
that you're sort of the same stage as a seedstage company.
And sometimes would, you know, I get turneddown by an institution and I'd say, well, I
agree.
I wouldn't take a chance on me either at thispoint, because it's so early, you know?

(41:54):
But, at the seed stage company stage, this iswhat I tell the founders, and at the first time
fund stage, is almost impossible to getinstitutional capital.
And so, there are now seed stage investors forVCs, for the founders, but there's no real seed

(42:15):
stage fund investors, which actually there'sprobably a market opportunity for that.
You can't pull a dropdown in PitchBook and lookup micro LP.
It's just not one of the dropdowns.
No, exactly right.
So just like a seed stage company, I alwaystell the founders, you need to go after the

(42:37):
person that is really trusting you and thatknows you well, because those are the people
that at this point, you're still saying, trustme, whether it's a company or a VC fund, you're
saying, these are the things I'm going to do,and you should just trust me.
And I think when you get to now for fund two,and then for fund three, for me, I I've done

(42:59):
it.
I can say, look what I did versus this is whatI'm going to do.
So I really would start with, I always tellboth founders and new managers there's gold in
your LinkedIn account.
So what you need to do is go through yourLinkedIn account and maybe they're not the
investor, but someone they know might be theinvestor and say, these are the things, this is

(43:20):
the opportunity I'm going after.
And here's why I'm the best person to do it.
And if you know someone in your network, Iwould love to talk to them or even for somebody
to give me advice.
So that is, you'd be so surprised becausethere'll be people that you would think, oh,
this person does a lot of investing.
So they're probably a sure bet or, this isanother one.
This person has so much money.

(43:41):
Why wouldn't they invest with me?
Well, guess what, that person might just reallybe comfortable in fixed income and cash, and
you can't blame them.
That's their own personal choice.
It doesn't matter if they have $10,000,000,000So there's going to be people too that you sort
of just meet, but it's going to be throughsomeone who knows you because you have to have
that trust factor that you're going to besurprised will just write you a check right

(44:02):
away.
People that would do it over the phone, and italways dumbfounded me.
But those are some of my greatest investorsthat I'm closest to now.
Awesome.
Awesome.
Thank you so much for sharing.
Oh, yeah.
Yeah, I think we talked about this too.
Mean, it's, there's no real formula orcorrelation.
I, you know, I think we referenced on one ofour discussions, Tracy, Elizabeth Yen's blog.

(44:25):
I think she talked to like 800 LPs and some ofthem invested and some of them didn't.
And she could not find some pattern to derivefrom that.
She's just like, look, there's no correlation.
So it is very much a numbers game.
It's a sales strategy.
You got a pipeline and you don't want to Thequote I've heard in the past is you don't wanna

(44:46):
offer a steak to a vegan, right?
If they focus Right.
If they're a real estate family, they're notgonna care about venture because they just
don't get it.
And I've actually done a couple syndicate dealsand I've talked to a couple LPs and they're
like, Joel, I just don't get venture.
It doesn't make sense.
Like I can't sell my shares.
I can't like just go on the app and just cashout.
I'm like, no, it's there's an education behindit And I think there's just some people that

(45:11):
just don't have an interest in it and it justisn't aligned with their strategy.
So it's like, it's very tough to try to feed itto them and continue stuffing it down their
pipeline if they don't care about it.
It's not in a lot You're
absolutely right.
So it has to, I always say too, look, ifsomeone really wants an above market return,
they should have invested in Apple last year,because you know, it's a great company, great

(45:33):
balance sheet, get 80% return on your money andyour liquid.
Right?
So, so this is an above market return, butthere also has to be a secondary reason for the
person to invest.
Like you said, the person who has real estate,or I had a friend who I still love and talk to
a lot, had sold a lot of taco bells.

(45:53):
And I kept trying to get him to invest in thefund.
He's like, Tracy, I just don't understandventure.
And, so, it's really about finding the personthat is really interested, has an emotional
connection to what you're doing too.
And that could be just wanting to be involvedin interesting, exciting new technology
companies, because that's very appealing for alot of people.

(46:15):
I think especially now, and this is the goldenage of venture because people are seeing tons
of exits.
There's still a lot of cash on the sidelines.
And I don't know if you guys saw, but in02/2008, there were a thousand family offices
and now there's 8,000.
Wow.
Yep.
So there is tremendous amount of interest ingetting into this game, you just have to find

(46:39):
the pipeline of people that have the abilityand the interest in investing in you.
And that could take 3 hundred-four 100 phonecalls or meetings or
And part of that increase of families is thenext gens, right?
So we actually had a next gen family come inlast night to our emerging manager program.
And he was like, look, you're going to have toslide into these DMs.

(47:01):
You can't tap that database that every singlefund manager has that they bought from
familyoffices.com.
No disrespect to familyoffices.com or any ofthese databases because everybody's pounding
those same databases.
So it might be innovative to kind of comment onyou know a single family office is a next gen.

(47:26):
They have an interest in sailing.
And maybe you comment on something that youresonate with too.
You don't wanna be fake about it, but slideinto their DMs, right?
Message them and kind of take that conversationoffline from Instagram, from all these other
digital channels.
So I think you have to kind of think a littlebit out of the box.
And I also too, there will be people that sayyes, upfront that will not end up investing.

(47:51):
And that's incredibly disappointing.
But then there are also too, I always say,don't discount someone who told you no, because
if you continue to prove yourself and do whatyou say you've done, even though they said no,
originally, you might actually be successfulwith them after you've had a few more successes
under your belt.
Sure.
Yeah, the average is nineteen months.
So that translates to at least a couple ofyears of relationship building.

(48:15):
And I mean, the institutions you probablyalready know, probably went through this,
Tracy, but they want to see a full fundlifecycle as well.
So they want to see the whole progression oflifecycle and then, hey, let's talk and fund
too.
So I think it's also important, would you agreeto meet those institutions now?
Because it takes a whole decade for them toeven observe what you did.

(48:37):
Yeah, I think so.
Think, but I would be selective about it too,because you can waste a ton of time with
institutions and they want all these specificreports and they want things printed out a
certain way.
And I think that if a fund is under a$100,000,000, look, there are people that go

(48:58):
out and raise a $100,000,000 first time funds,but they're generally a team that comes out of
Sequoia or another Frontgate or some of these,you know, really well known fund that they've
known already because they've been an LP inthat well known fund.
But if you're just starting out, I thinkinstitutional capital is almost a unicorn.

(49:19):
It's just so, we have one institutionalinvestor in our first fund.
I had expected them to be the first one inbecause they're strategic.
They were from the state where I was based.
And they ended up being the last investor andwe to, we had had to reopen the fund to look at
it.
So, so I would just, I think you're better offif you're raising a first fund or even a second

(49:43):
to talk to, people who are just a little moreaggressive, which is an individual or, and, you
know, and there's a lot of people out therethat have had liquidity events with startups or
are working for large technology companies thatare making a lot of current income.
And that's another thing too, the, if you're,if you're welcoming smaller checks into your
fund, say the smallest check size in ours was a100.

(50:05):
I would say to people, don't think of it as a100,000 remember it.
Cause a lot of people have not been in a VCfund before.
You know, you don't, you're not giving me the100,000 right off the bat.
Some people choose to do that.
I don't, I do the capital calls and the IRR.
And so I said to them, if you're committing a100,000, think of it as approximately 20,000

(50:27):
per year for five years.
And people look at that, they're like, oh,well, I can do that.
Yeah.
It's like one angel investment pretty much.
Yep.
Exactly.
What do
you think of angel groups?
Do you think they are a good community to buildLP relations with?
Or do you think they're trying to just get intothe deal?
Or have you seen that be a good I think that's

(50:48):
tough because people are in angel groups forthe passion of being involved with the startups
and the excitement of it.
So if you ask them to be in a fund, you'retaking away the what's the best part?
Well, I feel like they may also kind of getirritated with the management fee and carry.
They're like, why do I need to pay a carry if Ican just go direct?
Yep, although we're European waterfallstructure.

(51:09):
So I would always remind our limited partnersthat they are getting back all of their dollars
plus their fees before we see any carry split.
Yeah, and that goes back to the terms, right?
Understanding the terms and the devil is in thedetails.
So yeah, this is really helpful.
So anybody else have any questions for Tracy?
One follow-up.

(51:31):
So you give very nice details about the firstfund raising it.
Are there any tips about should it be an openfund rolling?
Because you said with your largest institution,you had to reopen the fund.
So what's the advantage or not of having sortof
an open rolling fund or a close?
What would you?

(51:53):
I am hopefully on a path to building aninstitutional quality product and they're most
comfortable with the closed end funds.
So that's why I did, even though I'm small, Ihave done everything by the book.
And we even have annual audit that I pay forevery year because we want to be institutional
quality as we move along.
Okay.
That's a good piece of feedback and a goodmindset to have too, because I think when you

(52:18):
get to that institutional path, you want tohave that roadmap, right?
So I think some of the institutions, even ifyou're talking to them now, they're not gonna
invest, they kind of wanna know what yourframework is for like fund two, fund four and
beyond.
So I think already doing the audits, eventhough it costs money and already kind of
having that structure in place, I think isreally a good best practice to have instead of

(52:41):
kind of saying, hey, we're gonna be angelsfirst and do syndicates and then go
institutional at some point.
So I think you hit it right on the head as faras just kind of the roadmap and having all the
infrastructure in place.
I that's have a quick question.
Yeah.
And I'll make it quick because I actually haveto drop in four minutes.

(53:01):
Tracy, again, great to see another woman BC.
I've spent a lot of years, excuse me, inmanagement consulting, but I wanna be able to
make this transition as well been in joe'sclass for about a month or two I love the term
silver tech that's the first time I've heard itbut I'm posting the chat I dealt with the
unenviable and emotionally and mentally taxingfeat of trying to get my mom into assisted

(53:25):
living last fall so everything you talked aboutI can absolutely say there's a market for that
there's a market for having a service for whatI went through to have me not go through
something like that and then I got reallyexcited so I'm curious about this term
SilverTech did that exist before you did youcoin that did you have a hard time getting

(53:46):
people excited about it like tell me more aboutSilverTech.
I coined it and it's sort of starting to stickalthough I would say people are more familiar
with age tech or elder tech, or senior tech,they're all interchangeable.
But I really like SilverTech, because I feellike it reflects the vitality and the

(54:08):
opportunity in this space.
It's not just all about things for skillednursing facilities, we're talking a lot of
really exciting longevity opportunities aswell.
Yeah, I totally agree and even the assistedliving or wherever it's like which one do you
choose?
Why?
What are the criteria?
And then now maybe dealing with now she's therebut how do I know that they're doing what they

(54:29):
say they were gonna do and occasionally we'llhave somebody else go in there.
So I'm already thinking about like otheropportunities for you.
I hear you.
Yeah,
that was that was so it's just really good tohear your story and unfortunately I know we
don't have much more time and I have to drop toask more questions but it's just great to hear
your experiences.
Thank you for
sharing with us today.
Happy to do it.
Yeah, thank you.

(54:49):
Yeah, Tracy, thanks a lot for coming.
It was really great learning from you and allthe storytelling.
I always ask one final question at the end.
Any nugget of advice that you got from a mentoror family member that you want to share with
us?
Well, I always say that my best mentor isWinston Churchill.
And you know, when people say that they don'thave access to a mentor, say, do you have

(55:14):
access to a library?
Because there's so many great biographies ofpeople that have done there, you know, done
that and been there before you.
And Winston Churchill always said, when you'regoing through hell, keep going.
And that, that honestly has gotten me throughso much, both personally and professionally.
You know, we're all going to have highs andlows.

(55:35):
When you're in those lows, if you just put onefoot in front of the other and keep going, you
know, some good stuff is around the other side.
I love that quote.
Yeah, I think it's, that's just our wholeecosystem, right?
I mean, dealing with founders, being anemerging manager, we're essentially founders
too, right?
So I think that's very encouraging.
And it helps you just light that fire again, ifyou don't have it and you need somebody to

(56:00):
light it for you.
So thanks for doing that for us.
And I hope you make it back to New York soon.
So we can catch up.
You're still in beautiful Montana, right?
Yes, which is great.
So cool.
Hope we get to do a coffee when you come outhere don't know, maybe I'll be in Montana
sometime.
Sounds
great.