🎧🍌 How to Raise a VC Fund, Traits of Top Emerging Managers | Samir Kaji, CEO of Allocate
Why 90% of venture funds struggle to raise, advice for emerging managers, triple-layered SPV's, why everyone is selling secondaries, and how AI is changing private markets and fintech
This conversation is a deep dive into the private markets, how the venture market is evolving, and why there are now 10x more private investment firms than public companies.
We also unpack why 90% of venture funds simply can’t raise capital right now, advice for anyone raising a fund today, how to stand out as an emerging manager, why secondaries have become a primary driver of liquidity in venture, and how to navigate SPVs as both a GP and LP.
We also talk through the AI products they built to evaluate fund managers at Allocate, and how AI is changing venture and company building.
Let me know what you think of this one!
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Timestamps to jump in:
5:31 Evolution of the private markets
17:55 VC markets post-2020
21:09 Risk / return profiles of various fund sizes
24:04 Secondaries will drive future venture returns
33:17 Creative ways to return capital
36:27 “Curiosity Revenue” in AI
41:52 Allocate’s Beyond Summit
43:42 Samir's AI fund analyzer
46:15 Fintech only 1% of financial services revenue
50:13 Triple-layered SPVs
54:50 Breaking down returns in venture
58:27 How to gauge a fund manager’s access
1:00:14 Determining appropriate fund size
1:05:02 90% of venture funds cannot raise right now
1:09:50 How to raise a fund today
1:15:37 ChatGPT roasts Banana Capital
1:19:56 Traits of the best VCs
1:22:41 Vetting grit, hustle, and obsession
1:31:12 Why using AI is table stakes
1:36:49 Value of podcasts
Referenced:
Try Allocate
Eric Vishria episode
Samir’s Venture Unlocked Podcast
Find Samir on X / Twitter and LinkedIn
👉 Stream on YouTube, Spotify, and Apple
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Samir, welcome to the show.
Samir Kaji:
Thanks for having me.
Turner Novak:
I'm excited. People actually don't know this, but I think we rescheduled four times to try to do this. It was twice from both of us. The most rescheduling I've ever had on an episode, so this is highly anticipated.
Samir Kaji:
Well, I'm glad we finally did it and fourth time's the charm in this particular scenario.
Turner Novak:
Yeah, yeah. I think this will be really interesting because we're going to do, I don't know, just a lot of going deep on the venture markets. You've also got a startup that you're running that people probably are interested in. So I think it'll be fun to get a perspective of both sides of it. But really quick, just for people who don't know, what is Allocate?
Samir Kaji:
Yeah, Allocate is a private markets company, and so one of the things that inspired Allocate... So I've been in the private markets now for 26 years. I started my career in '99 lending to companies during the .com bubble at Silicon Valley Bank.
Turner Novak:
Amazing time to start doing that.
Samir Kaji:
My God, I had six months of fun and then the bubble burst was April 2000 and the Nasdaq goes from 5,000 to 1200. I had to be in the unenviable position of working out a lot of those deals that were now distressed. But you kind of see what happens when things are up and into the right, which they have been for most of the 2010 to 2020 timeframe, which I know we'll get to later. But throughout that time I saw two things happening. So number one, private markets were getting bigger and bigger. So if you think about '90, there were companies that were going public. Amazon went public in '97, had less than 30 million in trailing 12 month revenue.
Turner Novak:
It was like two or three years old too at the time.
Samir Kaji:
It was about three years old at the time. So really, really early. Google of course, went public in 2004, and at the time it was fairly easy to go public. You had these boutique investment banks that were taking companies public. A billion dollar IPO is totally reasonable to be able to do. And during that time there's about 8,000 public companies. Today there's 4,000 public companies and a lot of things change. Of course, more private capital available. Sarbanes-Oxley and regulatory, the desire not to be public and deal with quarter by quarter analysts calls, things like that. And so during the time from '99 to 2020, I just saw the private markets getting bigger. So today, almost 90% of companies, they're doing over $100 million in revenues are privately held. You look at the top two venture backed companies that are private worth market cap 650 billion and could be a trillion with SpaceX and OpenAI.
And so during the time I was at SVB and then ultimately at First Republic, I started to see two things happening. Number one, it was just getting more and more complex in the private markets. How does an investor invest in these things? Unlike institutions that have been doing it for a long time, the old way people used to allocate capital as an individual was stocks and bonds. You do 60% in stocks, 40% in bonds. Around 2010 that changed and people were like, "Well, I want to invest in these private markets because they're big," because I can't get an Amazon three years after it's founded. In fact, that's a series B now. And ultimately, I started spending time with a lot of families and individuals and I was going through this myself, figuring out what I do and realized how tough it is. And it's not just one thing, it's everything from with 40,000 different firms out there across all private market asset classes, how do I find the right ones that are for me?
Turner Novak:
They're like more investment firms than public companies. To your point, 10X more investment firms than public companies.
Samir Kaji:
And it's grown and every single asset class has grown, right? Venture now 4,000 plus. In the US alone, maybe 7,000 globally. And ultimately, it got to the point where I'm like, God, there's so many constraints that don't allow people to participate responsibly, not just democratize. If you were to build a private portfolio, you have to do everything for fund opportunities, diligence, get access, subdocs are also a pain. And then after you invest, why do I have to log into 40 different portals to get my documents and then be able to track what's going on in my portfolio? And so our view was that that shouldn't be the case. Private markets are as important as public markets today. In fact, it's just one big continuum. So why not build a tool set that allows the end client to get the best outcome when it comes to private investing?
The way we do it is we built an operating system that covers each one of those constraints through different modules that are all software-based. Typically, we sell through advisors. Advisors are the ones that work with these individual clients and providing them the tooling to be able to expand what they do within the private markets to their clients. So today the company is four years old. Again, we call it the Allocate OS, which is the operating system for private markets. Company's about 65 people. We work with over 250 wealth advisor firms. We do have some large family offices that also have decided to come to us directly. So about 300 of those. And we cover everything from venture private equity and really provide the whole tool set.
Turner Novak:
And so how do people use it? It's an advisor that gives the login to an individual who might be one of the advisor's customers?
Samir Kaji:
Yeah, it's a great question. So the way they would work is an advisor would have their own white label platform to which they can pick and choose opportunities that we've sourced or they can create their own opportunities and offer those to their clients or things like subscription documents, KYC, AML, vehicle set up, client tracking, client tracking, even post investment. How much does Turner, for example, have in private markets in PE versus VC? What are his objectives? Where is the underexposed? How much spin tech exposure? If I put this in his portfolio, what happens to his overall volatility and time to liquidity?
So it's really that tool set that enables somebody to match an opportunity to a client portfolio. So the way an advisor would use it is either they're using it to source opportunities because we do source opportunities across different asset classes, bring those opportunities, be able to onboard those clients typically through feeder vehicles that will aggregate clients. So clients can write $100,000 check to get access to some of the top firms in the world and then be able to track all the investments in a single place.
Turner Novak:
The value to that is probably if I was an advisor and you were my client and I said, "Oh, let's get you some venture." I as the individual would've to go out and find all these funds or have my client maybe recommend me some funds versus allocate as a portal, login, a lot of options. You can maybe automatically source things. I'm assuming I could request things, I'm assuming. And to your point about the check sizes, if somebody wants to invest 50 grand in Sequoia, Sequoia will delete the email. They won't even open it. They'll just delete it right from the email reader.
Samir Kaji:
Well, and the bigger challenge obviously in things like Venture is VC still operates pretty insular. You still have to be part of this inside society. So it's not just, can I get access at a dollar size? Can I get access at all? And then am I seeing enough opportunities to be able to pick from the top? And we'll talk about dispersion and venture. Dispersion and venture is bigger than any other asset class. If you look at top decile emerging managers, guess what the 2010 to 2021 net IRR is?
Turner Novak:
Oh, I don't know, like 50% or something?
Samir Kaji:
Almost. Yeah, 40%. 40%. And even top decile to median is about 27%.
Turner Novak:
Yeah, that's crazy.
Samir Kaji:
And so to get into those funds, you need to know how to diligence those funds, what to look for, and be able to see enough opportunities to be able to juxtapose what's a great opportunity versus a mediocre one. And that's tough for people that aren't doing it full time.
Turner Novak:
I think the bulk of the back two thirds of our conversation, maybe three fourths of the conversations is going to be all about that. But I'm curious then when you had the idea to start doing this, people had tried to do these private market aggregator type of models. I don't know the best way to describe what's been done in the past, but what do you think people were getting wrong there and then why do you think allocates worked?
Samir Kaji:
Yeah, so I think there's a couple of things. So number one, a lot of people that have tried this have a cold start problem. Because if you think about if you're going to focus on one aspect of what we do, which is the matching of opportunities to the end clients being the advisor in this case to their clients, number one, you have to have great supply and inventory of opportunities. It can't be a marketplace. It has to be very curated.
Turner Novak:
It's like a managed marketplace essentially.
Samir Kaji:
Exactly. So what are the ones that have gone through full diligence on our side that are really the top ones that have done not only historically well, but have the best opportunity to do well on a go forward basis? And then how do you provide it to the end client without creating friction to the GP? So you still come in at a single check.
Turner Novak:
So that's when the feeder vehicle comes into play.
Samir Kaji:
Yeah, the feeder vehicle. And there's some clients that we have that go direct because we don't create a feeder vehicle for certain opportunity. And then there's the cultural problem on the other side, which is, okay, let's say you have supply, but you still need to have a demand side. Now fortunately, going back to my days at First Republic, I was able to build a lot of great relationships with family offices, wealth advisors. First Republic was a wealth advisor firm, so I learned a lot about the wealth advisor community. And so as part of that, we didn't have the cold start problem. And that was a big, big part. I think the other thing that a lot of people have made a mistake is try to disintermediate the financial advisor.
The reality financial advisors are a key part of the financial ecosystem. Even if you look at the independent wealth advisors out there, there's about 17,000 in the US. Well, the relationship with the advisor and client is not just give me investments. There's a lot that they do, whether it's estate planning, tax planning, financial, and sometimes even bill pay. So if you try to take away the advisor and say, "Well, no, you should just work with us," I think you're missing the really important relationship that's built, which is all trust-based between advisor and client. So our view was let's really focus on building an enterprise product that arms the advisors with the tools to be more successful in providing client outcomes, which today is 50 trillion plus. Only 3% is in private markets right now. So huge, huge opportunity there by doing it the way we have.
Turner Novak:
And it's interesting because if you just think then think at a super high level with this, you've got to go who's the end customer is the individual, and you have to go acquire each and every single one, or you acquire an advisor as a customer who has done the work on hundreds or maybe thousands of end clients for you. So it's maybe a more efficient customer acquisition model at the end of the day.
Samir Kaji:
It is, and part of the mission was for me, I went through this in 2010. My dad sold a bunch of his real estate and he said he was ready to retire, go off on the sunset, take 10 mile walks every single day, and he said, "Hey, go figure out what we're going to do." And I was like, "Well, I don't want to do just stocks and bonds. I want to do alternatives." Unfortunately, I was prevented from doing alternatives through because I was at SVB, we can't invest in funds at your bank. So I had to go to the Goldman's and UBS's and JP Morgan's. I just never felt that it was fine if you want Blackstone and Apollo, but I'm like, what about everything else?
So ultimately I'm like, if we're going to build something, how do we touch and make an impact on the most amount of people? Well, if we do it person by person, that's going to be really tough. But if you go to the advisors who some advisors are managing tens of thousands of clients, well, let's tool them to make the maximum impact for so more individual investors have now a better chance to create a long-term financial outcome that will exceed what they can do by themselves or through, if we try to do it one by one, which we'll have limited bandwidth of how many people we can help.
Turner Novak:
So there's maybe a dumb question, but can I go to the Allocate website and invest in one of the Allocate funds or are there certain rules around that or there's certain rules?
Samir Kaji:
Yeah, there's certain rules. So number one, you have to do accreditation. So it is behind certain things that are mandated by the SEC. So some funds required something called being a qualified purchaser, which means you have to have this higher level of accreditation of at least five million in investable assets. So each type of fund has certain things. Again, we don't control that, that's SEC mandated. So you really have to kind of follow those rules. Of course, it's KYC, KYB, AML. But ultimately, if someone's eligible to invest based on those SEC regulations, yes, somebody can invest. Right now focused on certain jurisdictions like North America.
Turner Novak:
So then interesting question when you talk about... You mentioned something about 2009 through 2010, you stopped in 2010. So what happened just generally in the venture market between 2020 and today? I don't know if you can walk us through what you observed from your seat, but I think people want to hear us talk through that.
Samir Kaji:
Venture just has changed, and we can go even way back before that. If you think about venture, it was pretty monolith at one point. So everybody was doing early stage investing. It was typically three or four partners sitting around a table making decisions across in different sectors. And then when technology really took off was really two things. One was cloud computing, making it really, really cheap to start a company. So you had a lot of companies now being able to start up businesses that were now disrupting big, big sectors. Like FinTech was like 2008, 2009.
Second is you had mobile phone. So now we have supercomputers in our pockets and all of that then proliferated into technology becoming bigger and bigger. And the protraction of companies going from inception to IPO or any exit has just gotten longer gone from four years to let's say 12 years.
Turner Novak:
If you're lucky with the 12.
Samir Kaji:
And there's companies like Stripe for example, that have been around a lot longer than that, and today are worth 91 billion, which is what? Almost five X, what Google or roughly five X what Google was when they went public back in 2004. So when you look at that, naturally what you're going to have is, and I draw these parallels, private equity went through this too, monolith to fragmentation. There's multiple service industries that also go through fragmentation over time. Accounting, legal.
Well, venture went from really being monolith to now being completely fragmented across what if you look at venture as a barbell on the right side, you have the mega shops, which it's hard to even say they're traditional purist venture anymore because the amount of growth you have in it. And folks like General Catalyst of course, have done things like buy hospitals. So it's more innovation capital and the game is very different in terms of what they're trying to do in terms of building their firms.
Versus on the left side you have the small funds that are doing seed. That's big long tail. The AUM is low, but at the end of the day, that is what venture used to be when you're thinking about investing in two people in a garage and being in there on the first check. So what we saw in 2020 was technology... It became very clear that the AUM within the private venture space, which just growing today, it's three trillion plus, it's growing. That is a real asset class.
In fact, venture has been the fastest growing asset class over the last 15 years from a CAGR standpoint in terms of where it started from an AUM standpoint and where it is today. Venture used to be a 30 billion. It used to cap out of 30, 40 billion a year and venture funds raised. That could be three funds now that are raising. And what was it? In 2024, I think probably a lot of your listeners saw that stat, 60% of the capital was raised by what, 30 funds or 30 firms?
Turner Novak:
Something like that. Yeah.
Samir Kaji:
So what we saw was this, it's hard even to describe what venture is. I don't even know what the description is, but we look at it as highly fragmented with each different part of the market offering a different risk return profile like seed funds. I can get a really high return. I've seen seed funds return to 250X. I've seen seed funds return to 30X or 40X. But you know what? There's a lot of survivorship bias. Just because you're a small fund doesn't mean you're going to get these high returns. It means you have the potential, but you got to take on a lot of volatility because there's so much competition.
On the big side with these firms that are raising 500 million, a billion, two billion, actually the consistency is there. You're not going to get a 50X on a two billion fund. You're just not. The math is very, very clear. And the whole business model there is you put a little bit at series A, which is almost like an option check. And then with a few companies, you're going to put as much capital and Thrive does a great job in doing this. And their model is like, can I get a five to 10X on one company-
Turner Novak:
Like a blended check over time.
Samir Kaji:
Exactly. And then you might be able to get five billion in total so that the total amount of capital that you return to LPs can be massive, but the actual multiples are going to be compressed because you're going round after round. You're cost dollar averaging up, but that's a different game. And so you're taking less risk, maybe shorter times of liquidity on the later rounds, but you're also getting compression. So it's volatility with the potential of high returns versus consistency with less upside return potential on a cash or cash basis.
Turner Novak:
I think two things that jump out that when you talk about the later stage, it's basically instead of Amazon going public with 20 in revenue. The larger funds are set up to basically, hey, don't go public. Let's just capture that. There's incentives where you can make quite a bit of money running an asset management firm that captures that upside. So it does make sense. The interesting thing you mentioned on the smaller earlier stage fund, you said that you've seen seed funds do 250X. I think the highest I've ever heard is 204X. What's this fund that did 250?
Samir Kaji:
And it's reported, right? So again, maybe we're talking about the same one, whether it's 204 or 250, it's lowercase.
Turner Novak:
Okay, is that TVPI that's 250?
Samir Kaji:
Yeah, it's a bit TVPI or gross, right? It might be gross MOIC, whatever the number is, but whether it's 200, 250 or 300, it doesn't really matter. When you have Twitter, Uber, and One Fund, that's $8 million. You have a lot of happy people. Now that is the exception of the exceptions, of course. That is not what you typically see, but you have seen a ton of funds that have actually DPI'd a 5X, for example, that are sub 100 million funds.
Turner Novak:
Are there any historical assumptions about venture? We've maybe talked about a little bit, but anything else you think we should maybe revisit just as an industry?
Samir Kaji:
I wrote this article recently is kind of retired, sort of this old purist way of thinking about venture capital. So oftentimes in Twitter I'll see the demonization of big firms. Your returns are going to be crappy and it never actually takes into account that the risk profile is just fundamentally different. Those are different products. So I also examine that. The second thing I would really examine is the world of protracted illiquidity is not going away. There is a substantial systematic issue or systemic issue when it comes to public offerings. Billionaire IPO is no longer viable. In fact, what is the average company that goes public? Three, $400 million in annual rights revenue, maybe a path to profitability or already profitable? That's a high bar.
And so one thing we have to revisit is this notion of getting liquidity and using those bigger funds, using tenders as a true form of portfolio management where in the past I think a lot of people were worried about signaling risk of selling out even at the series C or D as a seed firm. And I think that really needs to be significantly revisited in order for it to be a viable asset class for investors.
Turner Novak:
You need to make money, you need to make cash returns at the end of the day. I think a lot of the marketing around venture capital and startups, it's about founders creativity, taking risks, company building, but it's an asset. It's an asset class. You got to make actual tangible money at the end of the day. All that stuff leads to making money, but people need to get some cash back at the end of the day.
Samir Kaji:
I forgot who put this on Twitter. I think it was Josh Kopelman from First Round Capital. And he basically put something as what is the IR based on how long it takes to return money and it was like, if I return 5x or 3x or whatever it is. And the longer it is, obviously that impacts IRR, but to the extent that it almost makes the asset class not investible, if somebody is a seed fund and holding for 15 years, a 3x is terrible. That's a terrible type of return, especially if most of those distributions are coming at the tail end in years 13, 14, and 15. And so, I spent a lot of time thinking about secondaries, thinking about the trends within secondaries, where venture goes relative to private equity. Obviously last year was a huge secondary year with about $150 billion between GP-led and LP-led, venture was a small piece, 10% of that. That's changing. And so, these are the things that fundamentally we have to think about as that this industry starts to really gentrify and become much more of a main street asset class.
Turner Novak:
And I feel like they're talking about people being critical about certain managers, like in private equity. I know I've seen the stat of the average private equity backed company has traded hands three times before exits the PE industry. So it's fairly common in PE. It's like you've got a lower middle market fund that sells to a middle market fund or whatever, and then they hold it for a couple of years and then they sell it to Apollo or Blackstone or an upper mega fund, buyout fund or whatever. And then they might take it public or however it trades hand and be acquired by someone. So when you talk about know venture is just borrowing from how hedge funds evolved, borrowing from how PE evolved, this whole secondary and you're getting liquidity from within the same asset class. I feel like it's generally par for the course of how other asset classes have evolved.
Samir Kaji:
It's good portfolio management. So when we meet with the manager, so part of what we do, as I mentioned, is curate opportunities. One of the key questions we do ask is what is your methodology of liquidity? Meaning when do you sell? How does it need to impact the fund? At what stage are you doing it? Why are you doing it? Why are you not doing it? There was a lot of emerging managers that raised funds in 2015, '16, and '17. They had massive opportunity to actually get liquid in 2021 during these big growth rounds. By the way, many of those rounds will be the highest valuation that company ever receives because we were at peak startup at that time. You look back, and I met with a manager recently and I'm like, "What would've happened if you sold every single company that you could where there was a secondary tenor in 2021?"
This fund today is probably a 2.3x right now and it would've DPI'd at north of 4x had they sold some of the positions. And I get you want to hold, you don't know which companies are going to do, but you could take some money off the table. I mean, Benchmark has done it, USV has done it. It's just proper portfolio management. And I think the stigma definitely needs to retire because as a seed stage manager, for example, at the Series D, what value are you? You're probably three funds in at that point. You have hundreds of portfolio companies. You're focused on that zero to one. From an entrepreneur standpoint, in some ways, I'd like to replace you with somebody that is more appropriate for my stage that could help me where I want them to have more skin in the game.
Turner Novak:
Do you think there's a dynamic though where, let's say I'm a seed fund but I don't have a seed fund like return at that later stage because let's say I invested in 100 million posts and the company's worth 2 billion at the Series D. You would think, "Oh, Series D. It's worth 2 billion. Seed fund. Get out of here. You made your money." But I feel like maybe some of our entry multiples, especially within the last five years might've been a little bit too high where you almost can't do that.
Samir Kaji:
I mean, the seed rounds have not gone down in overall valuation much. Even during, despite this '22, '23, '24. I think Carta puts out some pretty good numbers on this, but on the West Coast, the average seed round is at a 20 post. And so when you're at a 20 post and you're putting in a million bucks, you own 5% of the company. By the Series C, maybe it's 2% of the company. So in that case, if the company's at 2 billion, you get 40 million bucks back. But if you have a $200 million fund or $150 million fund, it doesn't really move the needle that much, but it's still meaningful.
And so that's why making sure you understand the fund size of the ownership ownership, ownership does matter. And I think sometimes people are just like, "Hey look, I really like the entrepreneur. Whether it's a 20 or 30, it doesn't matter." It actually does matter. There are time to obviously make exceptions. You want to be disciplined, not dogmatic. But yeah, I mean, the equation of if I sell in a secondary, is it returning at least a third, a half of my fund? And that's when it becomes reasonable to start thinking about taking money off the table.
Turner Novak:
Especially in some of these super hot sectors, like with AI. There's a lot of dispersion. We talk about dispersion returns of funds, there's dispersion in valuation bands within certain subsectors. I've a friend who, I'm an LP in his fund. Extremely small. I'm most likely the smallest LP in his fund. Don't do very many fund investments. So I gave him a little bit of money and he has an AI company that he actually sold shares in in the Series B. He'd invested before we were excited about AI and it was a pretty reasonable entry price and he returned a nice chunk of the fund. For me, I was like, "Oh, nice. I got a significant little tiny amount. Of my tiny share, I got a significant amount back."
So it's almost to the point of borrowing from other asset classes. I feel like if you look at how PE has evolved, a lot of these early stage or lower, lower middle market PE funds, when you look at the data and private equity, some of the returns come from revenue growth, some come from cutting expenses, some of them come from debt leverage and stuff, but a significant amount of the return just come from multiple arbitrage of buying it three times EBITDA and selling it at six times EBITDA.
I feel like there's an element of that in venture that we can borrow from is just what are some low hype multiples or low... Because there's not always EBITDA to go off of, but are there lowish multiples that we can play in at the early stage? And then you do benefit as maybe a sector, becomes a little bit more exciting to people. When you're taking chips off the table, you get a little bit of that multiple expansion to get a little bit of a return boost as you're taking secondaries.
Personally, I mean, I haven't gotten to do this because I'm really only a couple years into this, but I think about it a lot of just you can't control the exit price, but you can control what your entry looks like. So you got to make sure that if things go well, you want to make sure that you're not just like, "Oh, this is kind of okay." You got to make sure they're like, "Oh, this went very well."
Samir Kaji:
Yeah, and I'll take it even a step further. And this was a funny analysis that somebody did that I was talking to. They looked at their seed funds back in, I think it was 2022, they looked at all their seed funds and said for '19 and '20 vintages, let's look at the graduation rate from seed to Series A. And during '21, the graduation rates shot up to a point that I've never seen. It was 70%, 80% in some funds. And not only was it the graduation, but it was the step up in valuation from that seed to A, which is often five times. In fact, it was almost comical to see companies raised in six months from the seed to the Series A with a valuation that was 80 to 100 million. And they looked at the analysis and they said, "Okay, well what if this particular fund sold all of their companies at the Series A?" And it was a two and a half or 3x type of return that they would've gotten in six months.
Turner Novak:
Yeah, insane. 100% IRR.
Samir Kaji:
Right, and of course that's anomalous and we had crazy time, but there are certain areas, and you mentioned this hot area. AI, of course, we know is very hot and there's this concept of the tale of two cities, which if you're an AI company, you are getting a significant uplift in valuation relative to non-AI companies. And so you do see some of these Series A companies or Series B companies. I mean, Cursor, everybody knows about, glean. These companies are going from zero to $100 million dollars in revenues in record time.
So even selling at that Series B could actually be as good as a normal IPO if that company is raising... I don't know what Cursor was. Was it 10 billion or something astronomical? If you came in at that first round and you invested in, let's say a $30 million per year, $40 million per year, whatever it was, you haven't taken that much dilution. That could return your fund and then some. That doesn't mean you sell all the shares. You keep some, but those are the type of things, I think, in certain areas will even present themselves at the Series B.
Turner Novak:
And I had Eric Vishria of Benchmark on the podcast maybe three episodes ago, four episodes ago, if people want to scroll back and listen to that one. But one of the things he said, he said there's about half a dozen companies in the Benchmark portfolio that did that, they went zero to 100 in less than 12 months. Just insane how often it's happening. And his general sense of it is that AI companies are growing somewhere between five and 10 times faster than SAS companies were. So when you just say, "Okay, are they overvalued? Are these unreasonable valuations?", ultimately the multiple that people are paying, it's a function of the growth rate. So there's probably some instances where you could say, if this is a really strong business, the multiples only two times higher than what you would've paid in SAS land, but it's growing 10 times faster. It's actually a significantly good deal. It's significantly under priced. So to the point of there being dispersion between subsectors, even in the hot sectors, you could argue that some of the best in class assets are actually under priced.
Samir Kaji:
The only caveat, and again, there's exceptions, Cursor is one of the most loved tools out there and there's a number of them like that, is a lot of these AI companies that are going from zero to two, zero to five, zero to 10, they are getting those high multiples. The issue I see is a lot of that is, we talk about ACV, I think of that as an annual curiosity revenue.
Turner Novak:
Curiosity, okay.
Samir Kaji:
It's easy for me to use a tool. It's just easy. But if there's nothing really of real utility, it's easy for me to cancel. And so you look at the cohort analysis and say, okay, if the cohort is like six months old or nine months, I don't know what the renewal rates are going to be. And my view, and again, I don't know what this is going to play out at, a lot of these companies that went from zero to 10 aren't real companies in the long term. They haven't built anything defensible and you're going to have massive amounts of churn. So that's where I get, as a seed manager, you have to look at that and say, is it time to potentially take risk off the table? Even if a company's doing 15 million and getting valued at, let's say 200 or 300 or even $400 million, that might be a reasonable way just to hedge against the case that there might not be defensibility for that type of AI application.
Turner Novak:
Yeah, the interesting parallel is if you just look at the crazy wave right before this with crypto stuff, growing really fast, there's a lot of companies growing fast, but also excitement around the space. If you're a company like Delta and you're like, "Hey, let's make each ticket an NFT", or something, a fairly reasonable person would say, "You know what? That's actually probably not a good idea." But if you're Delta and you're like, "Hey, we need to figure out how to use LLMs to price our tickets better or make our roads better", the reasonable person would say, "Ah, there's actually probably something here." So it definitely leads to this more curiosity to explore things. So I think that's definitely leading to the faster growth. And there are cases where some of them do actually work better, but then there's also cases where they might be trying six vendors and they switch the one that actually works.
Samir Kaji:
This is true for every hype cycle though, and there is hype. Now I do think there's the short term which is, yes, there's a lot of hype, there's overvaluation of a lot of these companies. Without a doubt though, if you think about supercycles, and Brad Gerstner talks about these supercycles all the time, every supercycle builds on the last one. So if you think about going back to semiconductors, to mainframe competing, to personal competing, the internet, obviously mobile, cloud, well everything led up to allowing things like GPTs and transformer technology, reading of all this kind of data that's out there, whether it be text-based or not. And so to me, there's no mistake, at least in my mind, that the next 10 years, we're going to see more technological innovation than ever before. Things are going to change, white collar, obviously, jobs will be affected en masse and we'll see, people are pretty resilient and will figure out things to do.
But the short term is probably things tend to overhype based on an economic standpoint. But the societal change that AI will bring is going to far outpace anything we've seen in the past, but we have to go through a lot of things. I actually was trying to use an AI tool the other day. I liked it for a month. I thought I was going to do a bunch of things, then I realized it didn't do anything. I went to someone else, I canceled the first one, then I used something else. Then two weeks later, I canceled that one. So just shows the volatility of the revenue itself. And I don't think SAS is dead. I just think that in today's world, anybody starting a company or even thinking about scaling their company has to take the mindset of AI, not just traditional SAS fixed ways of doing things. UI/UX is different. The way people will interface with your technology has to be different. And that's why some of these AI companies that just started are far outpacing their SAS equivalents just for people that just started three years ago.
Turner Novak:
Yeah. And actually an interesting example of that where I needed to remove the background and get a transparent image and I tried a couple different tools and this was around the time that ChatGPT got image and I was like, "Oh, let me just try ChatGPT. I was just like, "Remove the background and make it transparent," and it did it. And I was like, "Ah, this is amazing." I feel like everyone has those moments with these tools. But it's an interesting example of two years ago, three years ago, to remove the background from an image, you'd have to open up a image editing software and you can just throw it in ChatGPT and it's like emailing your designer on your team, "Fix this up. Clean this up." And over the past couple months when ChatGPT has gotten more image capabilities, I've just been using it for a lot of that stuff. It's like I don't even need to open the software, just do this for me.
So it works. It does things for you. And I think it's like who captures the workflow, who captures the use case. And this statement is not going to be the most groundbreaking revelatory statement, but if there's an existing tool like OpenAI or ChatGPT that if it can do something, I think you do it if you're a founder doing something, building something, you need to make sure that it doesn't fall within their existing wheelhouse or workflow.
Samir Kaji:
The tools have come a long way in a very, very short time. I've just never seen it. I mean Claude obviously, Anthropic came out with the new version. GPT continues to come out with things. We do this annual summit called the Beyond Summit where we bring together a bunch of LPs and GPs, about 260. Kevin, who's the Chief Product Officer of OpenAI came and spoke and just blew our minds in terms of all the things that are coming and how quickly things are moving. And so the rate of innovation is so much better. Think about it. Now we have access to PhD level intelligence. My own use case is, I can't live without AI, probably use it constantly throughout the day. My efficiency is probably 2-3x what it used to be because I'm able to do things that used to take me hours on spreadsheets, hours on document generation, even things like blogs, content, you can do in seconds. And it's gotten smarter and smarter, because now it includes memory, for example. So it remembers everything I've talked about.
And so I just look at where we are right now. And to bring it through an analogy of how far AI has come and the prevalence of using it, things like ChatGPT, which is very consumer focused, we were in Hawaii and my wife and I were there and there was a couple kids probably in their, I don't know, maybe nine, 10 years old. And the one kid asked the other kid, "Hey, we're in Hawaii. What kind of fish are in this one sort of beach?" And the other kid said, "Oh, just ChatGPT it." And in the past, what would people say? "Google it." People don't want the blue links where they have to go through and of parse through data. I want to be able to interface with it through something that just gets me right to the answer and I can go back and forth. So it just shows how far it's come in a very short amount of time.
Turner Novak:
Yeah. I'm curious when you mentioned some of the ways you're using AI, in basically building allocate, what things do you find have been most productive and just actually getting efficiency out of it and getting stuff done?
Samir Kaji:
So there's probably three main things. So how do we actually organize and build things? So we came up with a full product roadmap of how do we actually build this? How do we figure one thing after another? If I want to build this tool, what do I actually need to do? What are all the steps? What are the tools that I can use to fast track that? The engineers obviously use Cursor. So they use Cursor to be able to build things incredibly quickly.
Second is one of the things I think about is when you invest in private markets, it's not just about, "Turner, here's this great fund you should invest in," but why does it fit your portfolio? What does your portfolio model? So I was able to create a sophisticated portfolio model using Benchmark data that basically can say, "Turner, this is your list of questions that you answered. You're a moderate profile. Here's your asset allocation. Here's what you have in your portfolio. This is how far you are from your objective. This is your pacing. This is your volatility that you should expect. This is your TVPI you should expect. This is your net IR and this is your average time for first liquidity."
Turner Novak:
And this is the fund you should probably do or-
Samir Kaji:
Yeah, so if I show you that fund, it'll say, well, this is where the fund falls into because you're underexposed in FinTech and you have these other three funds that do a little bit of FinTech, but they don't overlap with this manager because they haven't done a lot of follow on.
Turner Novak:
That's pretty cool.
Samir Kaji:
Yeah, and it's sitting on all the data. That's all it's doing. It's basically taking that and then we create the instructions on how to think in our own portfolio model theory. And that would've take years to build in a typical SAS way. And now you can do it in, it's not minutes, but it's a few months to be able to build something like that. Additionally, workflows. So you've mentioned you invested in a couple of funds, the subdoc process is still super painful. What if you had an international passport or passport of some type that had all your information that you could go to a subdoc anywhere and say, "Auto-fill this for me, pull from all the documents," and it would just map automatically with all the answers and all you have to do is sign.
Turner Novak:
That'd be amazing. That save people entire staff on their team. It probably does that full time.
Samir Kaji:
It's not too far away. And so, I mean, I don't want to give too much away in terms of what we're building, but these are the type of things that embedded to normal workflows to create so much automation that used to be paper based and then it was SAS based with normal subscription flows and now moving to an AI driven way of doing it.
Turner Novak:
I saw a really interesting stat the other day. This is from 2019, so I think a little bit dated. Numbers are probably actually bigger I would assume. But it showed the percentage of IT spend and technology spend by sector. And it was, I don't know, retail, high tech was one of them, financial services was one, and there's maybe a couple other, healthcare or something. Financial services was actually the highest percentage of revenue that they were spending on technology or innovation or whatever they called it. And this is in 2019, I think it was 8-11% of revenue in financial services was spent on technology. So it's probably a little bit higher now, but to the point of there's a lot of opportunities to make the technology better in financial services, how much people are paying.
Samir Kaji:
And the technology that's out there, I mean, having been in financial services my entire life and now running a FinTech company-
Turner Novak:
It's spreadsheets basically.
Samir Kaji:
It's spreadsheets. I always tell people the most successful software company of all time in FinTech is Microsoft Excel. That's what everybody still uses. And I remember when I started this company, I started talking to a bunch of people, like, "What do you use and what is your stack?" And I couldn't believe how even when they're using technology, it's all primitive stuff. It literally felt like you logging into a Windows 95 and you remember the first generation of computers and how it looked and the terminals. Well that's what a lot of it still runs on.
And it's crazy because even in the wealth tech industry, so if you think about wealth tech more broadly, over a hundred trillion is managed by these advisors and they're still using tools that don't talk to each other, tools that were made 15 years ago and are deeply embedded but don't actually do much anymore. And so that spend will just continue to go up. Money's one of the biggest industries in the world, if not the biggest industry. Obviously it's the biggest industry in the world, but the infrastructure and the rails are just really, really old. That's why companies like Coinbase and Robinhood have been such breakout companies.
Turner Novak:
I saw another stat that was pretty interesting. It was something like only 1% of financial services revenue was generated by a technology company or a technology native company. I don't know how they measured this, maybe it was start date or how it's classified in the NAICS codes or whatever. So it's like 99% of financial services revenue is generated by non-technology companies. So it's like if we want to paint a massive TAM for this thing, it's like it could be 100x bigger if it grows from one to 100%.
Samir Kaji:
I think so. And the other thing is the people that own the wealth are very different than they were 10 years ago. Now you have about $80 trillion going from one generation, so baby boomers to millennials, Gen X, Gen Y, and folks like ourselves, we invest differently. We interact with brands differently. My dad used to go into a branch every day to do a deposit. I don't think I've been to a branch for 10 years. I don't want to go to a branch. I don't want to have to call somebody to do a wire. I want things quickly. I want them through my mobile phone. And so fundamentally as consumer behavior changes, so does investing behavior, but the technology wasn't made for this new group of investors who exhibit, for example, more of an affinity to invest in things like private investments. It was made for the institutions. And so everything needs to change. And we're probably in the second inning right now of really seeing that overall architectural change and allowing that to happen at a huge scale.
Turner Novak:
So question, it's not quite related, but I'm just going to pretend so we can pretend this is a good transition. I saw you tweet once about SPVs and what's going on. Maybe it fits in the liquidity, how the technology of the industry is changing, but what are you seeing happening right now in these late stage SPVs? I know you're smiling, so what's going on?
Samir Kaji:
Well, I think I've been offered by every broker, every single deal out there. And here's the issue with SPVs. So number one, there's a lot of adverse selection that happens. So the reality is when there's excess capacity, especially at Series A and Series B, unless you know the GP, you have a relationship, there's something that you're doing, you're more likely getting adverse election. And so if you're in Topeka for example, and you see a deal and it's some Series C deal and it's got this crazy valuation, no one's really leading it, but someone's doing an SPV for it, that's a red flag. And so the other thing I see sometimes is stacked SPVs. So I was talking to a family office recently and they had an opportunity to go into one of the hot companies, let's call it the top five hot companies within the AI space. And I was like, "Okay, well tell me what the SPV manager is charging." They're like, "One and 10." I'm like, "Okay, well that's-
Turner Novak:
That's pretty reasonable.
Samir Kaji:
That's around the ballpark of what is reasonable. It was a one time, 1% fee for admin. I'm like, "Okay, so they have direct access to the company?" And they were like, "Oh, it's a good question. Let me ask." What we found out, it was an SPV investing into another SPV, which invested into another SPV. Each had their own fee stack and it wasn't really disclosed to the investor. And I'm like, okay, now you're actually paying... One was one and 15, one was zero and 10. So if you stack them all up, I'm like, "Think about what this does to the investing profile of this deal." And no one has control either. The only the person that the SPV that's going into the direct company probably has some control. The second layer SPV is relying on that first person, and then the third level is now reliant, and then you're the fourth one down now. You have no control.
Turner Novak:
That shouldn't even be legal. Because I remember the first time I heard about an SPV investing in another SPV, I was like, "You should not be allowed to do that, let alone another SPV adding into that."
Samir Kaji:
Yeah. So, SPV into another SPV, it just depends on the fee structure and the relationship. But when you get four stacking SPVs and you have no clue who the original one, that becomes a huge fundamental problem. And I see, excuse my language, but I see this shit all the time. And it really, really upsets me when I see people putting hard-earned money and they're just being pitched by people that are just incredibly, incredibly focused on just getting... Because they have no... There's nothing to lose for them.
They don't report the SPVs. If the SPVs work, they get 10% carry on that one deal. If it doesn't work, sorry, it didn't work out, and they move on to do something else. And I think adverse selection is very... You got to be really careful in the SPV. Now, I think there's some great managers that do great SPVs and it's incredible. So, this is no widespread feeling that SPVs are bad. You got to know what you're getting into and you got to ask the right questions.
Turner Novak:
So, then on the other side of this, what would make a good SPV? If somebody is coming to you and like, "Here's a setup," and you'd be like, "Oh, you should consider doing this." What would that probably look like?
Samir Kaji:
So, number one is you get the SPV from, let's say, a GP that you've built a relationship with. So, the first question is, "Why am I seeing it?" Well, maybe I'm seeing it because I built a relationship and I'm an LP in that fund. And as part of what they're doing, sometimes their fund is going to be limited in size in terms of what they can do for follow-on. But they have seen the company since the beginning.
The company clearly has the metrics that are very healthy. Maybe it's led by another tier one firm that is leading the round. So, there's obviously that, or it might be Sequoia leading the round, and you're able to participate in an SPV at the same round as Sequoia is but at better terms than if I went into Sequoia directly in that case. And then you get transparency from the manager of what the company is doing. I've seen some managers actually do webinars with the founders.
Turner Novak:
Oh, I've seen that. Yeah.
Samir Kaji:
Yeah. And that's super helpful because then you can hear from the founder. You know what it is and you can make an informed decision. So, that's a great example of one. So, I think it comes down to transparency and understanding the why of why you're seeing it.
Turner Novak:
And I want to hit on the back half of this conversation a lot, about more he emerging manager segment. I know that's a big thing you guys focus on. At a high level, what drives most of the returns in venture? What should I be thinking about if I'm approaching this for the first time, trying to figure out what does good look like? How do I make money on this? Where do most of the returns generally come from?
Samir Kaji:
Venture itself, obviously, extreme power law driven, and when I say venture in this context, I'm really thinking about early stage venture, which is much different than, "I invest in an opportunity fund that's soon pre-IPO." That is less power law driven, very consistent. So, when you think about it, a lot of the venture returns, I don't know if there's one sector, and these things change over time, but it typically is you have to get into that top 5 to 10% of company every single year, and you have to be able to get enough ownership and you have to be early enough.
And so sometimes you'll see these venture funds where you'll see these great logos and you're like, "Wow, these guys got into some incredible companies." Then you realize their entry price on average is 1.4 billion and they were at series C and later. So, what we really look for are people that have... At the seed level.
So, let's take seed for a second. There's 2000-plus seed firms in the U.S. Number one is, we look for managers that know the what, how, and why. So, what inspired you to create this fund? You have a fund. What caused you to want to do this versus something else? Because you have opportunity costs. Raising a fund is not just raising a fund. You're actually going on and embarking on a journey to do a firm. So, really thinking about it. What led you to build a firm?
The second is, why are you distinctly advantaged in this particular thing you're doing? So, if you tell me you're doing AI, okay, well, how long have you been studying AI? What are your networks within AI? What allows you to be able to understand? Is it the app layer? Is it the infrastructure layer? Do you have the ability to not only see these opportunities, assess these opportunities, but do you win?
And so what we find is seed funds that do really well nail two out of the three at least, which is sourcing, picking or judgment, and then winning. In the early days, I think picking is probably the least important candidly, not because judgment doesn't matter, it just takes a long time to understand if you're any good at this. And it's probably three fund cycles, 10 years before I know did you get lucky or are you consistently good? And so I need to see that body of work.
I think everybody's fairly smart, generally. If you look at the pedigrees, people are smart. They get it. So, it's less about you're going to differentiate just because you're a little bit smarter than somebody else. Maybe there's a few people that are on the spectrum that can win based on their intelligence in certain area, but it's, are you seeing the right deals and can you win those deals? And so that's what we've seen pretty consistently with emerging managers.
If they can see deals within whatever thesis and they have something real or perceived that allows them to win consistently, that's largely all the battle. And if you can then augment it with great picking ability, now you have the ability to get that top 5 to 10% of companies within a certain sector or a theme, and those are what drives the returns. Where now you do get those 3X's, 5X's, 10X type of funds.
Turner Novak:
Yeah. What are you seeing then in terms of, how would I do that? If I'm like, "Okay, I want have good access," or, "I want to show that I'm getting in front of these good companies or winning them..." I think winning is maybe more clear. Just like, you're investing in things. So, how do you think more about access? How do I prove to somebody that I have good access or what would you be looking for on the LP side to vet that out?
Samir Kaji:
So, there's this concept when VCs look at founders, it's like founder market fit. What is that distinct advantage? Why does this make sense? So, going back to the analogy, a lot of seed funds are theme-based or their sector-focused. And so you're just looking at, "Okay, can I see this person actually not only see the deals, but do they have some kind of personal brand that's going to allow them to win? Do they have the network?"
I think network's really important. Because if you have network, people can reference you pretty easily. And at the beginning days of a startup, and I do view funds as startups if it's a Fund One, Fund Two, at the end of the day, a lot of it's just personal brand. And so you think about your firm. Your personal brand is much stronger than your firm brand right now.
And it's because you tweet. People know you. You do podcasts. You do all those things and people feel like they already know you. And so you bring a certain level of credibility. And the fact that if you send a tweet, maybe a company gets X amount of views, that is a tangible way that I can say, "This person is more likely to win the companies that they want to get into." And then you look at things like fund size. Is the fund size something that's going to allow them to win?
So, if you raise a 500 million fund, I'm like, "Well, now you're competing with a bunch of people, and now you've got to lead rounds, and you can't be a nice co-lead or part of a syndicate." And so all of those things, it's like, what is that winning equation and what is that GP market fit that allows them to win for a given fund size for a given market? And then there's that qualitative and quantitative analysis to be able to assess, has this person done it or have they built things that are tangible?
Turner Novak:
If I'm an LP looking at a fund, is there a good way to size up appropriateness of a fund size? I don't know if there's certain questions. Actually, it might be interesting if you want to ask me and we try to figure out what my fund size should be. I don't know if that's an interesting thought experiment. But how would you suss that out when you're meeting a GP?
Samir Kaji:
Yeah, the first thing is just intellectual honesty and inventory of who you are. So, some GPs make the mistake of saying, "Okay, I'm going to raise a fund of X based on the fact that certain institutional investors say they need to write a 10 million check. They don't want to be more than 10%, so I'm going to raise a $100 million fund."
Turner Novak:
Yeah. I've gotten that advice a lot of times. It's like, "Turner, you should be raising this size of a fund because I can't invest." And I'm just like, "That's too bad right now."
Samir Kaji:
And it's just not LP/GP fit then. Because if you do do that and let's just say, for thought experiment purposes, you're able to do that. Let's say there's a big difference between saying, "I can't invest because my check size," versus actually investing, right? There's a big bridge you have to cross. But let's just say, in a thought experiment, you can do that. You raise $100 million dollars, $10 million each from 10 different investors that are institutions.
But let's say you right now are still early in. You're building your network. You're not right at the point where you feel confident you can lead deals in the hottest companies. When I say hot companies, companies that are great founder, great TAM, they built something, made a subtraction. Well, now you are competing in a game that you're unlikely to win.
You are probably better off being a syndicate to build the credibility within that, get those founder references over time. And that's when I look at it and say, as a GP, I should be asking my question, "What is the game that allows me to most likely win?" Because you're... Be short-term focused, long-term greedy. If you're only focused on raising one fund, you're going to maximize and optimize in this fund size.
Turner Novak:
You're going to max those management PC up. Exactly.
Samir Kaji:
But if you're thinking about this as a 20, 30 year journey of building a firm, who cares if you raise 20? But if that 20 acts as the catalyst for returning the highest amount, getting to the best companies, well, you can scale over time as you continue to get... Whether you add people, whether you build your brand, whether you build credibility, you find your focus, you can do that over time. And so focus on a fund size that allows you to win.
And that requires an incredible amount of self-awareness of saying, "Can I compete?" If I have to now write a $2 million check into the seed stage-
Turner Novak:
You got to lead rounds probably.
Samir Kaji:
... now I'm competing against everybody else, including the big firms that are now leading and probably going to write a $5 million check or a $10 million check at 3x the valuation I'm willing to pay. Do I really want to play that game?
Turner Novak:
So, it's basically thinking, "What can I actually work with founders on?" And then you probably go and build your fund size from there. So it might be, "I think I can pretty reasonably write 100K checks into million dollar rounds, $2 million rounds. I'll do 30 checks." So, maybe you say it's like a $3 million fund, 100K times 30. Maybe you reserve a little bit for follow-on. Maybe plus or minus some of the check size, but $5 million fund or a $3 million fund. That's generally the practice you'd suggest going through?
Samir Kaji:
Yeah. Well, that's exactly. So think about what is your initial versus follow-on. So, again, $50 million fund, maybe that's 70% initial, 30% follow-on for a few of those companies. And then you say, "Okay, 70%." Remember, there's management fees. So, even to get to 50 million investor, you got to recycle capital. But let's just say you can do that. And so $35 million is going into initial checks and you're doing 35 companies. Now you're looking at a million bucks per company on average. Maybe it's 750 to 1.25.
Can you win at that check size? And if you're pre-seed and let's say the pre-seed round is 3 million, you're effectively a co-lead at that point. And so do you have all the requisite characteristics to play that game? And that's the rubric I think about. And when I meet a manager, are you playing a game you can win? Because it'd be like a seed stage company. If someone came to me and said, "Hey Samir, you're raising the seed round, but I only write $25 million checks, so will you take my $25 million check?"
If I took it, how would I responsibly deploy? Because now the expectations are I'm going to hyper scale, I'm going to grow it, and now to get to the next inflection point, I have to do so much. And now I've taken too much capital that I can actually responsibly deploy. So, that's where the discussion happens between LPs and GPs often.
Turner Novak:
And so you had this one thing that you tweeted. I think you tweeted and LinkedIn. The post ripped through the timeline on both platforms. So, it's a pretty interesting take or interesting observation, was that about 80 to 95% of emerging fund managers, they just can't raise any money right now. What is going on?
Samir Kaji:
Yeah. So, the tweet I put on, it's a week ago, it was like 85 to 90% of venture funds. Forget about just emerging-
Turner Novak:
Venture funds. Yeah.
Samir Kaji:
... are having a really, really tough time raising capital. The exception is, and we're in an amplified time of Tale of Two Cities. Both at the company side, if you're AI versus non-AI, and then within the venture universe is it, are you somebody that is obvious as somebody people want to back during times where there's some volatility, you want to back things that are more of a sure thing, right? And so what I'm seeing is, let's take the 10 to 15% first. I am seeing some of those funds raise at a time speed that I've never seen before. We're talking about open a data room and two months later they're done.
And it is just so extreme. That's a very small universe and that's some emerging managers that like, "I spin out of light speed. I spin out of index. I had a great track record." Guaranteed those funds are going to raise incredibly quickly and sometimes they're done before they start. The big established funds, they can raise very quickly and often are multiple times over subscribed, because the capital is starting to go toward perceived or real quality.
Now the 85 or 90%. Well let's talk about what's happening. So, one, the market's been really shitty the last few years. So, if you look at... 2021 was a great year. You had a lot of liquidity that was coming. Forget about the entry points, but there was a lot of liquidity in 2021. '22, markets change. The interest rates shoot up. And so '22, '23, and '24, we haven't seen much liquidity come back in an asset class that's already getting battered because of what happened in 2021.
So, there's a negative bias that's associated with, "Hey, I put a lot of money in 1920. I've made all these capital calls. I'm not getting any money back. I can't do anything more unless it's pretty obvious." The second thing is with a protracted illiquidity that's going on, investors are also making the decision not based on manager versus manager, but they're looking at it asset category versus asset category.
Today the risk-free rate is much higher. If you look at lower middle market private equity, the benchmarks are between 15 and 23% net IR. Well, why wouldn't I just put my money at that if I'm just looking at financial return on a risk-adjusted basis versus putting it into this venture fund, which is going to have a lot of volatility, going to take 14 years to get that cash. And ultimately if I don't have some picking advantage of getting the right funds, I'm just throwing darts. And that's a very reasonable take.
So, a lot of money has been extracted from just investing in venture. And a lot of the people that were actually backing these emerging managers, they were family offices. They were individuals. Well, those people, and especially the individuals in the case, have houses. They have mortgages. They have things that they need to do that even in the contemplation of investing in another long-only fund where I haven't gotten any money back is really hard.
So, if you're an EM, you're going to get hit because most of your capital, unless you're a spin out, is going to come from non-institutional capital. And when that non-institutional capital dries up, then you're really reliant on the long tail, which is number one, hard to find the right people that fit what you're trying to do it. So, it's like needles in a haystack. And a lot of the folks just aren't investing.
On top of that, institutions are going through it. You know the E&F, so endowments and foundations. Obviously with the new administration, they're going under a lot. So, whether it's Yale or EL or Harvard having to sell off massive positions to rebalance their portfolio because they're overweighted in certain asset class. So, you're sucking a lot of the LP capital out right now, and the people that do benefit are the people that are very obvious, emerging to established. Everybody else, it is a grind.
It's not uncommon to see fundraisings for an emerging venture fund to be two years. And that's why we see the mortality rate from a Fund One to Fund Two be 50%. Fund One to Fund Four being... you know what? 20% of firms that started Fund One even get to a Fund Four. And that's probably going to be the case until we start to see the liquidity problem start to resolve, which I thought it was going to be this year and then liberation day came and it threw the markets in a tizzy. And we'll see what happens in the public markets. I'm sorry, yeah, the public market, IPO market.
Turner Novak:
What do you think is the right way to raise a fund right now? If I were to come to you and say, "Samir, I want to... I'm raising..." Either it's Fund One, Two, Three. I'm not sure if this is different. Maybe that's an important thing to characterize here. But how would you recommend somebody do a fundraise process today if you are maybe more on the emerging manager side?
Samir Kaji:
So, I think about it very similar to a sales process. At the end of the day you are selling. Now, in this case you are not selling your product. The product, if you want to draw the analogy, is you. It's a people business. So, it's a blind pool. I have no clue what you're investing. So, I have to believe three things. I have to believe in the thesis that you're going after. Whatever. If it's sector, it could be geographic, whatever it is. Whatever you think is the main theme that you're rallying your investment effort around.
The second thing I have to believe is that you've appropriately structured this fund in the right way that can result in a great return. So, it's things like your terms being reasonable. It is the portfolio construction. Things that just relate to the actual product.
And the third thing, which is probably the most important, is do I have a clear and tangible view that you are the right person or team to be able to prosecute the strategy? And those things have to be clear. And before you start the fundraise, you have to put yourself in the LP shoes and answer those questions. And if you cannot... And this is where you have to take off the rose-colored sunglasses.
And what I actually do, and I tell GPs to do this, go to ChatGPT or Claude or whatever your favorite tool is and put your deck in, and then put in the prompt saying you are an institutional LP that's looking at thousands of funds. Put a very skeptical eye on why this is not going to work. And what you will get is actually pretty good feedback. It's not always easy to see that, but it is so incredibly valuable to do those things.
And so now you have that access to intelligence before you start to fundraise. Okay, so now let's say you figure all that stuff out. You figure out the fund sizing. You understand exactly why you're doing it. You understand what the thesis is. And now it's really a function of, who are the people that are most likely to invest in me? And so then it's like the LP fund fit. If you're raising 20 million bucks and you're going out to the pensions and the big foundations, you're just wasting your time.
You may do it because they're a friend and you want to get feedback. That's fine. But ultimately you have to know that it's more likely individuals. It's going to be family offices. And then you need to build a sales pipeline of people that are more likely to be folks that are investing in you. In the family office market, there's influencers. And these are family offices that are fairly sophisticated where other family offices follow them.
So, who are those nodes that you should be looking at where they can become your champion and start to introduce you to other families. Because now you get the transfer of trust. It's all a trust-based business. And the reality is when people are raising the funds, a lot of GPs go straight into the pitch without really understanding what you're really selling is you as a human being first. First and foremost. And so when I meet with somebody, you're selling to my heart, not my mind.
My heart will make the decision at the core of it. My mind will look to justify it over time. And so as you go to the fundraising, so number one, figure out who your LP fit is. Who are the nodes, which you can ask other GPs. And then from there, be able to have these conversations with people and get to know people as human beings. Ask them what they care about. And so when you go right into the pitch, it feels very transactional. And that's not going to work because you're selling to the wrong organ. You're selling to the brain, not the heart.
Turner Novak:
Yeah, it's interesting. So, you think identifying the nodes, probably a crucial piece of this. One thing I always do is whenever somebody cuts a check, like they're in, they've signed the docs, they've wired the first capital call, one thing I found works pretty well is like, "Samir, excited to have you on board. Are there one or two other people that maybe I should talk to?"
Because they're just more likely to... They feel like they have skin in the game and if they think it's a good investment, maybe they'll know other people. And it's just a way stronger ask than just like a, "Hey, you think that I suck at this, but could you introduce me to some people?" It's a little bit of a weaker ask when they're not actually in.
Samir Kaji:
And the other thing that I would just say in terms of identifying nodes and leads, it's actually better to go to other GPs if you're a GP that, not only you have a good relationship with, but are probably not having a tough time raising. Because the people that are a tough time raising are going to be very protective of their relationships if they are actively raising at the same time, and the signal is less. So, the reality is if somebody from name your brand- name firm that you're a friend of, Andreessen and Sequoia, whoever, let's say they have some family office contacts.
If they make the introduction to the family, there is a certain level of credibility that's now being driven versus another emerging manager that's struggling to raise that puts you in front. So, you have to think about things just like anything else. This is Sales 101. Capital formation is, in effect, sales. You are selling yourself. Now you're selling that, if you provide me with capital, I'm going to provide you with an outcome that on a relative basis is better than whatever the opportunity cost is.
Turner Novak:
So, I did the thing you suggested with ChatGPT. I put in my deck. I said, "As an institutional LP reviewing..." No, I said, "Pretend you're an institutional venture capital LP. Give me a skeptical opinion on why this will or won't be a good investment." The general takeaway is, the summary of the skeptical take, "This feels more like a content-driven influencer play than a rigorously institutionalized venture fund. Distribution is clearly a strength, but is it repeatable alpha or just noise?"
It's like, "Okay, that's a good critical take on this." And then actually it gave me a breakdown of there's five big points of too much emphasis on personal brand, track record too immature, portfolio construction discipline evolving, content as edge is not proprietary, management fee structure feels high." Okay, that's a good takeaway.
Samir Kaji:
So, if you send me a deck, I've also built an underwriting model that basically takes all the information we have on various funds, applies different parameters and scoring. So, after this, send me your deck and I can actually put together a full scoring model that'll go more in-depth than what you just did, which is more based on general research. Yeah.
Turner Novak:
So, how does that work for people who hear that? When you say that to me, I'm like, "Oh nice, tell me what goes into that." How do you build that out and what's all going into that?
Samir Kaji:
Yeah, that's a great question. So, number one is benchmarks, which we have a lot of benchmarks in funds now because we track so many and we have all the data. So, it's anonymized and aggregated data, like what's working, portfolio sizing, follow-ons, following rates, things like that, co-investors. And then what we do is build that rubric of the five or six things that matter the most. And underneath that there's sub points that say, manager sourcing. How do we define what manager sourcing is? Is it their network? Is it their brand? Is it the reach?
All these things that go into a unique parameter that is then pulled off the data rooms or the decks and says, "Okay, this person is a 4.2 out of 5 based on these things." And it actually provides me the full summary of what it's actually... Now, not 100% of the way I think, but it's probably close to 90%. What it can do in distilling down what a manager is doing... Because a lot of what we do is pattern recognition. So, if you can then apply that pattern recognition to a large language model and then be able to take data that then goes into that. It's remarkably helpful. And so even for GPs being able to do that and use our model, that's why I'll send you this afterwards because I think you'd love to see the output and it just makes you a better GP because it starts to then identify where you need to firm up the story or just improve the business model in some way.
Turner Novak:
Yeah. That makes sense. And it's interesting because in this one, some of the skeptical takes is it's like portfolio construction discipline is evolving. And it's because I specifically say in the deck how I've been increasing the ownership size and it's like you got to have strict ownership. So is that just like an LLM hallucination thing? Does it truly not understand it?
Samir Kaji:
Well, it's not trained. So it's not trained any way. So you're not providing any instructions of how to think. So if you look at my ChatGPT I've ... You're an institutional investor, but underneath that it has all of the entire rubric of how we look at it. So oh, if fund size goes up by this much, what you're really looking at is, okay, are they increasing ownership targets commensurately? Are they leading checks? Were they able to lead checks the last time around? So it's not just, oh, Turner, because you did 8,000 companies in the last one and you're doing 30, that's a bad thing. It just means that you've evolved your business model. And so it would actually capture this type of ... Not hallucination. It's actually doing what it's supposed to be, but it wouldn't know because it's not applying direct knowledge that fund models will change over time as fund size grows.
Turner Novak:
Interesting. Okay. Yeah, that's a good point. I know one of the AI companies I've invested in, a big piece of the tool is this creating the rules that go into how it performs the job, which I think is a very hard piece to get right with a lot of this stuff. So then just maybe in the sense of what you get from your tool and what you know about the universe of being a good venture investor, what do you see as being the traits of some of the best investors right now? Or how would you stand out as a top emerging manager right now today?
Samir Kaji:
I mean it's understated, but it's grit and hustle. I think that the best managers, even the ones that have been around and been successful, the ones that just want to compete and win. It's less about the dollars, it's less about what I would consider vanity metrics. I do see a lot of GPs, "Oh, vanity metric. We had a mark-up of this and we're doing expert." And I'm like, "You're a year in. It doesn't really matter. Think about what is the long term." Now if you tell me this company that you got in, you made seven customer introductions and you hustled to get them in front of things that led to deals. Now this company went from a million to four million in AR and you were a big part of it, now that's something repeatable. It's not something that I feel like, okay, well that's great, but what did you do?
And so the best managers are always looking for the edge of how do I provide a service to my founders that offers them the ability to go from whether it's zero to one, one to two, two to five, whatever the number is, and be the best at something. And so if you're great at go-to market, well, what are the OKRs that you're looking for in helping these companies? How do you identify the KPIs to know what you're doing is successful? Because as you know, the feedback loops are incredibly long on venture. I mean, you've been doing this for a while, but you don't really know if you're great yet and you won't until ... If you haven't returned a single dollar, by definition, you're not a great VC yet.
Turner Novak:
I have a couple single digit DPI returns.
Samir Kaji:
And I shouldn't say that because yes, if you were in the seed rounds of some of the best companies in the world, yeah, you're probably going to get there and it's very clear. But it's more a function of have you really identified your strength? Are you leaning into those strengths and is a repeatable playbook that you're building that you can track against? And I see the best managers ... I had Mamoon from Kleiner, for example, on my podcast about a year ago, and I asked the question, I'm like, "What are the OKRs? How do you even know what you're doing is working outside of the fact that these companies will be marked up and they grow?" He's like, "Oh yeah, the first thing we do is anytime a series A is raised and it's one of our big tier one competitors, we assess did we see it? If we didn't see it, why didn't we see it? What did we get wrong in our go-to market? And that's one of the OKRs that we track." And so identifying those metrics for success is really important. And then building an entire business plan. And then at the end of the day, you can't teach grit and hustle, but that's what really separates good from great.
Turner Novak:
You kind of talked about this a little bit because I asked this because I've heard some people say that grit and hustle, it's kind of like table stakes and you can't really have that be the thing that you differentiate on. So how would you assess if somebody truly has grit and hustle? Because if I'm pitching you on my fund, what am I going to say? I don't try hard. Oh, I only work a couple hours a day and don't really care if my companies do well. How do you actually assess that they actually care and try?
Samir Kaji:
I mean part of it's pattern recognition. Part of it is also references. Off sheet references are what a lot of institutional LPs do. So if I wanted to, for example, diligence you, I can probably reach out to 30 people without you knowing I did that and they all know you and I know them so well that they're going to be providing me with a real take. So for example, I just did diligence or somebody on my team did diligence on a manager where we did a bunch of references and it was just very clear that this person not only does what they say, but they go well above and beyond. In fact, they said they were going to make a few introductions. They ended up making 37 introductions to this person that resulted in a million bucks. There's degrees of everything. There's grit and there's real grit and hustle.
There's people that fly across the world to meet with an entrepreneur for breakfast to win a deal. That is a lot different than, "Hey, I'm going to get on a Zoom call next Tuesday if you have time." And so you can ferret these things up, but that's why you have to have the time to be able to do this. You have to go really, really deep. No, it's not enough. Grit and hustle is not enough, but it's a big variable that does go into the success equation. Yeah, you still have to have the right fund size. You still have to go into all the things that we had talked about before, portfolio construction, the right to win. What is your sourcing advantage? All those things matter. But if I were to sort of index between someone that's really smart and then someone that hustles really hard, the latter is going to win in my mind all day long because the person that has grit and hustle, they're probably fairly smart, and most people in this industry are not people that have IQs of 80. These are people that are smart, educated, they get it. And so what you're really looking for is that nice Venn diagram between intelligence, hustle and self-awareness.
Turner Novak:
I've heard my old boss Afore, Anamitra, he said they look for obsession, which is kind of a little bit tied in it. It's a characteristic of just not giving up, of just like are you obsessed with ... This is on the founder's side. Are you obsessed with the problem that you're solving? Are you obsessed with what you're doing? And I mean, obsession can kind of get you through anything. It's just like things don't go your way for a long time. If you're just obsessed with what you're doing, you won't give up. And that's not all of it, but it's a big piece.
Samir Kaji:
It's true for founders too. So when you're a founder, you have one asset. You have your company and it's going to either succeed or not. And as a founder, you're going to get punched in the face multiple times. Things are not going to work. Macro headwinds may come, micro headwinds may come. And if you're not really obsessed with the problem or passionate about what you do, you're going to give up and things are going to start to fall off the rails. Well, as a VC fund manager, you're going to fund one, that fund one may be around for 15 to 17 years. So are you really passionate about what you do? Are you obsessed with winning and creating sort of a ... Not just for yourself but legacy for helping founders, creating real value, driving value to LPs.
If you don't care about that stuff, it's not going to work because the moment it becomes tough to fundraise, you're going to give up. And that's why I see these LinkedIn updates, someone raised a fund one, then I see the LinkedIn update, "Oh, I just joined a product manager at Meta for fund two." I'm like, "Well, I thought you're going to be a long-term venture manager. What happened?" And then I correct them, they're like, "Nah. It's just too hard fundraising and it's just like, I don't want to do it." I'm like, "Well, you weren't obsessed then of creating a firm."
Turner Novak:
The one way I kind of describe what it's like fundraising as an emerging manager to founder friends is you remember when you raised your pre-seed, you had to raise a couple million bucks and a bunch of small checks and a lot of people said no, but eventually you got there. Just imagine of going to two million, you had to go to 10 or something, and it's like a full year instead of two months. That's how I usually describe it to people and like, "Oh, wow, yeah, that does sound like it sucks." And it's like, yeah, you got to kind of just do it.
Samir Kaji:
And you're also going to be dual-handed. Think about it. This is when the analogies with founders actually makes a ton of sense because you're doing everything. If you're solo GP especially, there's not a big IR team that's going to raising capital. You are the person. You are also the person that concurrently, if you do a first close, is also sourcing opportunities and trying to win deals and assess deals at the same time. Half of your time is going to be fundraising and talking to net new LPs, and you're going to have to modulate your time on a week-by-week basis. And by the way, now you have to think about paying bills and setting up a management company and hiring and all these things that come into business building. And again, that's where the obsession comes in. If you don't like doing those things, you're not willing to do those things, then don't raise a fund.
Turner Novak:
When I'm talking to friends who they're like a partner or associate at like a big fund, they just have all the things they have teams for. They have a marketing team, they have a platform team, recruiting, the IR team, they've got the operating partner. It's just like all those teams that you have is something that you have to do by yourself as a solo GP. So that might sound really fun, that might sound terrible. It's like reflecting. It's like, do I want to do all those things? And I think a lot of the times, honestly, even with me personally a lot of times, man, it does suck. There are a lot of things that just are not fun that you just kind of have to do, but it's like every job. My first job, I worked at a PE firm and I was an intern, and it started with they just gave you a spreadsheet of thousands of investment bankers and you just had to cold call them and ask if they had a deal for you.
The success rate was literally zero. I don't think anyone got a deal that way, but it sucked. And my boss told me, he's like, "Oh yeah, we make you do it for the first week or so, and we use that to see if you're any good. And then if you're good, we'll move you up to the next thing. And if you're not good, you just do that all summer." You still have to kind of do it throughout the course of the job. But it was one of those things that you kind of just have to do that shitty part and then you could do the more fun stuff. Which I don't know if people think updating spreadsheets at a PE firm is fun, but you get to do some slightly more fun stuff.
Samir Kaji:
It's part of building. Like anything else as a founder. I remember when I first started, because I've worked at big organizations, and when you go from a big org to starting your own company, it is totally different. Everything from like, oh, I got to figure out an incorporation to oh, I need insurance. Oh, we have to basically do this thing with, I have an employee over here, there's state laws over here. Oh, then I have to basically ... As we were picking different spaces, even coworking spaces, now I've got to negotiate this. And then the bank is asking me to print out something PDF and now I got to walk into the branch. I mean, thankfully I didn't have to go in the branch in this case, but these are just examples of stuff that I don't want to do these things, but you have to do these things and you have to be comfortable that that's part of the journey. And so that's the one thing I think a lot of emerging managers have underestimated is all the other shit that's not investing that you have to do to run a firm.
Turner Novak:
And I'll plug the sponsor for this episode is Warp. It's payroll for founders. So one of the things that hit me really hard was I was using a certain payroll provider and I had an employee. The employee was in New York and I had to do things in Delaware and California, and I live in Michigan, so I had four of these different state things. It was like a workers' comp, it was registration type stuff, and I missed it and I got fined or whatever. And I didn't even know about it for two years until they actually started mailing me. And is it on me? Is on the payroll provider or whatever? So to the point of all this extra stuff that you have to do, it was like, "God, I don't have time to deal with this. Can the software please do it? Can someone else please do it?" But anyways, so I've got a question for you. We talked a little bit about AI. I'm curious. I've been asking a lot of people. I see a lot of VCs. I think you actually tweeted about this. There's a lot of people tweeting about how AI is changing the way that VCs do things. What have you seen on that side?
Samir Kaji:
There's kind of the hot take out there, which is, oh, by 2028, the traditional VC is dead because artificial intelligence is going to be able to source, pick and all those things. I don't believe in that. I think it ignores the human element, you and I sitting together, me providing empathy, thinking around the corners. We're not an AGI yet to be able to do those type of things. But I do think it fundamentally will change the efficiency of how VCs work. So think about, we mentioned some of the things that we do internally to be able to accelerate and do things with more intelligence. So within a VC firm, if you look at those three different levels of things you have to do, source opportunities, you got to be able to assess, you have to be able to win them. Well, all of that can be enhanced by the use of artificial intelligence.
So for example, if I want to be able to parse all of companies that ... If I want to track when somebody puts stealth on their LinkedIn, I can start to be able to build these tools that allow me to see things that otherwise I would have to manually figure out or rely on my first degree networks. Second, to be able to pick opportunities. Well, if I have a big enough corpus of data, I can train on that and say, what are some of the characteristics, similar to what I do with scoring model, that help me filter through the noise and also do competitive analysis of what else is out there to determine what are the tailwinds and headwinds this company may face. And then even winning, for example. Part of winning, outside of just being somebody that people want to work with ... I mean, a lot of it is that. Do I want to grab a beer with this person? Do I like them?
Turner Novak:
Do I want to give them part of my company? I'm selling them part of the company and I'm going to be with them for a decade, probably longer.
Samir Kaji:
A decade. And it's hard to kick people off your cap table. And so ultimately it's like how well do you know my business? So if you now have done all the research and ChatGPT has research functions. If you come to me and you show me that you know so much about my company that now you can now do within a two minute sort of query, I'm more likely to want to work with you because now you've shown me you've done the research. There is a very successful emerging manager out there. They run 15 to 20 page research reports for each company to which they send the GP. I'm sorry, they send the founder. And say, "Here's what we found out about your space. This is how deep we've gone." They do market mapping and say, "These are the different layers. This is how we see your business evolving. These are the tailwinds, these are the headwinds. Here's what you have to think about." As a founder, if I'm getting that, I'm like, "Oh my God, they really understand my business." The chance of me picking them over some other VCs that's like, "We like you. We like what you're doing. It's big market, big tam. We like you. We like your energy." Who am I going to pick if these are both lead checks? It's not even comparable.
Turner Novak:
And it's interesting because a lot of venture funds kind of do that. Usually they'll send a deck when they're trying to win the deal and they've got all their public company logos and they slide your logo in there and try to make you feel all good about it and they've done their research on a market.
Samir Kaji:
But it's usually very surface level. It doesn't go deep enough. And if you're basically just telling me why I should pick you based on who you are, that doesn't actually mean that it's relevant for me. So if you show, "Hey, I'm in these great companies and that's why you should pick me." No, no. I want to pick you because number one, I think you're, in this case, I'm just going to use you as an example, a fundamentally good person that's going to be there when I need it through thick and thin. When I text you, you're going to respond. You're going to do what you say. I can trust you're going to be empathetic toward my journey. And then by the way, you know my business inside and out and you've evidenced that even before you wrote the check.
Turner Novak:
I mean, I think in this age of AI, the thing that I've tilted more and more towards is human relationships. I just can assume that it's kind of going to get commoditized. Everyone's going to kind of have better technology. The ai. Everyone's all going to benefit from it. And I feel like some people might miss that or they might forget about how important the is. So I've just been thinking a lot about how do I do more in-person events or even with this podcast, you just get to hang out with someone for two hours and ask them a bunch of questions. It's kind of fun getting to know people better like that.
Samir Kaji:
There's no substitute to that. I mean, I saw this, and this is why we spent so much time building community. We do 30 to 40 events per year. And part of it is to create meaningful human interactions, which you can't disintermediate just by using technology. Technology can enhance those relationships, but it's not replacing. And so maybe that changes five, 10 years from now when there's AGI, but I still think that we have millions of years of even going back before humans. There's a social construct that's really important with any living thing. And so fundamentally, I think that as a VC, you need to think about how you're going to lever AI, but I wouldn't be worried that it's going to replace you.
Turner Novak:
Yeah, you're going to be sending ... My humanoid and your humanoid will go to an event together and they'll debrief and come back to us or whatever.
Samir Kaji:
I hope not.
Turner Novak:
And you actually have a podcast. What's your podcast called for people interested?
Samir Kaji:
Venture Unlocked, which has started back in COVID. I'd been thinking about it for a number of years, and during COVID, I was at home and I'm like, "I better just go ahead and do this." And the whole concept is let's bring on GPs to talk about the art of building firms. What goes into decision-making, investment committees, building a firm, hiring talent. So we're about 140 or so episodes in and it's a passion project of mine. So it can be found at substackventureunlocked.substack.com.
Turner Novak:
Yeah. We'll throw a link in the show notes for people who want to check it out, and there'll be a couple other links for some of the other things we've kind of referenced. We'll throw them all in there. What have you learned from the podcast? Anything? Does it benefit anything?
Samir Kaji:
Number one, I think being a podcaster makes you a better ... In terms of engaging with people, you're a better listener. You're forced to listen in podcasts to the guests.
Turner Novak:
Oh yeah, you can't zone out.
Samir Kaji:
You can't zone out. So it's actually made me better at asking the right questions and building those meaningful relationships. But I also just learn a lot from people. Half the time I'm just sitting there, I'm like, "This sounds really good." Now it's forcing me to think in a different way and challenge some of my sort of heuristic views that I might've developed over a long period of time. So it's just made me better when I think about all aspects of life. Not just investing, but in a lot of our conversations, we go into the people side of things, the human side. And you've probably noticed this too. You're probably a better investor, but you're probably a better human being too, having gone through all these conversations over the course that you've started this podcast.
Turner Novak:
Yeah. I don't know my wife would agree.
Samir Kaji:
My wife wouldn't either. Trust me, mine's like, "You're the same guy. You're of worth." And I'm like, "Okay. Thanks. But I feel like I am."
Turner Novak:
Yeah, no, I think it's a lot of the same benefits. It kind of forces you to sit down. Just preparing for this, I was like, what can I learn from Samir? What can I ask him? What are other people going to like hearing from this? Then you kind of give the people a platform too. It's like, hey, a couple thousand people will listen to this. Hopefully you get some benefit out of it. So yeah, it's kind of turned into ... It was something I was really interested in. I kind of had the hypothesis that I think this will be beneficial for the fund and for portfolio companies. And we've actually had a couple ... I think the biggest one is people, regular listeners of the show will remember we had Dan Lawrence at Chain Guard on a couple ... He's actually been on twice. He's the only two time guest. And the first time he came on was November of '23.
They had just kind of announced their series B. So the thinking was, "I'll give you a platform to announce it. People can learn more about Chain Guard." And a couple of months ago he was telling me, "We hired 10 people from that episode." And I was like, "What? Why are you just telling me that now first off, but also that's awesome." So I had them on again. They're just like, "Al right. Let's announce a series D. Like let's talk more about the company and what you're doing." So it kind of turned into this distribution channel to actually help portfolio companies aside from also just being kind of fun and benefit everything else.
Samir Kaji:
And it feels good when you hear those stories. I had a GP that I had recently and they're like, "After the podcast I had seven inbound LPs that wanted to get to know me that I had never met before, and they heard me on the podcast. They liked what I said." So that's another thing that just kind of keeps you going. Forget about your self-improvement. Like can we help a lot of people through education by bringing on a great guest and have those great guests. That's why we have a lot of emerging managers on the podcast too. Because it's like, is there this additional benefit they can get? Because there's so many great EMs out there that no one knows about, and when you get their voice out there and people hear it, you can start to see the benefits that people can get. Now again, that's not why we do it. We do it primarily just to educate the market and we have a lot of fun conversations and I like it, you like it, but it's definitely been a labor of love over the last four years.
Turner Novak:
Well, that's awesome. Yeah. We'll throw a link in the show notes if people want to check it out. This has been a lot of fun. Thanks for doing this. I know you're on Twitter or X, LinkedIn. Both people should follow you there?
Samir Kaji:
Yeah. @SamirKaji on Twitter. I don't call it X. And then LinkedIn is just Samir Kaji and then the Venture Unlocked. So I appreciate you having me on. This is a lot of fun.
Turner Novak:
Yeah. This is a lot of fun. We'll have to do it again sometime.
Samir Kaji:
Awesome, man.
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