Transcript
1
00:00:00,080 --> 00:00:04,080
It's rare for a venture fund, as you guys know,
to raise more than 500,000,000 or even a
2
00:00:04,080 --> 00:00:07,040
1,000,000,000 or 2,000,000,000 or
3,000,000,000, but it's not very rare in this
3
00:00:07,040 --> 00:00:10,960
day and age that private equity funds raise 1,
5, 10, $20,000,000,000 funds.
4
00:00:10,960 --> 00:00:12,400
You know, there's a guy named Ted Wechsler.
5
00:00:12,400 --> 00:00:14,125
He's a portfolio manager for Warren Buffett.
6
00:00:14,125 --> 00:00:18,945
From what I understand about his fund is that
he always liked having family offices because
7
00:00:19,004 --> 00:00:22,684
when you have a family office client, you're
talking directly to the principal.
8
00:00:22,684 --> 00:00:26,844
Even if you talk to institutions, and it could
be, you know, a great endowment with a great
9
00:00:26,844 --> 00:00:28,500
name and a great history.
10
00:00:28,500 --> 00:00:30,100
There's always a couple steps removed.
11
00:00:30,100 --> 00:00:33,060
You know, you have the investment team, you
have the investment committee.
12
00:00:33,060 --> 00:00:38,179
So the ability to make quick decisions is
obviously slows down when you have layers in
13
00:00:38,179 --> 00:00:40,420
between money and person making decisions.
14
00:00:40,420 --> 00:00:44,041
So I think the major strength of having family
office capital is the speed and quick ness and
15
00:00:44,041 --> 00:00:46,575
the efficiency that a decision could be made by
a family office.
16
00:00:46,675 --> 00:00:47,115
What's the largest ticket you've ever gotten at
Alpine in almost
17
00:00:47,115 --> 00:00:47,195
10 years?
18
00:00:47,195 --> 00:00:51,454
For more ideas on how to raise venture capital
in this market, make sure to subscribe below.
19
00:00:52,234 --> 00:00:53,774
Les Beck, you're in.
20
00:00:53,835 --> 00:01:03,179
I've been, excited to chat, ever since Steve
Chasen introduced us, a few months ago, and
21
00:01:03,179 --> 00:01:04,299
we've been going back and forth.
22
00:01:04,299 --> 00:01:06,939
And I'm really fascinated by everything that
you built at Alpine.
23
00:01:07,099 --> 00:01:08,799
Welcome to the 10X Capital podcast.
24
00:01:08,859 --> 00:01:09,260
Thank you.
25
00:01:09,260 --> 00:01:10,700
Thank you very much for having me.
26
00:01:10,859 --> 00:01:11,579
It's my pleasure.
27
00:01:11,579 --> 00:01:13,020
So let's talk about Alpine.
28
00:01:13,020 --> 00:01:16,575
So tell me about your background and how you
came to found Alpine Capital Advisors.
29
00:01:16,875 --> 00:01:17,515
Sure thing.
30
00:01:17,515 --> 00:01:21,915
I spent the first, half of my career in sort of
traditional capital markets, equity research,
31
00:01:21,915 --> 00:01:27,435
sales and trading, and then I sort of stumbled
into a role at a place called Park Hill when it
32
00:01:27,435 --> 00:01:29,489
was first starting up in 2007.
33
00:01:29,549 --> 00:01:33,950
I I didn't really I didn't even know really
what a LP was, but one of my mentors, his name
34
00:01:33,950 --> 00:01:36,609
is Hari Hari Huran, who runs a a big hedge
fund.
35
00:01:36,909 --> 00:01:41,629
He he knew these guys and basically annoyed
them to hire me with not having any experience
36
00:01:41,629 --> 00:01:42,369
about fundraising.
37
00:01:42,590 --> 00:01:43,814
And then they took me on.
38
00:01:43,814 --> 00:01:45,094
I stayed there for 6 years.
39
00:01:45,094 --> 00:01:50,295
And then on March 7, 2014, we started our
business.
40
00:01:50,295 --> 00:01:54,135
And I only mentioned that date because we're
we're almost 10 years old in about a couple
41
00:01:54,135 --> 00:01:54,534
months.
42
00:01:54,534 --> 00:01:55,895
And the rest they say is history.
43
00:01:55,895 --> 00:02:00,500
So we're a private placement agent working with
managers of all shapes and sizes, everything
44
00:02:00,500 --> 00:02:05,560
from a $100,000,000 managers to managers that
manage north of a a 100,000,000,000, 4 offices,
45
00:02:05,939 --> 00:02:08,040
and, we cover investors all over the world.
46
00:02:08,419 --> 00:02:10,500
One particular strength of ours is Latin
America.
47
00:02:10,500 --> 00:02:11,314
We have 3 offices.
48
00:02:11,635 --> 00:02:16,995
We have an office in Santiago where my partner
resides in Santiago, Chile, Mexico City, and
49
00:02:16,995 --> 00:02:18,275
and the Sao Paulo as well.
50
00:02:18,275 --> 00:02:22,115
But we cover investors in Asia and Europe and
obviously in North America as well.
51
00:02:22,115 --> 00:02:23,235
So you came from Park Hill.
52
00:02:23,474 --> 00:02:27,090
For those that don't know, Park Hill is one of
the most prestigious names in this business.
53
00:02:27,090 --> 00:02:29,250
What did you learn from your 6 years at Park
Hill?
54
00:02:29,250 --> 00:02:32,129
I started this business off in public markets
and hedge funds.
55
00:02:32,129 --> 00:02:36,049
I think probably one of the things that I
always found pretty interesting is that, you
56
00:02:36,049 --> 00:02:39,375
know, I found our team on the public market
side, because you get this kind of monthly mark
57
00:02:39,375 --> 00:02:42,114
when you're looking at hedge funds, we always
send out more information.
58
00:02:42,174 --> 00:02:46,254
I think we were in tune with the markets a lot
more because it was sort of kind of live and in
59
00:02:46,254 --> 00:02:46,834
your face.
60
00:02:46,974 --> 00:02:51,375
We worked pretty hard and but the private
equity guys were the ones that always made a
61
00:02:51,375 --> 00:02:52,050
lot more money.
62
00:02:52,290 --> 00:02:55,969
And to that end, I always wondered why until
and I didn't really know why until I started my
63
00:02:55,969 --> 00:02:56,370
own business.
64
00:02:56,370 --> 00:03:00,770
Another thing is that we didn't work with many
venture capital funds at Park Hill.
65
00:03:00,770 --> 00:03:05,169
I think maybe the reason why for that, why a
lot of placement agents back at that time
66
00:03:05,169 --> 00:03:08,564
didn't really work with a lot of venture funds
is because venture funds are smaller.
67
00:03:08,564 --> 00:03:13,444
I think it's been talked many times on your on
your show that there if a hedge fund uses a
68
00:03:13,444 --> 00:03:16,105
placement agent, sometimes an LP asks why.
69
00:03:16,165 --> 00:03:20,390
Because the most storied firms in the world,
your Sequoias, your Benchmarks, your Acels,
70
00:03:20,390 --> 00:03:23,430
your Union Square Ventures, maybe once upon a
time, they used a placement agent.
71
00:03:23,430 --> 00:03:26,469
For for the most part, the best ones don't need
a pay a placement agent.
72
00:03:26,469 --> 00:03:29,770
So peep LP start to wonder about, you know,
adverse selection bias.
73
00:03:30,150 --> 00:03:34,375
So the combination of adverse selection bias,
skepticism, and smaller funds, you know, that's
74
00:03:34,615 --> 00:03:38,615
it's rare for a venture fund as you guys know
to raise more than 500,000,000 or even a
75
00:03:38,615 --> 00:03:42,134
1000000000 or 2,000,000,000 or 3,000,000,000,
but it's not very rare, especially these day
76
00:03:42,134 --> 00:03:46,860
and age in this day and age that private equity
funds raise 1, 5, 10, $20,000,000,000 funds.
77
00:03:47,020 --> 00:03:48,780
So from an economics perspective, it it made
sense.
78
00:03:48,780 --> 00:03:52,300
So I learned a couple of things, you know,
starting my own business and a couple of things
79
00:03:52,300 --> 00:03:55,199
working at Park Hill, and I'm I'm looking
forward to get into it.
80
00:03:55,259 --> 00:03:58,539
How do you compete against a large large
players like Park Hills?
81
00:03:58,780 --> 00:03:59,819
You're obviously more boutique.
82
00:03:59,819 --> 00:04:00,960
What is your main differentiator?
83
00:04:01,275 --> 00:04:05,514
I don't know if I think about competition as
far as in the placement agent business, or I
84
00:04:05,514 --> 00:04:09,194
don't think about it a lot because we know what
we are and what we know what we aren't.
85
00:04:09,194 --> 00:04:13,775
We will never be a Park Hill, an Evercore, a
Credit Suisse with, you know, huge footprint,
86
00:04:13,834 --> 00:04:16,334
lots of offices, lots of distribution people.
87
00:04:16,394 --> 00:04:21,089
And and by knowing what will not we what we
won't be allows us the freedom to kind of feel
88
00:04:21,089 --> 00:04:26,610
comfortable about what we are, which is that we
focus on managers that we think are, you know,
89
00:04:26,610 --> 00:04:30,954
differentiated, that we can focus on from a
sort of single distribution perspective.
90
00:04:30,954 --> 00:04:35,595
That is to say that I'm and my team who is very
senior on this distribution side are handling
91
00:04:35,595 --> 00:04:37,935
all interactions between the GPs and the LPs.
92
00:04:38,074 --> 00:04:42,475
Our mandates are, generally speaking, either
smaller or if they're working with larger
93
00:04:42,475 --> 00:04:47,689
managers, they're they're specifically focused
on specific regions or a specific list of
94
00:04:47,689 --> 00:04:48,189
investors.
95
00:04:48,329 --> 00:04:52,169
But to us, one of the great things about our
business is that because it's owner operated,
96
00:04:52,169 --> 00:04:55,610
because we don't have a lot of other
bureaucracy that I would argue other placement
97
00:04:55,610 --> 00:04:59,129
agents have, they're not we're not owned by
anybody, anyone outside our business.
98
00:04:59,129 --> 00:05:02,105
We, you know, we we don't report to a big bank
or anything like that.
99
00:05:02,105 --> 00:05:06,425
It's that we have power and the to basically
work with any GPs that we want to.
100
00:05:06,425 --> 00:05:08,425
And these manager these GPs can be very small.
101
00:05:08,425 --> 00:05:10,185
They could be very niche, or they could be very
large.
102
00:05:10,185 --> 00:05:11,064
It's really up to us.
103
00:05:11,064 --> 00:05:13,379
And the decision process for that is is very
small.
104
00:05:13,379 --> 00:05:16,740
You know, if I decide that I wanna work with
the GP, then we work with the GP.
105
00:05:16,740 --> 00:05:20,500
Sometimes I think at larger organizations, the
decision making process is a lot more
106
00:05:20,500 --> 00:05:22,740
complicated or at least involves a lot more
people.
107
00:05:22,740 --> 00:05:28,597
And so I think not knowing knowing what we are
and what we aren't has allows us to be a lot
108
00:05:28,597 --> 00:05:30,905
more efficient, at least in my mind, with the
whole fundraising process.
109
00:05:31,205 --> 00:05:34,025
And tell me about the life cycle with a
potential GP.
110
00:05:34,165 --> 00:05:36,085
How long before you start working with them?
111
00:05:36,085 --> 00:05:38,085
I hope you don't mind, but this isn't a cop out
answer.
112
00:05:38,085 --> 00:05:40,085
I I really don't think there's a typical life
cycle.
113
00:05:40,085 --> 00:05:43,449
You know, we've had some GPs that we just kind
of hit it off with, and in a couple months,
114
00:05:43,449 --> 00:05:44,649
we're in the market with them.
115
00:05:44,649 --> 00:05:49,449
And there's some GPs that we've talked to for 5
years or or longer that we decided for, you
116
00:05:49,449 --> 00:05:52,169
know, the reasons on our side, reasons on their
side, it made sense to work.
117
00:05:52,169 --> 00:05:54,410
So I I don't think there is a typical life
cycle.
118
00:05:54,410 --> 00:05:58,165
And I think I think if you ask your average LP,
they would probably say the same thing.
119
00:05:58,165 --> 00:06:02,404
You know, they would say that there's no
specific timing as to when an LP will know when
120
00:06:02,404 --> 00:06:03,285
they invest with the fund.
121
00:06:03,285 --> 00:06:06,245
It just kinda comes together when it comes
together, and that could be very early in the
122
00:06:06,245 --> 00:06:08,670
life cycle of that JP, or it can come further
down the road.
123
00:06:08,990 --> 00:06:12,850
And and when it comes to on the LP side, so
tell me about those relationships.
124
00:06:12,910 --> 00:06:14,670
Tell me about the need that you fill for them.
125
00:06:14,670 --> 00:06:19,069
And and and also in in broader ecosystems,
there's LP consultants, there's Fund of Funds.
126
00:06:19,069 --> 00:06:22,245
How do you directly or indirectly compete with
other solutions out there?
127
00:06:22,324 --> 00:06:25,285
I don't know if we compete against consultants
and Fund of Funds.
128
00:06:25,285 --> 00:06:27,444
In fact, we have a couple Fund of Funds that
are our clients.
129
00:06:27,444 --> 00:06:30,345
And then certainly on the consultant side, we
talk to a lot of consultants.
130
00:06:30,564 --> 00:06:32,964
So at least I don't see us competing against
them.
131
00:06:32,964 --> 00:06:35,204
I think we're very collaborative with a lot of
Fund of Funds.
132
00:06:35,204 --> 00:06:39,480
Some of the largest relationships that we have
on the LP side that we market to are Fund to
133
00:06:39,480 --> 00:06:41,480
Funds, and same thing on the consulting side.
134
00:06:41,480 --> 00:06:44,439
So I don't really see any kind of competition
on that front.
135
00:06:44,439 --> 00:06:47,339
And as I mentioned, you know, a lot of Fund to
Funds are our clients.
136
00:06:47,480 --> 00:06:52,795
So I think maybe what we compete against with
and specifically as it relates to Venture is
137
00:06:53,014 --> 00:06:57,175
the mind space of a general partner in the
sense that the GP really has to decide whether
138
00:06:57,175 --> 00:07:01,095
or not to use a placement agent and how
effective we will be, how much it will cost.
139
00:07:01,095 --> 00:07:03,115
Can they do it themselves to their own
networks?
140
00:07:03,319 --> 00:07:07,959
What kind of message it will send to the market
or to other general partners or our limited
141
00:07:07,959 --> 00:07:08,199
partners.
142
00:07:08,199 --> 00:07:12,439
And I think we compete with the the mind space
that a GP has to, like, think about when it
143
00:07:12,439 --> 00:07:16,599
needs to weigh all the reasonings why or why
not to hire a placement agent.
144
00:07:16,599 --> 00:07:20,955
And the reasons why we think a GP will hire a
placement agent is not only to raise money.
145
00:07:20,955 --> 00:07:25,835
It may be that a GP hires us because there's a
certain type of investor that they don't have
146
00:07:25,835 --> 00:07:26,395
access to.
147
00:07:26,395 --> 00:07:30,955
Maybe there's a place in the world like Latin
America, like the UK, like Asia, that they
148
00:07:30,955 --> 00:07:33,840
don't have many investors and they'd like
diversify their investor base.
149
00:07:33,840 --> 00:07:38,080
Maybe in this tough fundraising environment,
they want to expand their capabilities because
150
00:07:38,080 --> 00:07:39,280
it's tough to raise money.
151
00:07:39,280 --> 00:07:40,480
So why not hire extra help?
152
00:07:40,480 --> 00:07:44,954
Another reason why people is that may hire a
place of agents because they they they could
153
00:07:44,954 --> 00:07:47,675
probably do it if they had a lot of time, but
maybe they don't have a lot of time.
154
00:07:47,675 --> 00:07:50,555
Maybe there's a certain opportunity or a
certain fund they're looking to get off the
155
00:07:50,555 --> 00:07:54,074
ground, and they need to truncate the timeline
for which they need to raise that capital.
156
00:07:54,074 --> 00:07:56,794
So I think placement agents just for the except
for the share reason, hey.
157
00:07:56,794 --> 00:07:57,595
We wanna raise money.
158
00:07:57,595 --> 00:08:01,540
There's a lot of different reasons why GPs hire
placement agents that just aren't the sort of
159
00:08:01,540 --> 00:08:02,660
blanket to raise money.
160
00:08:02,660 --> 00:08:06,660
When you mentioned geography, you have an
office in Santiago, and you also have reach
161
00:08:06,660 --> 00:08:07,699
within Mexico City.
162
00:08:07,699 --> 00:08:11,860
If a GP was to hire Alpine to geographically
for Latin America, how would that work?
163
00:08:11,860 --> 00:08:15,305
Do you basically bring in the relationship and
then the GP has to go there quarterly or
164
00:08:15,305 --> 00:08:15,705
yearly?
165
00:08:15,705 --> 00:08:19,225
Or do you manage the entire kind of IR function
for that GP?
166
00:08:19,225 --> 00:08:19,865
There it varies.
167
00:08:19,865 --> 00:08:24,904
You know, we have some GPs that wanna be in x y
z country so many times a year.
168
00:08:24,904 --> 00:08:28,425
They don't mind traveling down there, creating
kind of creating the relationships, nurturing,
169
00:08:28,425 --> 00:08:29,644
and feeding those relationships.
170
00:08:30,420 --> 00:08:33,860
But there's some temp GPs that tell us, listen,
we're going down to Latin America twice.
171
00:08:33,860 --> 00:08:35,620
1 to introduce ourselves and 2 to close.
172
00:08:35,620 --> 00:08:39,139
And if we if that doesn't work for you guys,
then that doesn't work for you guys.
173
00:08:39,139 --> 00:08:40,500
Some people it's interesting.
174
00:08:40,500 --> 00:08:44,365
We we funny enough, we work with an Asian
manager and they love seeing clients.
175
00:08:44,365 --> 00:08:46,125
But we started up with them during COVID.
176
00:08:46,125 --> 00:08:49,804
And, obviously, during during COVID, there
wasn't a lot of travel between Asia and Latin
177
00:08:49,804 --> 00:08:52,605
America, and we brought a few clients in just
via Zoom.
178
00:08:52,605 --> 00:08:57,004
So I I don't mean to weave around the answer,
but I think really we customize our fundraise
179
00:08:57,004 --> 00:09:01,019
strategies to whatever the GP's is comfortable
for or what what whatever a way that we think
180
00:09:01,019 --> 00:09:02,620
could work in that specific region.
181
00:09:02,620 --> 00:09:07,100
So if we think that a manager can raise capital
by just going down there twice, and we think
182
00:09:07,100 --> 00:09:08,139
it'll work, we'll we'll do it.
183
00:09:08,139 --> 00:09:11,500
But, you know, we'll tell others that, no, you
need to go down there more if it's another type
184
00:09:11,500 --> 00:09:15,055
of GP who's maybe newer or less familiar
relating to their strategy.
185
00:09:15,055 --> 00:09:16,115
So it's it's different.
186
00:09:16,495 --> 00:09:19,934
So it comes down to brand and track record on
whether somebody could pull something of that
187
00:09:19,934 --> 00:09:20,095
off?
188
00:09:20,095 --> 00:09:21,235
Well, it could be familiarity.
189
00:09:21,455 --> 00:09:25,475
It could be the sort of cycle and and maturity
of the individual clients.
190
00:09:25,695 --> 00:09:29,450
It could be the amount of exposure underlying
LPs may have.
191
00:09:29,450 --> 00:09:35,610
So for instance, a lot of LPs at the end of
2021 may have had a lot of growth in venture
192
00:09:35,610 --> 00:09:39,769
and software buyout and all that stuff that had
been really doing well for a long time.
193
00:09:39,769 --> 00:09:43,795
And so sometimes it's not the bet you know, you
wanna wait a little bit before you bring more
194
00:09:43,795 --> 00:09:45,154
product like that to the market.
195
00:09:45,154 --> 00:09:49,475
So again, I think it's it's very case
dependent, and it depends on the type of
196
00:09:49,475 --> 00:09:51,415
client, both on the LP and the GP side.
197
00:09:51,554 --> 00:09:55,075
When it comes to investor relations, so you've
come there, you've you've introduced yourself,
198
00:09:55,075 --> 00:09:57,089
then you came back and you collect the money.
199
00:09:57,089 --> 00:09:59,910
That's probably rare, but maybe not with the
GPs that you work with.
200
00:09:59,910 --> 00:10:01,049
But let's say that happens.
201
00:10:01,269 --> 00:10:05,590
How often should that GP be going to that
geography to Latin America after after the
202
00:10:05,590 --> 00:10:05,990
close?
203
00:10:05,990 --> 00:10:06,230
Yeah.
204
00:10:06,230 --> 00:10:07,190
It's it's a good question.
205
00:10:07,190 --> 00:10:09,990
It doesn't sound like a broken record, but it
it it again, it depends.
206
00:10:09,990 --> 00:10:11,355
I think Latin American clients.
207
00:10:11,355 --> 00:10:15,034
I'm happy we're talking about Latin America
because it is a very different region, and it's
208
00:10:15,034 --> 00:10:16,634
a specialty and strength of our firm.
209
00:10:16,634 --> 00:10:20,714
I think to overgeneralize, Latin American
clients, generally speaking, they do a lot of
210
00:10:20,714 --> 00:10:21,454
work upfront.
211
00:10:21,514 --> 00:10:27,519
But once they do the work, if you as a GP
deliver the returns and, you know, the risk and
212
00:10:27,519 --> 00:10:30,240
the returns that you said, I think it generally
they're pretty hands off.
213
00:10:30,240 --> 00:10:31,679
You know, they come to the AGM.
214
00:10:31,679 --> 00:10:32,559
They may come and see you.
215
00:10:32,559 --> 00:10:36,879
But there are some LPs in the US and Europe and
other parts of the world that are very they
216
00:10:36,879 --> 00:10:37,759
they poke around a lot.
217
00:10:37,759 --> 00:10:38,879
They want special terms.
218
00:10:38,879 --> 00:10:40,485
They may ask for special reporting.
219
00:10:40,485 --> 00:10:42,644
They may see their GPs on a quarterly basis.
220
00:10:42,644 --> 00:10:44,884
They may talk to their GPs on a monthly basis.
221
00:10:44,884 --> 00:10:48,485
And we don't see much of that in Latin America,
which is I think a good good news to a lot of
222
00:10:48,485 --> 00:10:48,884
GPs.
223
00:10:48,884 --> 00:10:52,884
Outside of geography is how an LP behaves in
the 1st 2 weeks that you meet them very
224
00:10:52,884 --> 00:10:55,465
indicative of how they'll do behave over the
next several decades.
225
00:10:55,470 --> 00:10:56,929
Do you find that to be highly correlated?
226
00:10:57,309 --> 00:10:57,470
Yeah.
227
00:10:57,470 --> 00:10:58,589
That's an interesting question.
228
00:10:58,589 --> 00:11:03,069
You know, we we don't neither us or the GPs
kind of we both take time to get to know each
229
00:11:03,069 --> 00:11:03,309
other.
230
00:11:03,309 --> 00:11:03,470
Right?
231
00:11:03,470 --> 00:11:05,549
Because it's it's in a very important
relationship.
232
00:11:05,549 --> 00:11:06,750
We represent.
233
00:11:06,750 --> 00:11:09,565
And furthermore, I would say, even evangelize
the GPs that we work with.
234
00:11:09,565 --> 00:11:12,784
And that's hard to do after getting to know
someone for 2 weeks.
235
00:11:13,085 --> 00:11:17,585
So, we at least wait a couple months for us to
get some to kind of really get the familiarity
236
00:11:17,965 --> 00:11:18,865
with the story.
237
00:11:18,924 --> 00:11:23,399
And I think the GPs do the same thing because,
you know, the GPs so to many of the GPs, like,
238
00:11:23,399 --> 00:11:26,759
their funds, they're their creation, they're
their babies, and they wanna protect it.
239
00:11:26,759 --> 00:11:30,200
And they wanna make sure that the partners that
go on that go out on their behalf are good
240
00:11:30,200 --> 00:11:30,679
people.
241
00:11:30,679 --> 00:11:32,919
And so I think they too, you know, tread
lightly.
242
00:11:32,919 --> 00:11:37,495
In fact, there's there's a GP that we work with
for many years, and they're you know, we work
243
00:11:37,495 --> 00:11:40,615
with certain products with them, and we we
we're looking to work with more products with
244
00:11:40,615 --> 00:11:41,095
them.
245
00:11:41,095 --> 00:11:44,954
So we don't know that part of the firm, and
they're kind of completely re underwriting us
246
00:11:45,095 --> 00:11:48,379
after working with them for over 5 years
because it's a different part of the side of
247
00:11:48,379 --> 00:11:48,779
the firm.
248
00:11:48,779 --> 00:11:53,659
So that just goes to show you how careful GPs
are when choosing partners, especially on the
249
00:11:53,659 --> 00:11:54,139
capital raising.
250
00:11:54,139 --> 00:11:57,019
Tell me about the different regions, and what
are some things that GPs should know about
251
00:11:57,019 --> 00:11:58,639
raising from LPs in those regions?
252
00:11:58,779 --> 00:12:03,035
I really think this is this is a very
interesting question because we think about
253
00:12:03,175 --> 00:12:06,855
even though we don't have capabilities in every
nook and cranny in the world, we think about
254
00:12:06,855 --> 00:12:08,855
holistically how we can help GPs.
255
00:12:08,855 --> 00:12:12,855
And I think GPs that we work with, the big
enchilada is, of course, the US.
256
00:12:12,855 --> 00:12:16,320
It's the largest and most active LP ecosystem
in the world.
257
00:12:16,320 --> 00:12:17,360
I think always will be.
258
00:12:17,360 --> 00:12:22,559
Europe sort of is and probably will always be
the 2nd largest, and those are the 2 that
259
00:12:22,559 --> 00:12:23,360
people focus on.
260
00:12:23,360 --> 00:12:25,860
Within North America, I think Canada is very
interesting.
261
00:12:25,920 --> 00:12:28,320
We've been marketing to Canada for a long
period of time.
262
00:12:28,320 --> 00:12:32,804
There, we see an explosion of sort of family
offices and high net worth individuals.
263
00:12:32,945 --> 00:12:36,544
There are will and always will be the pensions,
but I think that's the newest development that
264
00:12:36,544 --> 00:12:37,904
we're trying to, you know, solve for.
265
00:12:37,904 --> 00:12:40,485
And we're registered in the UK with the FCA.
266
00:12:40,785 --> 00:12:44,465
UK is a very interesting market because it's
really not just the UK.
267
00:12:44,465 --> 00:12:45,480
It's a global market.
268
00:12:45,480 --> 00:12:48,679
You see a lot of global allocators, global
family offices there.
269
00:12:48,679 --> 00:12:51,639
So and and other institutions kind of opening
up to alternatives.
270
00:12:51,639 --> 00:12:53,399
The Middle East is a place that I don't know
very well.
271
00:12:53,399 --> 00:12:56,360
I'll be going to that for the first time, but
it's a place where I think the whole world is
272
00:12:56,360 --> 00:12:58,125
going to to find capital there.
273
00:12:58,524 --> 00:13:00,044
Funds small, medium, and large.
274
00:13:00,044 --> 00:13:01,725
Your question on Asia is interesting.
275
00:13:01,725 --> 00:13:06,445
You know, Asia has always been a sort of what I
call like a elephant hunting type of place
276
00:13:06,445 --> 00:13:11,085
where you would kind of look at big insurance
companies, big banks, big sovereign wealth
277
00:13:11,085 --> 00:13:12,399
entities, things like that.
278
00:13:12,399 --> 00:13:16,160
But what we've been really focused on in the
last couple of years has been the family
279
00:13:16,160 --> 00:13:17,679
offices, family office space.
280
00:13:17,679 --> 00:13:21,620
I think it's not to know someone's no no
surprise that Asia will become the largest
281
00:13:21,759 --> 00:13:24,320
economic economic zone of the world.
282
00:13:24,320 --> 00:13:27,105
So as a result, there's going to be a lot of
family offices there.
283
00:13:27,264 --> 00:13:32,225
And the place that we think that family offices
are centering their activity is Singapore.
284
00:13:32,225 --> 00:13:34,065
So we've been spending a lot of time in
Singapore.
285
00:13:34,065 --> 00:13:38,704
And it is a lot of Asian family offices, but it
is also a lot of family offices from other
286
00:13:38,704 --> 00:13:42,350
parts of the world like Europe, like the Middle
East, and and all over Asia, Southeast Asia,
287
00:13:42,350 --> 00:13:45,970
South Asia, North Asia, China, Korea, Japan,
Australia.
288
00:13:46,029 --> 00:13:48,750
So it's it's a very interesting part of the
market that I think will grow.
289
00:13:48,750 --> 00:13:52,029
And then at some point in time, there'll be
more sort of high net worth family offices
290
00:13:52,029 --> 00:13:53,629
wealth in Asia than there is in the US.
291
00:13:53,629 --> 00:13:57,925
And we wanna continue to plant seeds to to to
sort of capitalize on that in the, in the years
292
00:13:57,925 --> 00:13:58,485
to come.
293
00:13:58,644 --> 00:14:01,065
What are the pros and cons of taking money from
family offices?
294
00:14:01,524 --> 00:14:02,164
Pros and cons.
295
00:14:02,164 --> 00:14:03,205
So, well, it's interesting.
296
00:14:03,205 --> 00:14:05,065
There's, you know, there's a guy named Ted
Wechsler.
297
00:14:05,284 --> 00:14:08,164
And some of you may, may know him on this
listening to the show.
298
00:14:08,164 --> 00:14:10,245
He's, he's a portfolio manager for Warren
Buffett.
299
00:14:10,245 --> 00:14:15,029
And from what I understand about his fund is
that he always liked having family offices
300
00:14:15,029 --> 00:14:19,590
because when you have a family office client,
you're talking directly to the principal or the
301
00:14:19,590 --> 00:14:20,894
or the agents of that principal.
302
00:14:20,894 --> 00:14:21,326
Even if you talk to institutions and it could
be, you know, a great endowment with a great
303
00:14:21,326 --> 00:14:28,884
name and a a great history, there's always a
couple steps removed.
304
00:14:28,884 --> 00:14:30,404
You know, you have the investment team.
305
00:14:30,404 --> 00:14:31,764
You have the investment committee.
306
00:14:31,764 --> 00:14:37,220
So the ability to make quick decisions is
obviously slows down when you have layers in
307
00:14:37,220 --> 00:14:39,300
between money and the person making decisions.
308
00:14:39,300 --> 00:14:43,059
So I think the major strength of having family
office capital is the speed and quickness and
309
00:14:43,059 --> 00:14:46,580
the efficiency that a decision could be made by
a family office.
310
00:14:46,580 --> 00:14:50,845
Now there's obviously, you know, family offices
that operate akin to institutions that have
311
00:14:50,845 --> 00:14:53,725
investment committees and have an investment
staff and things like that.
312
00:14:53,725 --> 00:14:57,965
But if you really know the principal and the
principal trusts you, my sense is that even in
313
00:14:58,125 --> 00:15:02,605
during the worst times, the principal will open
their wallet up and and give you capital, when
314
00:15:02,605 --> 00:15:07,639
most other type client client types are sort of
thinking it over, especially in times like
315
00:15:07,639 --> 00:15:10,600
COVID or the GFC when, you know, things were
pretty scary out there.
316
00:15:10,600 --> 00:15:13,559
I would say that if you knew a family office
and they trusted you, you did a good job for
317
00:15:13,559 --> 00:15:13,799
them.
318
00:15:13,799 --> 00:15:16,039
The odds of them adding capital to you are much
higher.
319
00:15:16,039 --> 00:15:17,480
So that's that's that's a pro.
320
00:15:17,480 --> 00:15:19,615
I cons for having family offices.
321
00:15:19,615 --> 00:15:23,794
You know, I I don't I I really don't know what
the cons would be for the family office unless,
322
00:15:23,934 --> 00:15:30,014
of course, you were looking for sort of these
huge behemoth like tickets, and there aren't
323
00:15:30,014 --> 00:15:34,759
that many on the family office side that could
write, you know, 50, 100, $200,000,000 tickets.
324
00:15:34,759 --> 00:15:39,580
So if you were a large fund out there, I'm not
sure having relationships with exclusively
325
00:15:39,639 --> 00:15:42,919
family offices could get you there just by just
focus on the family office segment.
326
00:15:42,919 --> 00:15:45,975
What's the largest ticket you've ever at Alpine
in almost 10 years?
327
00:15:45,975 --> 00:15:48,855
For the sake of humility, I don't I don't mind
talking about the numbers.
328
00:15:48,855 --> 00:15:53,095
Well, I'm talking about, you know, hype up your
GPs, not you, but hype up your clients.
329
00:15:53,095 --> 00:15:53,254
No.
330
00:15:53,254 --> 00:15:53,495
No.
331
00:15:53,495 --> 00:15:55,735
I I did a lot of heavy lifting too.
332
00:15:55,735 --> 00:15:55,894
No.
333
00:15:55,894 --> 00:16:00,029
I I won't talk about the number, but I think
the largest, tickets that we've got for our
334
00:16:00,029 --> 00:16:04,829
clients on the GP side are ones that are not
only you know, they're not only financially
335
00:16:04,829 --> 00:16:09,389
driven, but there's a strict a certain
strategic element that the LP finds that they
336
00:16:09,389 --> 00:16:10,429
could derive out of it.
337
00:16:10,429 --> 00:16:14,445
And or it's such a special GP that the LP
special GP that the LP loves them so much that
338
00:16:14,445 --> 00:16:15,884
they want to either do a couple of things.
339
00:16:15,884 --> 00:16:19,644
They want to make them into a fully sized
position with the first, you know, with the
340
00:16:19,644 --> 00:16:20,605
first investment.
341
00:16:20,605 --> 00:16:22,764
They may want to even do something like, hey.
342
00:16:22,764 --> 00:16:27,070
We're going to commit to this fund, but we're
also going to pre commit to your next fund
343
00:16:27,070 --> 00:16:32,590
because we don't want to be cut out next time
you raise, and we want to lock that capacity in
344
00:16:32,590 --> 00:16:34,429
right now because we think you're something
special.
345
00:16:34,429 --> 00:16:38,429
And then the other reason is is something
strategic that the the GP offers a special
346
00:16:38,429 --> 00:16:42,764
window into a specific asset class, an
opportunity, a sector, a region, something
347
00:16:42,764 --> 00:16:47,004
where the LP finds very interesting and wants
to learn alongside the GP of what they're
348
00:16:47,004 --> 00:16:47,245
doing.
349
00:16:47,245 --> 00:16:51,644
And that will hopefully bring additional
benefits outside of the financial returns to
350
00:16:51,644 --> 00:16:52,304
the organization.
351
00:16:52,620 --> 00:16:56,000
So those are the types of whenever we had a big
ticket, it usually was something like
352
00:16:56,299 --> 00:16:56,379
that.
353
00:16:56,379 --> 00:16:56,700
Absolutely.
354
00:16:56,700 --> 00:16:58,940
So you mentioned the pre committing, that's a
novel structure.
355
00:16:58,940 --> 00:17:02,940
I think founders fund required that from LPs,
but but outside of the mandate, it's a novel
356
00:17:02,940 --> 00:17:03,340
structure.
357
00:17:03,340 --> 00:17:07,095
What are other non traditional structures that
LPs like to invest in?
358
00:17:07,174 --> 00:17:11,355
We're seeing now the sort of renaissance of
these creative structures because it's a tough
359
00:17:11,414 --> 00:17:12,454
fundraising environment.
360
00:17:12,454 --> 00:17:15,095
So GPs are having to get creative to get that
capital.
361
00:17:15,095 --> 00:17:18,634
You mentioned co investments, and I think
that's that's one of the primary things that
362
00:17:18,694 --> 00:17:19,815
LPs are asking for.
363
00:17:19,815 --> 00:17:23,720
You know, some LPs say, hey, listen, before we
commit the fund, we wanna see a few co
364
00:17:23,720 --> 00:17:28,039
investments and maybe even consummate a few co
investments before we commit to the fund.
365
00:17:28,039 --> 00:17:30,119
Sometimes they say, and we we even want it fee
free.
366
00:17:30,119 --> 00:17:31,799
In some cases, they're okay to pay fees.
367
00:17:31,799 --> 00:17:33,880
So that's one thing on the co investment side.
368
00:17:33,880 --> 00:17:35,159
They wanna see co investments.
369
00:17:35,159 --> 00:17:39,134
They sometimes even wanna put in writing the
amount of co investment to fund ratio if they
370
00:17:39,134 --> 00:17:40,174
decide to go into the fund.
371
00:17:40,174 --> 00:17:43,215
So LPs are, you know, they're seeing more co
investments than they've ever seen before.
372
00:17:43,215 --> 00:17:44,494
So that's one particular thing.
373
00:17:44,494 --> 00:17:48,975
Another thing is secondaries and that could be,
you know, an LP led secondary or something that
374
00:17:48,975 --> 00:17:52,250
some of your listeners may have heard of called
the continuation vehicles.
375
00:17:52,309 --> 00:17:55,190
And this is something that I think you're going
to see a lot of.
376
00:17:55,190 --> 00:17:57,190
I you're definitely seeing on the private
equity side.
377
00:17:57,190 --> 00:18:00,150
We do a lot of private equity, but I think you
are going to start seeing it.
378
00:18:00,150 --> 00:18:03,914
I think you're already seeing it, starting to
see it on the venture capital side, where there
379
00:18:03,914 --> 00:18:08,255
is an asset that is sort of going to live
beyond the life of the fund.
380
00:18:08,555 --> 00:18:11,995
Now VC funds can extend pretty long, but
private equity funds a little shorter.
381
00:18:11,995 --> 00:18:16,715
But even still, there are some assets that the
GP feels, hey, I don't think it's a right time
382
00:18:16,715 --> 00:18:17,115
to sell.
383
00:18:17,115 --> 00:18:20,750
I want to give it another few years for it to
kinda get go build some value.
384
00:18:20,750 --> 00:18:24,830
And then they all create a vehicle and some LPs
will wanna get out and some new and the GPU
385
00:18:24,830 --> 00:18:27,330
will try to find us some new some new LPs.
386
00:18:27,470 --> 00:18:31,150
So I think from that end, it's an it's an
interesting way to also create a relationship
387
00:18:31,150 --> 00:18:35,725
with a new LP by bringing them to a
continuation vehicle and hoping to either
388
00:18:35,725 --> 00:18:40,125
formally staple or paperclip, you know, some
people informally, a commitment to their next
389
00:18:40,125 --> 00:18:41,805
funds through these continuation vehicles.
390
00:18:41,805 --> 00:18:43,805
And the same thing could be said with co
investments.
391
00:18:43,805 --> 00:18:48,789
You can either formally staple, like legally
staple, or you can do a handshake or a paper
392
00:18:48,789 --> 00:18:49,750
clip by saying, hey.
393
00:18:49,750 --> 00:18:50,150
Listen.
394
00:18:50,150 --> 00:18:53,509
We'll show you this co investment, but if this
works out, like, we hope you come into our
395
00:18:53,509 --> 00:18:53,830
fund.
396
00:18:53,830 --> 00:18:57,509
So there's these things that are happening,
and, you know, LPs are very creative thinking
397
00:18:57,509 --> 00:18:58,964
about those types of things.
398
00:18:58,964 --> 00:19:00,825
There's a lot more that we could talk about.
399
00:19:01,285 --> 00:19:03,845
If you had a few hours, I could talk about, but
we could probably don't.
400
00:19:03,845 --> 00:19:08,484
But but it's definitely if you're an LP and you
have an idea of how to work with the GP.
401
00:19:08,484 --> 00:19:09,605
It's the time to tell them.
402
00:19:09,605 --> 00:19:13,045
No matter how wackadoodle it may seem, it may
just work in this fundraising environment.
403
00:19:13,045 --> 00:19:13,510
Problem solving.
404
00:19:13,510 --> 00:19:14,441
GPs have their problems.
405
00:19:14,441 --> 00:19:15,372
LPs have their problems.
406
00:19:15,372 --> 00:19:18,630
So so in terms of LPs, what what are their
problems in this market?
407
00:19:18,630 --> 00:19:20,957
Aside of not getting money back, that's an
obvious one.
408
00:19:20,957 --> 00:19:22,586
But what are they trying to solve?
409
00:19:22,586 --> 00:19:24,448
What kind of funds are they looking for?
410
00:19:24,448 --> 00:19:28,201
What's a common problem that LPs come to you
and say, Les, if you could deliver this, I'd
411
00:19:28,201 --> 00:19:28,790
write a check
412
00:19:28,790 --> 00:19:28,986
today.
413
00:19:28,986 --> 00:19:31,735
Let me talk about maybe the LP that doesn't
have a lot of capital.
414
00:19:31,735 --> 00:19:36,404
And I think on the private side, and I think
that is the majority of of LPs out there that
415
00:19:36,404 --> 00:19:41,200
have committed so much to private equity that
because they're not getting capital back, their
416
00:19:41,200 --> 00:19:43,680
decisions are whittled down to just a couple.
417
00:19:43,680 --> 00:19:48,080
You know, the first decision is, hey, I don't
have a lot of capital, so I need to either end
418
00:19:48,080 --> 00:19:52,559
relationships with some existing managers or I
need to scale back the size of my my
419
00:19:52,559 --> 00:19:57,494
commitments when I re up or reinvest in in in
their next fund and sometimes both.
420
00:19:57,494 --> 00:19:59,974
And so I think their solution is okay.
421
00:19:59,974 --> 00:20:03,815
Well, suppose you'd like all your managers and
suppose you wanna keep your re ups the same.
422
00:20:03,815 --> 00:20:04,775
Now what do you do then?
423
00:20:04,775 --> 00:20:05,974
There are some things you could do.
424
00:20:05,974 --> 00:20:09,369
You know, one thing you could do is you could
use a secondary market to try to find some
425
00:20:09,369 --> 00:20:14,250
liquidity either through just a plain chain
secondary for funds that you feel like you're
426
00:20:14,250 --> 00:20:17,210
not going to continue with and get some cap
liquidity there.
427
00:20:17,210 --> 00:20:21,609
But what I was also referring to is is there's
some novel things, things like structured
428
00:20:21,609 --> 00:20:25,755
secondaries where an asset manager will sort of
take the cash flows.
429
00:20:25,755 --> 00:20:30,475
And once they're paid out a certain multiple or
IRR, you can get some cash back, retain the
430
00:20:30,475 --> 00:20:34,315
upside, but let an asset manager get a little
bit of that while maintaining the relationship
431
00:20:34,315 --> 00:20:35,195
with that GP.
432
00:20:35,195 --> 00:20:37,674
So a lot of these and I don't wanna call them
problems.
433
00:20:37,674 --> 00:20:38,009
Right?
434
00:20:38,009 --> 00:20:41,450
Mean, they're basically because these things
are these these are situations that may be
435
00:20:41,450 --> 00:20:41,950
temporary.
436
00:20:42,089 --> 00:20:45,289
And they're all the it's a very simple it's
very simple math folks.
437
00:20:45,289 --> 00:20:48,890
Like, because no one knows, like, when these
institutions or these LPs are going to get more
438
00:20:48,890 --> 00:20:49,390
liquidity.
439
00:20:49,529 --> 00:20:51,950
But it's basically number 1, are they going to
get realizations?
440
00:20:52,154 --> 00:20:56,674
Or number 2, is the underlying liquidity of the
market or the underlying denominator that we've
441
00:20:56,795 --> 00:20:59,035
that I think some some of your guests have
talked about before.
442
00:20:59,035 --> 00:20:59,275
Denominator.
443
00:20:59,275 --> 00:21:00,154
The dominator effect.
444
00:21:00,154 --> 00:21:05,750
Do the public markets melt up so much that they
they they shrink or dilute the size of private
445
00:21:05,750 --> 00:21:09,269
so that you could build up your privates
program and reallocate more capital to the
446
00:21:09,269 --> 00:21:10,070
private portfolio.
447
00:21:10,070 --> 00:21:12,710
And I I I think there's there's a chance that
may be happen.
448
00:21:12,710 --> 00:21:15,830
I mean, it was, you know, last year was a great
year for the markets, but they don't.
449
00:21:15,830 --> 00:21:20,525
What so the denominator effect has been diluted
down, but what they haven't been seeing is
450
00:21:20,525 --> 00:21:22,144
realizations from the private managers.
451
00:21:22,205 --> 00:21:26,545
So it is their their main issues are at least
the symptom comes from illiquidity.
452
00:21:27,325 --> 00:21:31,005
Also, I mean, there's there's you know, an LP
wants to and should.
453
00:21:31,005 --> 00:21:32,519
We all know it's very hard to market time.
454
00:21:32,519 --> 00:21:32,920
Right?
455
00:21:32,920 --> 00:21:35,080
Warren Buffett says it can't, you know, market
time.
456
00:21:35,080 --> 00:21:38,840
But they want to be they want to continue to
commit, you know, through vintages, and they
457
00:21:38,840 --> 00:21:40,299
want to have vintage for diversification.
458
00:21:40,680 --> 00:21:44,805
So a lot of liquidity is not because they don't
have the money, but it's already spoken for
459
00:21:44,884 --> 00:21:46,725
with managers that they like and they trust.
460
00:21:46,725 --> 00:21:50,404
So to your new managers, it's not that they
don't have money and they're not allocating.
461
00:21:50,404 --> 00:21:55,125
It's just that their inability, their
wherewithal to invest in new managers is
462
00:21:55,125 --> 00:21:59,125
significantly handicapped by their inability to
have free encumbered cash that they could put
463
00:21:59,125 --> 00:21:59,945
to new managers.
464
00:22:00,359 --> 00:22:04,619
What determines what GPs, LPs like and trust
outside of returns?
465
00:22:04,680 --> 00:22:08,920
Well, I think David Swenson always said the
first thing that he looks for in a good manager
466
00:22:08,920 --> 00:22:09,559
is character.
467
00:22:09,559 --> 00:22:10,759
The second thing is character.
468
00:22:10,759 --> 00:22:11,799
The third thing is character.
469
00:22:11,799 --> 00:22:17,345
So, like, I think the character of a manager is
is first and foremost something that now he has
470
00:22:17,345 --> 00:22:21,365
to find because you can explain bad
performance, but it's very hard to explain
471
00:22:21,424 --> 00:22:22,464
explain bad behavior.
472
00:22:22,464 --> 00:22:25,984
Or in the case of, you know, some situations,
bad operations or for people that don't have a
473
00:22:25,984 --> 00:22:27,024
great non investment side.
474
00:22:27,024 --> 00:22:30,304
So I I really think that the first and foremost
is you gotta have people that are highly
475
00:22:30,304 --> 00:22:30,804
communicative.
476
00:22:31,079 --> 00:22:35,500
LPs want highly communicative, highly aligned,
passionate, hardworking, motivated,
477
00:22:35,559 --> 00:22:37,559
incentivized folks to represent them.
478
00:22:37,559 --> 00:22:41,319
And I think that's the the the that's the
starting point because there's a saying that
479
00:22:41,319 --> 00:22:43,659
people don't buy performance, they buy a
process.
480
00:22:43,744 --> 00:22:46,144
And there's certainly, you know, name your
venture fund.
481
00:22:46,144 --> 00:22:48,545
There are certainly times where venture funds
have gotten wrong.
482
00:22:48,545 --> 00:22:51,505
You know, Sequoia probably around I don't I
don't want to guess.
483
00:22:51,505 --> 00:22:54,865
I haven't seen the returns, but I'm sure
Sequoia and the rest of a lot a lot of other
484
00:22:54,865 --> 00:22:58,080
venture funds, you know, they probably had a
pretty terrible vintage around that sort of 90
485
00:22:58,080 --> 00:23:01,039
8, 99 time frame when the tech 1st tech wreck
happened.
486
00:23:01,039 --> 00:23:05,519
And I'm sure same the the ones in the early
2000s when you had Facebook and Google go
487
00:23:05,519 --> 00:23:09,615
public, and I would imagine those were some of
the some of the best returning VC funds.
488
00:23:09,615 --> 00:23:13,535
So I think there's gonna be good times and bad,
but you have to have that relationship, that
489
00:23:13,535 --> 00:23:15,154
communication, and those incentives.
490
00:23:15,375 --> 00:23:16,654
And incentives are very important.
491
00:23:16,654 --> 00:23:16,974
Right?
492
00:23:16,974 --> 00:23:20,575
The alignment and the way that people get paid,
when they get paid, how they get paid.
493
00:23:20,575 --> 00:23:24,174
Another thing that we, David, might wanna talk
about is valuations, how people think about how
494
00:23:24,174 --> 00:23:25,234
they value their portfolio.
495
00:23:25,349 --> 00:23:27,609
Is it very conservative, or is it not very
conservative?
496
00:23:27,669 --> 00:23:32,470
So a lots of these things set the foundation of
the relationship between the LP and the GP, and
497
00:23:32,470 --> 00:23:34,730
I think are even more important to them than
the performance.
498
00:23:34,869 --> 00:23:36,230
Couple things to unpack there.
499
00:23:36,230 --> 00:23:37,589
1 is bad behavior.
500
00:23:37,589 --> 00:23:40,634
What is bad behavior that you've seen from
managers that have gotten scale?
501
00:23:40,875 --> 00:23:43,755
So I would say, you know, bad behavior is
obviously very subjective.
502
00:23:43,755 --> 00:23:47,595
But one thing is GPs that are just not they
don't communicate well with their LPs.
503
00:23:47,595 --> 00:23:51,195
Whether times are good or times are bad,
inability to really know what's going on from
504
00:23:51,195 --> 00:23:54,109
LP is something that I think is, like, would be
frightening to me as an LP.
505
00:23:54,109 --> 00:23:55,630
If the GP sort of says, hey.
506
00:23:55,630 --> 00:23:55,950
Listen.
507
00:23:55,950 --> 00:24:00,349
You can't talk to the head of our firm or the
portfolio manager or the deal person because
508
00:24:00,349 --> 00:24:03,069
either they just don't want you to talk to them
or you're not a big enough investor.
509
00:24:03,069 --> 00:24:06,375
You know, to me, that would be a problem,
especially when things are going haywire as
510
00:24:06,375 --> 00:24:08,375
they sort of have been in VC for the last few
years.
511
00:24:08,375 --> 00:24:13,174
You know, bad behavior could be described also
as just growing either too many growing your,
512
00:24:13,414 --> 00:24:14,214
fund product line.
513
00:24:14,214 --> 00:24:15,335
So having too many funds.
514
00:24:15,335 --> 00:24:15,575
You know?
515
00:24:15,575 --> 00:24:19,654
And I think back to David Swenson, he called it
product proliferation or or asset gathering.
516
00:24:19,654 --> 00:24:19,894
Right?
517
00:24:19,894 --> 00:24:21,569
You know, raising funds that are too big.
518
00:24:21,569 --> 00:24:25,169
I'm not going to name names here, but you know,
there are definitely some VC funds where you've
519
00:24:25,169 --> 00:24:29,490
seen again, back to Swenson, his old adage
sizes in the NBA performance, they've gotten
520
00:24:29,490 --> 00:24:34,069
bigger and the performance has sort of become
from great to good to mediocre.
521
00:24:34,355 --> 00:24:38,115
Now they make more money for themselves, but
they make less money for their clients.
522
00:24:38,115 --> 00:24:41,795
And the trade off that they make is, it's like,
well, why would anyone invest in a fund that
523
00:24:41,795 --> 00:24:43,394
has worse returns than they used to?
524
00:24:43,394 --> 00:24:46,835
And the fact of the matter is is that, you
know, the great venture funds that had the 4
525
00:24:46,835 --> 00:24:48,299
x's and and above, No.
526
00:24:48,299 --> 00:24:50,940
There is a whole world out there that doesn't
need a 4 x fund.
527
00:24:50,940 --> 00:24:53,360
And some of these LPs are large institutions.
528
00:24:53,580 --> 00:24:57,740
And the thing is, is that if you can get a much
larger ticket with less of a return, you make
529
00:24:57,740 --> 00:25:00,000
out on the on the economic side by raising.
530
00:25:00,154 --> 00:25:00,315
Okay.
531
00:25:00,315 --> 00:25:04,554
I raised a $300,000,000 fund 20 years ago, but
I wanna raise a $3,500,000,000 fund now.
532
00:25:04,554 --> 00:25:08,474
You make a lot more money, especially on the
management fee with that $3,500,000,000 fund
533
00:25:08,554 --> 00:25:11,115
$1,000,000,000 fund, even if the returns are
half as good.
534
00:25:11,115 --> 00:25:14,954
So I I don't know if I called it bad behavior
because it's an it's a market, but certainly
535
00:25:14,954 --> 00:25:19,250
some LPs have felt sort of like hoodwinked that
my old great fund that I've supported for a
536
00:25:19,250 --> 00:25:23,730
decade, decade plus has decided to create more
products, has decided to deprioritize them as a
537
00:25:23,730 --> 00:25:28,769
relationship, has decided to launch mega funds,
or has forced me to invest in other funds that
538
00:25:28,769 --> 00:25:32,975
they know I don't want to invest in, but are
kind of stapling the commitment from one fund
539
00:25:32,975 --> 00:25:35,775
to another fund to get access to the fund that
I've always been in.
540
00:25:35,775 --> 00:25:38,735
So those are just some examples, but we can go
on and on about that.
541
00:25:38,735 --> 00:25:40,255
And you mentioned venture marks.
542
00:25:40,255 --> 00:25:44,115
Some some mark very conservatively, some mark
very aggressively.
543
00:25:44,255 --> 00:25:48,759
It's not as big of an issue in private equity,
but in venture capital, should should every VC
544
00:25:48,759 --> 00:25:50,359
be marking their marks very conservatively?
545
00:25:50,359 --> 00:25:52,139
And is there not a middle ground there?
546
00:25:52,839 --> 00:25:54,519
We'll get right back to the interview.
547
00:25:54,519 --> 00:25:58,220
But first, to stay updated on all things
emerging managers and limited partners,
548
00:25:58,359 --> 00:26:02,384
including the very latest data on venture
returns and insights on how to raise capital
549
00:26:02,384 --> 00:26:06,244
from limited partners, subscribe to our free
newsletter at 10xcapitalpodcast.com.
550
00:26:07,744 --> 00:26:08,644
That's www.onezeroxcapitalpodcast.com.
551
00:26:11,904 --> 00:26:12,065
Yeah.
552
00:26:12,065 --> 00:26:14,099
I I, you know, I don't know the right answer to
this.
553
00:26:14,259 --> 00:26:19,299
I just know that some LPs have the same company
in their portfolio marked differently by
554
00:26:19,299 --> 00:26:20,200
different VCGPs.
555
00:26:20,579 --> 00:26:25,160
In some cases, same company with 3 different
marks from 3 reputable GPs.
556
00:26:25,220 --> 00:26:28,835
There are some LPs out there that love the
conservative marks because they always know
557
00:26:28,835 --> 00:26:31,634
that, you know, well, they can't get much worse
than this if you take a really, really
558
00:26:31,634 --> 00:26:32,674
conservative view on the marks.
559
00:26:32,674 --> 00:26:37,634
But listen, I mean, if I was an LP, and I I'm
not saying LPs want this, but I'm just kind of
560
00:26:37,634 --> 00:26:39,715
putting my shoes in, putting myself in their
shoes.
561
00:26:39,715 --> 00:26:43,640
And I get paid on IRRs even on a backward
looking basis over a few years.
562
00:26:43,700 --> 00:26:47,319
And I invest in a lot of VCs that had last
round valuation.
563
00:26:47,380 --> 00:26:51,539
I mean, if my compensation was was was based on
that, I mean, I would I would get paid more
564
00:26:51,539 --> 00:26:51,859
money.
565
00:26:51,859 --> 00:26:53,559
And, money is a great motivator.
566
00:26:53,619 --> 00:26:57,384
So I can't really say what's right or what's
wrong, but I can say that a lot of LPs are
567
00:26:57,384 --> 00:26:57,884
confused.
568
00:26:57,944 --> 00:27:02,105
And that exacerbates the issue of liquidity
because when you don't know what your marks
569
00:27:02,105 --> 00:27:04,664
truly are, don't know how much capital you have
to commit.
570
00:27:04,664 --> 00:27:08,984
And then you have to write an an LP who doesn't
know these companies inside out, they have to
571
00:27:08,984 --> 00:27:11,650
make the arbitrary decision of how to mark
their own book.
572
00:27:11,650 --> 00:27:15,809
Because if there's 3 or 4 companies that have
this different valuations, they're gonna have
573
00:27:15,809 --> 00:27:19,090
to either create some kind of mishmash
Frankenstein valuation, or they're gonna say,
574
00:27:19,090 --> 00:27:19,410
listen.
575
00:27:19,410 --> 00:27:21,029
I really wanna wanna be super conservative.
576
00:27:21,090 --> 00:27:25,424
I'm gonna take the most conservative mark, or
I'm gonna take the mark of the GP that I trust
577
00:27:25,424 --> 00:27:25,904
the most.
578
00:27:25,904 --> 00:27:28,424
And that's something that is, you know, to me
bizarre.
579
00:27:28,424 --> 00:27:29,825
It doesn't happen in private equity.
580
00:27:29,825 --> 00:27:30,945
It only happens in venture.
581
00:27:30,945 --> 00:27:34,865
And, you know, something and I don't I don't
know if I could show my my screen here, but I I
582
00:27:34,945 --> 00:27:36,170
if you could bear with me.
583
00:27:36,170 --> 00:27:41,529
But so we did a poll of our GPs, and we
basically asked them sorry.
584
00:27:41,529 --> 00:27:42,890
I'm trying to just oh, here we go.
585
00:27:42,890 --> 00:27:44,809
So we asked them very simple question.
586
00:27:44,809 --> 00:27:47,450
How confident do you feel about your VC
valuations?
587
00:27:47,450 --> 00:27:52,125
And then you can see right there, 73% of them
said they're not confident in their VC marks,
588
00:27:52,125 --> 00:27:54,785
and only 7% said they're confident in their VC
marks.
589
00:27:54,845 --> 00:27:59,244
So to think about that, you know, some some
endowments, some some family offices I know
590
00:27:59,244 --> 00:28:03,480
have 50% of their book, of their entire
endowment, of their entire portfolio in VC.
591
00:28:03,480 --> 00:28:07,559
And to have a 7% confidence, I'm not saying
that it's it's the same 7 piece, same
592
00:28:07,559 --> 00:28:09,480
endowments and and family offices.
593
00:28:09,480 --> 00:28:14,600
But if you thought about that, that 7% of them
had confidence that their VC marks are marked
594
00:28:14,600 --> 00:28:16,894
properly, that'd be a pretty big problem.
595
00:28:16,894 --> 00:28:20,894
If half your endowment was in VC and you only
had a 7% confidence that those marks were
596
00:28:20,894 --> 00:28:21,295
correct.
597
00:28:21,295 --> 00:28:22,654
What do LPs do in that case?
598
00:28:22,654 --> 00:28:25,295
Do they just take a systematic 20, 25% cut?
599
00:28:25,295 --> 00:28:27,869
Or what are some ways that's l LPs solve that
problem?
600
00:28:27,869 --> 00:28:28,990
I've heard a lot of different ways.
601
00:28:28,990 --> 00:28:31,869
I mean, one way you you could do this is you
could go to your GPs and say, hey.
602
00:28:31,869 --> 00:28:32,109
Listen.
603
00:28:32,109 --> 00:28:34,029
I want you to I wanna take the quick hit.
604
00:28:34,029 --> 00:28:35,230
I wanna take the quick pain.
605
00:28:35,230 --> 00:28:38,589
I want you to mark down as conservatively as
possible across your portfolio.
606
00:28:38,589 --> 00:28:41,869
But the problem is it's up to the GP as to if
they'll do it or not.
607
00:28:41,869 --> 00:28:43,305
Some people, they're like, listen.
608
00:28:43,384 --> 00:28:44,825
We just have to do it by the book.
609
00:28:44,825 --> 00:28:46,105
We don't control our GPs.
610
00:28:46,105 --> 00:28:50,505
Our GPs will give us our marks, and we have to
aggregate those marks and then put it into our
611
00:28:50,505 --> 00:28:50,825
NAV.
612
00:28:50,825 --> 00:28:51,625
And that's all they do.
613
00:28:51,625 --> 00:28:55,349
I mean, after all, like, these are all
professionally audited firms, and they all have
614
00:28:55,349 --> 00:28:57,269
talked to their auditors about why the marks
are right.
615
00:28:57,269 --> 00:29:01,669
And who be it for me, you know, as an LP to
kind of change those numbers around.
616
00:29:01,669 --> 00:29:02,890
I'm not a venture capitalist.
617
00:29:02,950 --> 00:29:06,150
I'm not a professional person who knows these
companies inside out.
618
00:29:06,150 --> 00:29:07,990
So why should I be changing the marks around?
619
00:29:07,990 --> 00:29:13,234
But some LPs have artificially taken their NEVs
down just because these these and many of these
620
00:29:13,234 --> 00:29:17,875
not are non profit institutions that have a
fiduciary responsibility to reserve enough cash
621
00:29:17,875 --> 00:29:21,575
to allow them to pay for the ongoing operations
of their institutions.
622
00:29:21,634 --> 00:29:23,095
And it could be a hospital.
623
00:29:23,154 --> 00:29:24,694
It could be a university.
624
00:29:24,755 --> 00:29:26,970
You know, it could be these institutions that
we rely on.
625
00:29:27,210 --> 00:29:30,409
So let's double click a little bit on the LP
relationship.
626
00:29:30,409 --> 00:29:33,849
I think that's an integral part of the industry
and something that doesn't get enough cover.
627
00:29:33,849 --> 00:29:39,609
So after the LP invests into, let's call it
fund 3, their first fund, how often should the
628
00:29:39,609 --> 00:29:41,309
GP should be meeting with the LP?
629
00:29:41,615 --> 00:29:45,215
Outside of quarterly reports, what should the
GP be doing in order to build a close
630
00:29:45,215 --> 00:29:46,355
relationship with the LPs?
631
00:29:46,575 --> 00:29:49,055
Again, it's I I think it's a case by case
basis.
632
00:29:49,055 --> 00:29:53,535
So that interaction with the LP, or between the
LP and the GP is obviously gonna be more
633
00:29:53,535 --> 00:29:55,759
frequent, more distant at this onset.
634
00:29:55,759 --> 00:29:56,399
But well, listen.
635
00:29:56,399 --> 00:30:00,799
If you've been with a firm for 10 years, 20
years, you know, onwards, there obviously
636
00:30:00,799 --> 00:30:03,759
probably isn't as big of a need to have as
frequent a dialogue.
637
00:30:03,759 --> 00:30:08,079
Maybe there is when there's things like
leadership changes or strategy changes or I'm
638
00:30:08,079 --> 00:30:09,375
gonna launch this fund and that fund.
639
00:30:09,375 --> 00:30:11,174
I'm opening this office or that office.
640
00:30:11,174 --> 00:30:15,894
I think LPs or GPs ask me a lot about the types
of questions you're asking me, and I don't
641
00:30:15,894 --> 00:30:19,894
think relationships between GPs and LPs are
that different than any other relationship.
642
00:30:19,894 --> 00:30:23,195
It's it's it's highly dependent on the nature
of the relationship.
643
00:30:23,335 --> 00:30:28,049
So I can't really put an exact number on it,
but I think, you know, giving some examples
644
00:30:28,049 --> 00:30:30,289
that I did, you can kinda get the sense of what
I'm talking about.
645
00:30:30,289 --> 00:30:33,650
With the LP communication, they're essentially
trying to solve around 2 issues.
646
00:30:33,650 --> 00:30:35,169
1 is how is my investment doing?
647
00:30:35,169 --> 00:30:38,130
And 2 is what information do I need to make
another investment?
648
00:30:38,130 --> 00:30:42,464
Is that a fair distillation of of what they're
trying to get from from the relationship and
649
00:30:42,464 --> 00:30:43,204
from the contact?
650
00:30:43,265 --> 00:30:43,904
Well, yeah.
651
00:30:43,904 --> 00:30:47,744
I mean, how my investment doing is doing,
especially for early stage managers, I think is
652
00:30:47,744 --> 00:30:48,944
a very hard thing to do.
653
00:30:48,944 --> 00:30:52,900
I mean, you're sort of waiting a long, long,
long time to really find out how they're how
654
00:30:52,900 --> 00:30:53,460
it's doing.
655
00:30:53,460 --> 00:30:58,820
But there is a interesting thing that happens,
and and it's it's only human nature where a GP
656
00:30:58,820 --> 00:31:02,740
will tell an LP about the good things that are
happening about their portfolios much more
657
00:31:02,740 --> 00:31:05,320
likely than the bad things that are happening
about the portfolio.
658
00:31:05,460 --> 00:31:10,954
And I would say that the LPs that have the
strongest relationships with their GPs are the
659
00:31:10,954 --> 00:31:15,595
ones that have a transparent, communicative
relationship where you can talk not only about
660
00:31:15,595 --> 00:31:17,454
the good stuff, but the bad stuff too.
661
00:31:17,914 --> 00:31:19,755
And so I think, you know, you're right.
662
00:31:19,755 --> 00:31:22,289
You know, when you make an investment, you
wanna know if you're making money, whether
663
00:31:22,289 --> 00:31:24,630
you're losing money and all that kind of stuff.
664
00:31:25,009 --> 00:31:28,930
But like I said in the last question about
relationships, relationship is based on
665
00:31:28,930 --> 00:31:30,070
transparency and honesty.
666
00:31:30,369 --> 00:31:34,755
And if something's going wrong, gone wrong,
it's I think it's better to just kind of
667
00:31:35,315 --> 00:31:40,115
surface it out than kind of hide it instead of
just thumping your chest every time something
668
00:31:40,115 --> 00:31:41,335
goes right with your portfolio.
669
00:31:41,795 --> 00:31:47,474
In terms of Alpine's role, are you after the
the LP has invested in the GP, are you also
670
00:31:47,474 --> 00:31:51,579
meeting with the LP and briefing them on the on
the GP and on their performance?
671
00:31:51,579 --> 00:31:55,579
Or is it just do you hand off the baton and
say, you know, GP, now this is your
672
00:31:55,579 --> 00:31:56,079
relationship?
673
00:31:56,700 --> 00:31:58,640
Generally speaking, we hand off to the baton.
674
00:31:58,779 --> 00:32:02,859
And even before, you know, even before before
the relationship is consummated, I think it's
675
00:32:02,859 --> 00:32:08,125
essential that after make the initial
interactions happen between the GPs at the GP
676
00:32:08,125 --> 00:32:12,525
and the LP, and this could be over a number of
different years, a a number of years, is that
677
00:32:12,525 --> 00:32:17,660
we allow the GP and LP to organically cement a
relationship together without any of our
678
00:32:17,660 --> 00:32:20,220
involvement because we're not gonna be around
forever.
679
00:32:20,220 --> 00:32:25,359
We act on a agent agency, not a principal
basis.
680
00:32:25,580 --> 00:32:29,900
So, you know, by the definition of that, we are
not taking fiduciary responsibility over the
681
00:32:29,900 --> 00:32:30,400
introduction.
682
00:32:30,644 --> 00:32:35,045
I take obviously reputational responsibility
because if I introduce a lot of bad funds or
683
00:32:35,045 --> 00:32:38,164
bad companies to our investors, they're
probably not gonna talk to me, and they're
684
00:32:38,164 --> 00:32:39,924
probably gonna tell their friends, don't talk
the less.
685
00:32:39,924 --> 00:32:44,980
But generally speaking, you know, I think it's
very important that the LP and the GP establish
686
00:32:45,140 --> 00:32:49,080
have some time to establish some basic level of
relationship away from us.
687
00:32:49,140 --> 00:32:55,380
I do think that we do handhold longer and
closer in places outside of the US, like Asia,
688
00:32:55,380 --> 00:32:56,440
like Latin America.
689
00:32:56,714 --> 00:33:00,794
And, you know, that should probably be expected
given potential cultural differences, the lack
690
00:33:00,794 --> 00:33:05,035
of travel from the GP to the LP or the LP to
the GP, and the lengths in some cases, the
691
00:33:05,035 --> 00:33:05,934
language differences.
692
00:33:05,994 --> 00:33:10,154
So I think it depends, but generally speaking,
we like the LP and GP to have a very direct
693
00:33:10,154 --> 00:33:10,654
relationship.
694
00:33:10,789 --> 00:33:14,710
You're known for your kind of round tables and
for your gatherings, and we we could always
695
00:33:14,710 --> 00:33:15,190
edit this out.
696
00:33:15,190 --> 00:33:18,869
But tell me about kind of the groups, the
amazing LP groups that you put together in
697
00:33:18,869 --> 00:33:19,509
different regions.
698
00:33:19,509 --> 00:33:20,470
How did that start?
699
00:33:20,470 --> 00:33:21,990
What are you trying to accomplish?
700
00:33:21,990 --> 00:33:25,315
And then how do how do LPs sign up for
something like that?
701
00:33:25,315 --> 00:33:29,075
Well, I have to credit a couple people out
there who really kinda gave gave us the idea.
702
00:33:29,075 --> 00:33:31,255
The first is the Smithsonian Investment Office.
703
00:33:31,474 --> 00:33:37,009
So when COVID hit, no one was traveling, but
LPs were very interested in what was going on
704
00:33:37,009 --> 00:33:37,490
in the world.
705
00:33:37,490 --> 00:33:42,929
And so what we did is that the Smithsonian and
myself, every Thursday night hosted on a
706
00:33:42,929 --> 00:33:46,690
clubhouse, a gathering of LPs that would just
talk about what they're seeing in the markets
707
00:33:46,690 --> 00:33:50,644
and what they're seeing, hearing from their
managers because, you know, the the there was
708
00:33:50,644 --> 00:33:51,045
no travel.
709
00:33:51,045 --> 00:33:52,105
There was no discussion.
710
00:33:52,325 --> 00:33:53,865
No one really knew what was going on.
711
00:33:53,924 --> 00:33:57,365
And that turned into a weekly thing that every
Thursday night, because none of us were leaving
712
00:33:57,365 --> 00:34:00,244
our house, no one would know who's getting on
the plane, that every Thursday night, we would
713
00:34:00,244 --> 00:34:01,045
meet up and we'd talk.
714
00:34:01,045 --> 00:34:02,909
So that was sort of the first iteration.
715
00:34:02,909 --> 00:34:06,349
There's also a friend of mine, and he works at
the he works at an endowment.
716
00:34:06,349 --> 00:34:09,869
I don't wanna out him just because just in case
his compliance department doesn't know he does
717
00:34:09,869 --> 00:34:10,109
this.
718
00:34:10,109 --> 00:34:14,289
But he had interesting group of LPs together
unified on a platform.
719
00:34:14,349 --> 00:34:17,855
And, but it was a platform that focused on a
specific part of the world.
720
00:34:17,855 --> 00:34:22,175
So one of the people in the group said, maybe
you should reach out and do this on another
721
00:34:22,175 --> 00:34:22,675
platform.
722
00:34:22,815 --> 00:34:28,494
And so we started using platforms, whether it's
social media, and then Zoom kinda came into
723
00:34:28,494 --> 00:34:28,974
effect.
724
00:34:28,974 --> 00:34:33,820
So we would have these events where we'd have
an LP only chats about what people wanted to
725
00:34:33,820 --> 00:34:34,140
talk about.
726
00:34:34,140 --> 00:34:39,039
It might be a specific investment idea, a
manager, a sector, a specific geography.
727
00:34:39,260 --> 00:34:41,680
It could be even something like careers and
compensation.
728
00:34:41,739 --> 00:34:42,855
It could be LP software.
729
00:34:42,855 --> 00:34:44,295
You know, LP software has been amazing.
730
00:34:44,295 --> 00:34:50,295
It's it's it's amazing how painful the
experience LPs have had with LP software with,
731
00:34:50,295 --> 00:34:54,614
you know, systems and software and how they
continually try to optimize for it, but most of
732
00:34:54,614 --> 00:34:59,800
them feel almost helpless to to to deal with
the current system that they're dealing with
733
00:34:59,800 --> 00:35:00,440
right now.
734
00:35:00,440 --> 00:35:01,960
So we've we've done a lot on that.
735
00:35:01,960 --> 00:35:03,339
You know, all this is just crowdsourced.
736
00:35:03,400 --> 00:35:06,839
Now that these are real issues and problems and
curiosities that LPs have.
737
00:35:06,839 --> 00:35:11,824
All we do is just we're the organizer of these
of these events, and they could be very small
738
00:35:11,824 --> 00:35:12,224
to very large.
739
00:35:12,224 --> 00:35:12,545
They could be
740
00:35:12,625 --> 00:35:14,704
And these are virtual or these are in person
too.
741
00:35:14,704 --> 00:35:15,184
Correct?
742
00:35:15,184 --> 00:35:15,984
We we do both.
743
00:35:15,984 --> 00:35:16,804
We do both.
744
00:35:17,105 --> 00:35:18,324
This has been really enjoyable.
745
00:35:18,545 --> 00:35:20,864
Thank you for taking the time to sit down and
chat.
746
00:35:20,864 --> 00:35:24,385
What would you like for our listeners to know
about you, Alpine, or anything else you'd like
747
00:35:24,385 --> 00:35:25,184
to shine a light on?
748
00:35:25,184 --> 00:35:25,425
Yeah.
749
00:35:25,425 --> 00:35:28,739
I, you know, I really wanna reach out to those
managers that are starting out.
750
00:35:28,739 --> 00:35:33,140
Maybe you're even an undergrad or a grad
student who's hasn't even thought about
751
00:35:33,140 --> 00:35:35,160
starting a an investment firm.
752
00:35:35,700 --> 00:35:40,275
And I would like for you guys to focus on the
non investment side because that's very much
753
00:35:40,275 --> 00:35:40,994
what I focus on.
754
00:35:40,994 --> 00:35:45,235
I focus on the non investment side of the
business which is mostly the fundraising but
755
00:35:45,235 --> 00:35:48,195
it's a lot of the advice that we give to
managers when they're building their business.
756
00:35:48,195 --> 00:35:54,599
Because I think when you read a lot about these
great investors and you you're you're you're in
757
00:35:54,599 --> 00:35:57,480
a business school or you're reading these
books, you learn about the art of investing.
758
00:35:57,480 --> 00:36:02,039
But a lot of times you don't focus on the non
investment side and the non investment side
759
00:36:02,039 --> 00:36:07,075
whether it's fundraising operations accounting
all these things that are essential are things
760
00:36:07,075 --> 00:36:08,515
that lps focus on.
761
00:36:08,515 --> 00:36:13,075
And the sooner you have a good thoughtful
approach to how you build your non investment
762
00:36:13,075 --> 00:36:15,494
side, I think the sooner you will be
successful.
763
00:36:16,035 --> 00:36:20,434
Sometimes lps are very lenient because they
know that managers are new and they're happy
764
00:36:20,434 --> 00:36:21,849
to, you know, help them out.
765
00:36:21,849 --> 00:36:25,769
In many cases, they I think they're even more
understanding for venture capital managers
766
00:36:25,769 --> 00:36:29,949
because, you know, venture capitalists, there's
it's hard to find a good venture capital fund
767
00:36:30,090 --> 00:36:30,409
out there.
768
00:36:30,409 --> 00:36:34,269
And if they find a great investor who may not
have thought about the non investment side,
769
00:36:34,385 --> 00:36:38,644
they're happy to give advice on how they build
build a non investment side.
770
00:36:38,864 --> 00:36:41,824
So I would think really carefully about that
side of the business.
771
00:36:41,824 --> 00:36:44,864
It's usually you know an afterthought until
they have to.
772
00:36:44,864 --> 00:36:46,565
So that would be my one piece of advice.
773
00:36:47,230 --> 00:36:49,550
And I know we've had conversations offline.
774
00:36:49,550 --> 00:36:53,969
You're driven by things outside of just fees,
which is sets your partner in the space.
775
00:36:54,510 --> 00:36:58,769
What makes you so passionate about being a
placement agent and raising capital for GPs?
776
00:36:59,054 --> 00:37:02,574
You know, I'll I'll give you one selfish answer
and one little less selfish answer.
777
00:37:02,574 --> 00:37:06,894
So one of the greatest things that one of the
greatest perks about our business is that we
778
00:37:06,894 --> 00:37:12,655
have the we're in the lucky position that we
hear all the great questions that our LPs ask
779
00:37:12,655 --> 00:37:13,554
of our GPs.
780
00:37:14,070 --> 00:37:17,930
And at the end of the fundraise, we can make
the decision and usually do make the decision
781
00:37:17,989 --> 00:37:19,289
to invest in the manager.
782
00:37:19,349 --> 00:37:23,210
So most LPs, right, they they ask these GPs
their questions in a vacuum.
783
00:37:23,430 --> 00:37:27,864
But at the end of the fundraise, we would have
have heard 100, thousands of questions from our
784
00:37:27,864 --> 00:37:28,364
LPs.
785
00:37:28,744 --> 00:37:32,525
And that's that's really a gift that I think is
very unusual in this business.
786
00:37:32,825 --> 00:37:36,204
And it gives us confident confidence and
comfort to invest our managers.
787
00:37:36,344 --> 00:37:38,364
And I think that's a really great perk.
788
00:37:38,664 --> 00:37:41,864
You know, the second thing is, you know, you
talked about not caring about new fees.
789
00:37:41,864 --> 00:37:45,869
You know, I I got I got a family to feed and
I've got employees to pay.
790
00:37:45,930 --> 00:37:51,050
So we obviously care about the fees, but you
know, I think you always have also care about
791
00:37:51,050 --> 00:37:56,344
the fit of what you're doing and what the
market wants.
792
00:37:56,344 --> 00:37:58,605
And the market is not one type of LP.
793
00:37:59,385 --> 00:38:03,784
The market is an amalgamation of lots of
different types of LPs that want a lot of
794
00:38:03,784 --> 00:38:04,684
different things.
795
00:38:04,824 --> 00:38:09,900
So for instance, if I'm raising money for a
$4,000,000,000 firm, right, that $4,000,000,000
796
00:38:10,280 --> 00:38:15,400
firm may not be as interesting to an endowment
or a family office that invest in managers and
797
00:38:15,400 --> 00:38:20,264
most family offices endowments invest in
managers, at least for the first time in that
798
00:38:20,264 --> 00:38:23,144
that are that are raising less than a
$1,000,000,000 and in some cases less than
799
00:38:23,144 --> 00:38:29,144
$500,000,000,000 So I have to not only find
those bigger managers that a pension fund or
800
00:38:29,144 --> 00:38:33,784
insurance company can invest in, but also have
to find those smaller managers than endowment
801
00:38:33,784 --> 00:38:35,409
and a family office want to invest in.
802
00:38:35,409 --> 00:38:41,409
And so there's no kind of universal fund that
is will be magical to all types of LPs and now
803
00:38:41,409 --> 00:38:42,949
not to all LPs in the world.
804
00:38:43,090 --> 00:38:47,329
And that's what I mean by not always trying to
chase the biggest fee because we have these
805
00:38:47,329 --> 00:38:50,974
great relationships with LPs because we've been
doing it for a very long period of time and we
806
00:38:50,974 --> 00:38:52,114
work really hard at it.
807
00:38:52,335 --> 00:38:56,255
But I think if you cannot no no LP is going to
invest in a fund just because you have a good
808
00:38:56,255 --> 00:38:56,755
relationship.
809
00:38:57,054 --> 00:39:01,394
They're only going to invest in funds that they
truly find organically compelling.
810
00:39:01,775 --> 00:39:05,980
And by doing that, we have to source a lot of
interesting ideas and a lot of different ideas
811
00:39:05,980 --> 00:39:08,799
of different shapes and sizes for different
types of LPs.
812
00:39:09,339 --> 00:39:12,859
And you're essentially you're essentially
operating a marketplace, so you're finding out
813
00:39:12,859 --> 00:39:13,739
from LPs what they need.
814
00:39:13,739 --> 00:39:18,394
And obviously, then you have they have GPs and
you track that in the CRM, or you you built out
815
00:39:18,394 --> 00:39:20,255
your own CRM, or how do you manage that?
816
00:39:20,474 --> 00:39:22,715
We we we have databases, but I I think it's
simple.
817
00:39:22,715 --> 00:39:22,795
Right?
818
00:39:22,795 --> 00:39:27,355
You know, I I again, like, you know, I mean, I
know Warren Buffett's not, like, a big fan of
819
00:39:27,355 --> 00:39:32,039
of of of VC, but but he has invested in things
like Snowflake and things like that that, you
820
00:39:32,039 --> 00:39:35,640
know, they're they're public, but they're
they're definitely high high high growth tech,
821
00:39:35,640 --> 00:39:36,440
high valuation tech.
822
00:39:36,440 --> 00:39:40,599
So but, like, you know, Warren Buffett always
has this sort of, like, gut mentality based on
823
00:39:40,599 --> 00:39:42,300
the interactions that he has with people.
824
00:39:42,679 --> 00:39:47,934
And I would say, you know, the same thing for
us as in our relations in in relations to what
825
00:39:47,934 --> 00:39:49,474
type of GPs that we work with.
826
00:39:49,614 --> 00:39:55,375
A lot of times we're responding to the demands
and interest of what LPs want, but a lot of
827
00:39:55,375 --> 00:39:59,714
times we're taking our own view on what we
think is interesting in the market.
828
00:40:00,119 --> 00:40:03,639
And in some cases, very confident that the
market will adopt it.
829
00:40:03,639 --> 00:40:09,159
And in some cases, hoping, pleading, begging,
praying that the market will find it
830
00:40:09,159 --> 00:40:12,679
interesting, not really knowing if they they
they will find it interesting.
831
00:40:12,679 --> 00:40:14,039
And in some cases, we've gotten it right.
832
00:40:14,039 --> 00:40:15,515
In other cases, we haven't gotten it right.
833
00:40:15,515 --> 00:40:19,275
So I think it's a combination of trying to, you
know, find out where that hockey puck is going
834
00:40:19,275 --> 00:40:23,675
as far as what clients clients might like, and
a little bit of it is is is being responsive to
835
00:40:23,675 --> 00:40:25,215
what they're, looking for.
836
00:40:25,446 --> 00:40:28,806
Well, Les, thank you for the bonus couple of
questions, and, thank you for jumping on the
837
00:40:28,806 --> 00:40:30,966
podcast, and, look forward to meeting up soon.
838
00:40:30,966 --> 00:40:31,367
Absolutely.
839
00:40:31,367 --> 00:40:31,847
Thanks, Dave.
840
00:40:31,847 --> 00:40:32,646
Thanks, Les.
841
00:40:32,646 --> 00:40:33,306
Bye bye.
