John Kim - How to Raise a Few Billion Dollars - [Invest Like the Best, EP.482]

Today my guest is John Kim. John is one of the world's top and most prolific fundraisers. He was chief client officer at General Catalyst, where he helped raise many of the firm's flagship funds. He is now chairman and president of corporate development at Lila Sciences, a company building scientific superintelligence, where he has helped raise several hundred million dollars. He is also the author of The Tao of Fundraising. This conversation is really a guide on how to raise money from someone who has done it at the highest level. We talk about why persuasion equals desire minus fear, the difference between belief and trust, the laws of fundraising, and how to build the consensus that moves big pools of capital. Please enjoy my conversation with John Kim. For the full show notes, transcript, and links to mentioned content, check out the episode page ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠. ----- Become a Colossus member to get our quarterly print magazine and private audio experience, including exclusive profiles and early access to select episodes. Subscribe at ⁠colossus.com/subscribe⁠. ----- ⁠Ramp’s⁠ mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Go to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠ramp.com/invest⁠⁠ to sign up for free and get a $250 welcome bonus. ----- Trusted by thousands of businesses, ⁠Vanta⁠ continuously monitors your security posture and streamlines audits so you can win enterprise deals and build customer trust without the traditional overhead. Invest Like the Best listeners get a special offer of $1,000 off Vanta when you go to ⁠vanta.com/invest⁠. ----- WorkOS⁠ is the infrastructure B2B and AI-native companies use to sell to enterprise. It covers everything enterprise security requires: SSO, SCIM, RBAC, Audit Logs, AI governance, and more. Trusted by 2,000+ fast-growing companies, including OpenAI, Anthropic, Cursor, and Vercel. ----- Rogo is the AI platform for finance. They're building agents for Wall Street that are trained to understand how bankers and investors actually do work: from diligence and modeling, to turning analysis into deliverables. To learn more, visit rogo.ai/invest. ----- ⁠Ridgeline⁠ has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. Visit⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ridgeline.ai⁠. ----- Editing and post-production work for this episode was provided by The Podcast Consultant. Timestamps: (00:00:00) Welcome to Invest Like The Best (00:02:02) Introduction of John Kim (00:02:39) Money Moves at the Speed of Trust (00:05:06) How to Start a Fundraising Campaign (00:08:03) Persuasion Equals Desire Minus Fear (00:12:20) How to Raise a Few Billion Dollars (00:15:58) The Benchmark Story (00:18:36) The Law of Differentiation (00:24:13) Law of Tradeoffs and Law of Pipeline (00:27:52) The Karpman Drama Triangle (00:30:42) Oprah Winfrey (00:33:49) Most Common Fundraising Mistakes (00:38:35) Secretary of State (00:45:40) The Inner Game (00:47:38) The Kindest Thing

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Patrick O'Shaughnessy?

  Ramp is the only platform built to make your finance team leaner, faster, and better, saving businesses 5% annually on average, so you can stay focused on growth. Ramp just opened for business in the United Kingdom. So if you're running a business in the UK, you can now use Ramp's AI-powered finance platform to manage cards, expenses, bills, approvals, and accounting, all in one place. I run my business on Ramp, and so should you. Learn more at ramp.com/invest. Rogo is the AI platform purpose-built for financial institutions, serving tens of thousands of bankers and investors at hundreds of leading firms worldwide. Rogo's AI agents autonomously execute large chunk of your firm's workflows. They can screen deals, draft SIMs, run buyer outreach,

• 0:44Patrick O'Shaughnessy?

  and do diligence on data rooms, all with full security and compliance handled. Every action feeds Rogo Intelligence, the firm's context layer, turning years of deal experience into a secure, governed, institutional memory that makes each new transaction stronger than the last. To learn more, visit rogo.com/invest. OpenAI, Cursor, Anthy, and Vercel all have something in common. They all use WorkOS. To achieve enterprise adoption at scale, you have to deliver on core capabilities like SSO, SCIM, RBAC, and audit logs. Instead of spending months building these mission-critical capabilities yourself, you can just use WorkOS APIs to gain all of them on day zero. Visit workos.com to get started.

• 1:30Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus, along with all of our podcasts, at colossus.com.

• 1:54Speaker 01

  Patrick O'Neal is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.

• 2:22Patrick O'Shaughnessy?

  Today, my guest is John Kim. John is one of the world's top and most prolific fundraisers. Over his career at General Catalyst, he helped raise billions of dollars and turned GC into one of the largest venture firms in the world. Today, he's chairman and president of Corporate Development at Lila Sciences, a company building scientific superintelligence, which has raised over $500 million. John is also the author of The Tao of Fundraising. This conversation is really a guide on how to raise money from someone who has done it at the highest level. We talk about why persuasion equals desire minus fear, the difference between belief and trust, the laws of fundraising, and how to build consensus that moves huge pools of capital. Please enjoy my conversation with John Kim.

• 3:01Patrick O'Shaughnessy?

  We were chatting before, and you said, if you were to rename your book, you had an idea what you'd call it. How would you rename it?

• 3:07Speaker 02

  As I wrote the book, The Tao of Fundraising, I had this idea that I wanted to put something philosophical out in the world, because fundraising isn't just an idea of persuasion. It's actually a way of life, that the actual interacting with people through the lens of them as the center of your conversation is a way of life. And that way of life requires a certain level of responsibility. When you start to get good at understanding how people work and how people react, and how they will react to me, or to you, or to other personas, you can actually use that for your own selfish needs, or you can use it for good. So I called it The Tao of Fundraising. But in the end, I don't know how many people actually care

• 3:48Speaker 02

  about that philosophy. What most people want to know is, how do you get money? I think I probably would have just renamed it Money Moves at the Speed of Trust, because the entire book really is about that. How money pools and areas, and people hold on to it, and resources. And we can put a lot of words around what actually motivates people to move in a direction. And that's really important, making sure that you say, hey, I want the money to move in this direction, not that direction. The real trick is that most people know how to get people's attention and get interest moving in the direction. That last unlock of trust actually is the magic key. So many people do such a good job of using

• 4:30Speaker 02

  logos or logic to actually get somebody to a yes. And they still say no, because it's the difference between belief and trust. I didn't write this in my book, and I wish it was the first chapter. Belief is, like, I believe you, yes. What you're saying makes sense. I believe you. Trust is very different. I don't have faith in it. I don't trust it. And people say, well, how can you believe something and not trust it? Have you ever gone skydiving? You know, are people who are terribly afraid of flying, do you believe that the pilot is qualified? Of course you do. And so, trust, you can get people, and people, unfortunately, just don't get to that last piece, where they get people to

• 5:15Speaker 02

  believe that this is going to work. They believe it is the right thing. They just don't trust that you're going to actually fulfill what they need. And it's very complicated.

• 5:26Patrick O'Shaughnessy?

  I want to go to the situation where I'm a person, I have an idea, something I want to do, it requires capital or resources of some kind. What people should understand about that starting state that you've learned, and where people then tend to fall down. Like, I think one of the interesting messages that you and I have talked about before is, of course, a good idea is important, a good product, the thing you're trying to build or sell, or what have you. But that people maybe underestimate the role that capital can play in making that thing happen. And therefore, this skill that you've learned a lot about and done a lot of, is just unbelievably valuable, but no one really knows how to do it beyond the idea. At the very beginning, orient us around that combination of idea plus capital, and the importance of the relationship.

• 6:11Speaker 02

  First, you have to look and say, okay, who are the people who trust you? This is why they call it friends and family. What is friends and family?

• 6:19Patrick O'Shaughnessy?

  I trust.

• 6:19Speaker 02

  I trust. I don't think it's totally true that friends and family are people who will give you money, they're not afraid to lose it. Their tolerance for loss actually may be much, much worse than an institution. That's, I think, kind of an urban myth, that, oh, go to friends and family, because they'll give you the money as charity. I think the most expensive money is borrowing money from your friends, because if you don't give the money back, your friendship is not the same anymore. But they trust you, and they want to see you do well. And their desire minus fear, which is, we talk about persuasion, their fear of losing money is subordinate to their desire for you to do well. And they know that in order for you to do well, you need resources you don't have. So, as an

• 7:04Speaker 02

  individual, first, you need to find out who trusts you. Who are the people who desire your success more than they fear? Or, they trust you're going to make money for them. They desire to make money, and they don't fear that you're going to lose it, because they've seen you in action in other places. So that's where you have to start. Politicians call this the hard reelect number. The hard reelect number is some base number where, no matter what you do, they still will vote for you. So you first have to figure out, naturally, who would give me money? And then, from there, you sort of multiply it. You say, well, if I think that my friends and family are going to give me, let's say, a million dollars, then maybe my goal should raise two or three million dollars, because

• 7:46Speaker 02

  from their trust, I can leverage their trust to see. Now, maybe you could do better than that, but you have to start from there. You're not going to raise $100 million off a friends and family of a million, but you should do better than $500,000. By the way, that tends to be my experience. If your first close is a billion dollars, you tend to tap out at 2 billion, because your first close almost always is your hard reelect number. That has been my experience. First, find out, how much money do I really think trusts me already? And then, from there, let's build on it with a campaign. And then, we could talk about the actual mechanics of doing a campaign.

• 8:23Patrick O'Shaughnessy?

  Before we do that, I'd love you to dig deeper into this very simple idea of persuasion equals desire minus fear. Like, it's an incredibly simplifying, elegant way of thinking about this. Why is that the reduction that you've arrived at versus some other one?

• 8:37Speaker 02

  This is, like, a decade ago, I was talking to one of the masters of the universe, and I was talking about, oh, I think it's desire minus fear. And, thanks, Mr. Obvious, everything's, you know, greed and fear. And I looked, and I said, wow, that's actually not true. The simplicity of it isn't the wisdom of the phrase, it's the nature of desire, it's the nature of the positive side. It's the invitation to say that people can be inspired by something that is not just self-serving. Greed is self-serving. The human condition has so many things it desires. The ego has so many things it desires. Otherwise, we would never give money away. Otherwise, we would never do things that are generous for people. Otherwise, we wouldn't

• 9:19Speaker 02

  care about the environment, care about our children, care about desire. So, when you're talking to somebody and trying to persuade them, too many people, and this is maybe one of the most important lessons that people seldom get right when they first start fundraising. In the alternatives world, an investing professional talks to somebody on the other side, they're called limited partners, and they just are so passionate about how much money they're going to make for them, and the returns. Because the more money they make, the bigger the plane, or whatever it is, because they're motivated that way. And of course, as a fiduciary, you're saying, well, this has to be what you care about.

• 9:59Speaker 02

  But the dirty secret to the relationship is that very few, some do, very few limited partners are actually compensated on the returns that the general partner makes. Very few are. Some are. Some are compensated on IRR. And it's hard, right? Because the alternatives business, you have to wait for 10 years to see if something's good or bad. So it's really kind of an awkward alignment of interests. Say, okay, I'm going to pay you on an IRR, but we don't really know if this is really good, so I could pay you a ton of money. And the general partner could be tricking up the IRR, and there are lots of great tools to do that these days. That's a misalignment of interests, if I'm giving you my money

• 10:41Speaker 02

  to actually manage. So therefore, there are a lot of people who just simply don't make money if you make money. So in other words, there is no greed. So there's got to be some other motivations. So when you're trying to raise money, look for that motivation that they have, because they're in that spot for some reason. The fear piece is also really important. And fear might as well be, in other words, of saying trust, you know, it's the anti-trust. The way to inoculate yourself against fear is trust. In fact, the more fearful somebody is, and the more trust you can develop, the less desire they need. But if they just trust me absolutely... Then everything else will pair in comparison. If they have no fear, in other words, it's riskless, they will do it.

• 11:26Speaker 02

  And this is one of the things that ties into so many hedge fund professionals that appear on your podcast as well. We'll talk about risk-loving, risk aversion. I think that's kind of bullshit. I don't really think there's such thing as risk-loving, risk aversion. I think that there are only people who perceive there's no risk. I think that no one actually really invests with a lot of risk. I think that people actually convince themselves that the risk is far less than what it really is in order to justify the risks they're taking so they can receive the reward. And where do we see this gambling, right? The casino. It's part of the human condition that we rationalize away the risk. And so somebody says, I'm risk-loving. No, you're not.

• 12:09Speaker 02

  You're just really good at rationalizing away the risk. And not to zero, but if you know your outcome is gigantic, you just have to rationalize the risk to half of what it really is and you'll say yes. And that's where a lot of cognitive mistakes are made in investing for sure.

• 12:26Patrick O'Shaughnessy?

  A lot of this equation is you've talked about applying it early to get going. I'm also very curious about applying some of these ideas much later on. So if I think about your time at General Catalyst or something, you're on fund eight or whatever. You're established. People know who you are. There's somewhere in the book, you said, the path of least resistance is often that money goes to stuff already in motion. Fund eight, let's say, or series D or whatever, you're like, you're already in motion.

• 12:52Speaker 02

  Yeah.

• 12:53Patrick O'Shaughnessy?

  What have you learned about doing a really great job at that stage? What happens there that's distinct from just like the early stuff of total uncertainty? We don't even know if you're any good. Like, how would you do that even? Like, I'm even thinking literally about you sitting down like, okay, we're going to go raise this thing.

• 13:08Speaker 02

  So we basically set out on a campaign of consensus. So one of the ways to get rid of fear is consensus. Consensus, by the way, is the hardest, maybe one of the most powerful things to move entire markets. Because consensus is a macro view. And by definition, you have a macro view, you've influenced the macro world. So you'll see this, why propaganda in its best and worst forms creates a consensus. There are a couple of ways to go about it. You could argue that there is the classic innovator, early adopter, early majority, late majority laggard. In which case you have to close the gap and lots of people have written wonderful books about early adopter to early majority. Once you cross that gap, it all of a sudden consensus starts to happen. That is a really powerful framing.

• 13:53Speaker 02

  So we know the winner on the other side of that gap is actually winner take all. So therefore it's worth it. The second way you can get at it is that big money tends to hide behind committees. Because if you've got a committee of eight or nine people and you have to vote, what then by definition is happening? You have a consensus decision. I have never seen a consensus decision-making process make a contrarian bet. Unless the group is designed to make contrarian bets. That's very hard to do. And that's why it's very hard to find good venture capital firms because they tend to be contrarian firms. So how do you build consensus? You build it with consistency.

• 14:33Speaker 02

  Find people who you can do things for that are actually part of the group that you want consensus around state pension plans. Let's say consultants, sovereign wealth. Do they care about co-investment? Do they care about fees? Do they care about access transparency? Do they care about intellectual property? Do they care about just being entertained? Find it, give it to them. They come back to you, build. Now you've got a sovereign wealth plan. Now you've got a pension plan. From there, you start to meet people and they say, hey, you realize that this state pension plan has invested this. And next thing you know, the next round, you end up doubling it. And so if you take a look at the experience, all of a sudden, General Catalyst and others are starting to become consensus. And this is true for any of the other folks who have amassed capital.

• 15:16Speaker 02

  There's a consensus that they're the winners of the class. And General Catalyst created a consensus. And so that was the whole goal. But you had to do it fund by fund by fund, but it was very intentional. And by the way, here's the thing, you have to have the courage then to lose the people who actually were the people who invested with you because you were contrarian. In other words, you have to have the courage to get past the innovator's dilemma. And so if there's a set of folks, high net worth family offices, endowments or whatever it is, or small fund of funds that say, hey, you're now too big for me. You're going to lose them and you have to have the courage to do that. The only way you're not going to succeed is if you actually want to have your cake and eat it too.

• 15:57Speaker 02

  Now, there is a truth to, if your performance is so dynamic, you're so differentiated, then you'll be able to run the table. And there are firms who do that. You can't get into the fund, you can't because their performance, their track record is so absurdly strong relative to the industry that you trust that they're going to actually develop these returns again.

• 16:18Patrick O'Shaughnessy?

  I remember once one of the partners at Benchmark, I asked them, how do you fundraise? And they said, well, we send an email on a Tuesday night and the fund is closed on the same morning.

• 16:25Speaker 02

  Right, right, right. So in that case, let's talk about trust. So the consistency, right? They consistently perform exceptionally well. Consensus is, they're actually one of the best funds in the world. And there's scarcity. You don't have to have experts like a consultant say, well, that's the best one. Like, look, I already know consensus is there. They don't have to do anything for you. There's no reciprocity, but returns. And by say but returns, again, that that isn't everybody's desire. It's most people's desire because it makes them look good. But it's really about the consensus and the scarcity that allows them to have the advantage and the privilege of keeping their funds small and keeping their fundraising energies, calories very, very low.

• 17:06Patrick O'Shaughnessy?

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• 17:50Patrick O'Shaughnessy?

  because of how far ahead RidgeLine's AI features are compared to anything else in investment management software. I've been hearing from a lot of investment managers about AI and they fall roughly into two camps, with some unsure where to even start and others convinced that they can build their own order management system over a weekend. The reality is that running an investment firm will always require governance, controls and a single source of truth for your data. And no amount of AI enthusiasm changes that requirement. RidgeLine is built on exactly that foundation, which is why I believe that the firms that come out ahead in the AI era will be the ones running on RidgeLine's unified platform. If you're serious about your firm's AI strategy, RidgeLine should be part of that conversation and you can request a demo at ridgeline.ai.

• 18:34Patrick O'Shaughnessy?

  You mentioned the word differentiation before. Can you explain your law of differentiation?

• 18:39Speaker 02

  If anybody wants to learn three laws of physics that are the most important in fundraising, law of differentiation, law of trade-offs and law of pipeline. Let's talk about law of differentiation. This is the law, right? This is your track record plus your differentiation and you divide all that by the complexity of your story. So track record, that isn't just your returns, but is how do you behave? So if you're an elected official, your track record is your voting record, right? Or it's the way you show up in the media, it's your consistency. Differentiation could be anything like, it can be, I can take contrarian bets. It can be, I only do one or two things, but when I do them, I'm highly operationally intensive.

• 19:23Speaker 02

  It can be, I access this part of the market that no one else does. It could be my GP commit is abnormally large. So let's take those two positive features. When you're trying to build a portfolio, because almost everybody at the institutional, at the big money, not the small money, the big money has a portfolio. So you have a portfolio of diversified assets and you try to have those assets not replicate what each other's doing because if they're autocorrelated, then, you know, you didn't do a great job. So you kind of want people who are differentiated. And so you're trying to add something that is additive to your portfolio somehow, some way. All right. Then complications. Complications are usually the enemy of trust. The more I have to explain, like when my, my daughter comes back late at night

• 20:08Speaker 02

  and I said, look, you know, you're supposed to be back at midnight, but gosh, it's 2 AM and explain yourself. And there's this long story of this and that. I'm like, I don't trust this. My daughter's pretty smart. She knows, oh dad, you know what? I just blew past it. I was having fun.

• 20:25Patrick O'Shaughnessy?

  Sorry.

• 20:25Speaker 02

  Sorry. Like, why trust her? Complications gut you. They gut you for two reasons. First, they gut you because it ruins or it just dilutes trust. But the second is really much more commercial, which is I've seen with my own eyes many times where people trust and want to do something, but they can't explain it to somebody else that is making the decision. You better give them that phrase that they can repeat to somebody else because that's how somebody else will then trust what they're saying. And that is the trick. And one of the most famous examples of this is, is of course, the OJ Simpson trial. If the glove doesn't fit, you must acquit.

• 21:10Speaker 02

  One of the most famous lines in the history of the world. Well, you really think that if he didn't have that, these folks would have actually been okay walking out of the courtroom, finding him not guilty or being hung as a jury and having to explain to the media why they did that? No way. But he was smart enough to say, okay, guys, you're going to have to defend yourself to everybody. It's very complicated why. They're not going to want to hear about your civic duty to, to adjudicate the law. You say, look, I had no choice. The glove didn't fit. I had to acquit. Changed my life when I saw that, by the way. Like, wow, that's what, that's what persuasion looks like. So if you have complications, make sure you give them that phrase that allows you to cut through those complications, even if you have complications.

• 21:54Patrick O'Shaughnessy?

  And so when you were doing a fundraise, would you literally go through these three variables and try to improve each one systematically during the process?

• 22:01Speaker 02

  Very, very much religiously. That track record plus differentiation divided by complexity of thought. You're constantly trying to make the track record look better in their eyes. You're constantly trying to make your differentiation look better. And you're constantly trying to reduce your complications. Differentiation piece is back to the question you asked me about General Catalyst. Okay, what do people do when they get to that level? There are two kinds of people who sustain. There are those who find their why. Why are we this big? Why do we exist? And there are those who just say, now I've got the money. I'm now big and I'm going to continue to push forward. Those who do that actually get small again. Those who find their why, like, why do we need to be this big? Why is this size helping us? And why is this helping you?

• 22:46Speaker 02

  And the why can't be a branding. Because every why has a cost. Every differentiation has a cost. Great differentiation requires great sacrifice. And if you're willing to say, I am never going to invest in weapons. Well, then you're going to miss out on a generational amount of investing that's happening right now in the venture community. Take a look, you can go back 2019. And the vast majority of venture capital firms say, we will never invest in weapons. It's the hottest area right now. The same people who said they would never invest in weapons are actually now leading the weapons charge. It's unbelievable. Great differentiation requires great sacrifice. They will never be differentiated for what they say. They've lost their consistency. So in the long run, if anybody remembers, they'll remember,

• 23:31Speaker 02

  hey, you said you're never going to do this. Now you are doing it. And that's you lost your why. You lost your why you're doing it. Because it was just branding. As a great advisor, as a fundraiser, you're always trying to say, hey, you got to have the courage to stay disciplined in your differentiation. Because if you don't, there's not differentiation. And people will see through it ultimately. Then the other two laws, just really quickly, is the law of trade offs. Size, speed, and terms. I cannot tell you how obvious it is and how no one believes this. That if you want to raise a fund or you want to raise an investment, your trade off is how much money you want to raise? How fast you want to raise it? What kind of terms you're going to give?

• 24:11Patrick O'Shaughnessy?

  And is it as simple as like you hear this about quality cost and speed and building a house or something like you get to pick two? Is it kind of the same?

• 24:18Speaker 02

  Yeah, you get to pick two, right. But the difference here, though, Patrick, is that it gets back to money moves at the speed of trust. So size and terms really trade off from each other. Speed actually is trust. And that's the part where it drives me crazy when I try to explain to somebody like, no, no, this isn't just a discussion of mechanics. Okay, let's use scarcity. I take my size, I shrink it up to the scarcity, a real scarcity. People will move faster. Let's say I don't have scarcity. Now geometrically, they're going to move slower. That's straightforward. So back to your example, the venture capital firm. I'm saying, look, I just send it out and next week they bring it in. It's very scarce, money moves fast. But let's say you don't have scarcity.

• 25:02Speaker 02

  Now money is going to move very, very slowly. It's going to move at the speed of trust. Then there's the terms. Well, the terms, lowering the terms, actually may make the person move a little faster, but they're going to move faster because they think that you won't have capacity for them now that you've actually come to this tipping point where, oh, my God, if I don't move, I'm going to miss out and I was here early. That's how it moves faster. It doesn't move faster because, well, I lowered the terms. Why aren't they coming in faster? No, the state pension plan still has to go through. It's four months of diligence and this and that. And people miss that trade off versus quality, speed, and cost. They actually truly do trade off from each other. You could have speed if you have scarcity.

• 25:44Speaker 02

  Very few people I know will actually legitimately use scarcity. Benchmark does, wonderful. Most people like to bullshit their way through scarcity. Oh, well, if we have room. And the investor 100% knows that they're lying and you immediately lose credibility. So I never let my candidates, the people I represent, I never let them play that game. Because they see through and you lose trust. And if you lose trust, you lost the velocity of money. Then if you take a look at just the law of pipeline, you need to run a campaign where you have a pipeline and you have to shove it through a conversion ratio and there's a bite size. The only thing you care about is your conversion ratio. Only thing. Why?

• 26:28Speaker 02

  Because if you know your conversion ratio is 20%, then you know it's just a matter of effort. If you know your bite size is going to be a certain amount, just plus or minus on a bell curve, and you know your conversion ratio is this, then all you do is say, okay, cancel Christmas, cancel Easter, cancel Valentine's. I'm just going on the road and I'm going to meet people. And by the way, who figured this out? Just the largest asset managers in the world. They're just like, look, we're just pushing our product through a conversion ratio. And our levers that we get to pull are how do we improve that conversion ratio? You can do it by having better performance. You could do it by having better differentiation. You could do it by reducing the complexity of your story. And now all of it ties together. Now, appreciate, you have to get past the hard reelect number

• 27:13Speaker 02

  because that conversion ratio is artificially high. But once you get past your hard reelect number and you start getting the market and you're like, wow, one in 10 people are saying yes. Then it's just really a matter of, hey, how much do you want it? Like, what do you want to get to? And so it's literally just pipeline times conversion ratio times bite size. That literally is the only math that is important for a fundraise.

• 27:34Patrick O'Shaughnessy?

  I really like the simplicity of thinking through you raising money for a company or for a fund or whatever, starting with the law of differentiation, then thinking about these trade offs, like being deliberate about, intentional about what you're going to care about. And then it's just the actual motion of like going to do it where conversion ratio is the thing. That allows us to come now to this idea of the drama triangle. So here's my value proposition. Here's how I'm thinking about what I want. And like, here's the equation that's going to determine if I'm successful. They have to literally just go sit and do meetings. And so I'd love you to describe this idea of the drama triangle and personas. Because I think it's a really useful frame on, if you're doing 100 meetings, it's a helpful thing to know.

• 28:13Speaker 02

  There is a psychological framework called the Karpman drama triangle. And the idea is that we as people have a hard time accepting that we have agency in our lives. So therefore we have a victim consciousness. And so when something bad happens, it happened to us. Life happens to us. When life happens to you, you're a victim. But when bad things happen, you're a victim, responsible for what happened. And then when you're a victim, you're looking for a villain. And usually you're also looking for a hero. In a sales pitch, if you already know that this person is feeling victimized or feeling something, some way is happening to them.

• 28:52Speaker 02

  If you can find out what that is, it is very easy then to craft a story that allows you to alleviate that pain. And if you can do that, then you become heroic. So for instance, somebody's complaining about the fees. You can, rather than saying, I hate the game, not the player, which isn't so useful, you can talk about how you can mitigate fees if that will help them say yes. It's your choice, you can do that. And that allows them to say, okay, I've found a hero for my problem. I found a solution for my problem, right? That's really what they're looking for, a solution. But that's a heroic idea.

• 29:37Speaker 02

  If you can't be a solution, then you look at the villain and you just have deep empathy for the villain that exists. And then you just move into therapist mode. I've never met somebody who isn't better off by being empathetic to that problem. Like, I've never met the person who has been shunned because they're overly empathetic to somebody's real problem that they've discovered. In fact, it's quite the opposite. You learn to trust them. And it is a very simple way to manage a meeting. Is to find out what is the drama? Is there drama in this person or these people? Do I have the ability to be a solution to that drama?

• 30:20Speaker 02

  If I cannot be a solution to that drama, can I empathize with that drama? So they're listening to my solution as something that is useful for them. And in its own way, that's almost as much as you need to actually make sure that almost every sales call goes well. If you can find a wavelength to the person where they actually feel comfortable with you.

• 30:41Patrick O'Shaughnessy?

  When I asked you like, who are the great masters that you've encountered of building real trust? Who comes to mind and what is it that they're doing so effectively?

• 30:50Speaker 02

  Oprah Winfrey. And I would call Oprah's game a promotion of goodness. And people wanted that in society at that time. And frankly, I think people want it today. So what I mean by goodness? Goodness is the combination of kindness plus conviction. You can be kind but not having conviction. You can have conviction and not be kind. I think that whenever you saw Oprah open her mouth, or whenever she presented something, there was a kindness to her, but there was a conviction that she stood for something, that she meant something. In some ways, she preceded the podcaster in that she had a conviction

• 31:31Speaker 02

  of what she wanted to get out of the person for the rest of the world to hear. Sometimes it was about pain, sometimes it was about inspiration, usually it was about inspiration. And so in terms of engendering trust, she did a wonderful, wonderful job of engendering trust with bigger audiences. She exhibited more institutional trust-building exercises like reciprocity, like she would literally give gifts to the audience.

• 31:57Patrick O'Shaughnessy?

  Yeah, you get a car.

• 31:58Speaker 02

  You get a car, right. But she also created consensus. I mean, she had the Oprah's Book Club. That was the mother of all consensus, like, hey, the idea that this book club or these books are the best books for people to read, she became as powerful, or I would argue more powerful than any of the bestsellerists. And that's a consensus idea, like, who wants to read these things? Authority, she was able to use and recruit people with authority to talk about issues of our society that otherwise wouldn't have a stage. That's the podcaster's sort of zone of influence today. She was able to create liking, which is a way of creating trust. I like you, you like me. And imagine how incredible this is in

• 32:41Speaker 02

  a population that she's an African-American woman, that she's able to sit and she is a beloved individual in the Midwest, which tends to skew different demographically. But she's able to engender liking, and she's incredibly empathetic. And so consistency, she's very consistent with the way she actually brings people on stage and what she says and what she believes, and how she was always able to give somebody something inspirational in a conversation. You never left a conversation with Oprah thinking, well, that was a downer. It just never happened. So if you know consistently, I'm going to turn on the channel, I'm going to see Oprah, and I'm going to be inspired, then that's her brand. And then the last

• 33:25Speaker 02

  was scarcity. She had a scarcity about her in that she really didn't show up anywhere else but Oprah. You didn't see her, you know, in a lot of advertisements. You didn't see her on doing other talk shows. You didn't see her do anything else. She just was Oprah, and that's all she did. So if you want to see Oprah, you had to tune in to that, and that creates trust.

• 33:47Patrick O'Shaughnessy?

  So in this process that we've laid out, what are the most common mistakes that you see people make?

• 33:54Speaker 02

  Most common mistake is super easy, is that people over-index on logic. It blows me away. The logos, ethos, pathos, right? Logic, emotions, and values. Simon Sinek talks about the question why, which is actually your emotional and your value or your intuitive engine that actually makes you make decisions, and that the frontal lobe actually is, is what actually just puts meaning to all of the feelings. Well, as it turns out, that's generally true. There are two ways I get people to remember this, that don't get confused with a, here's the logic of why, and you do it. And usually the logic is, my returns

• 34:34Speaker 02

  are so great, I do such a great job. It's table stakes. But I always remind people two things. First, I say, well, back to the difference between belief and trust. You can win the belief. This plane's not going to crash. I'm still scared. Money's not going to move. So in other words, you've got to get them past the fear. And people don't address the fear in the room. Biggest mistake is they stay with logic. They don't address the person in the room. They address the fiduciary objectives in the room. Second way I get them to remember it is the phraseization, right, literally means to create a condition.

• 35:14Speaker 02

  So you think of civilization means to take something that is hedonistic or brutish and to make it civilized. So you create civilization, but it does not start out as civil. To create organization, something that's chaotic and dispersed, and you are creating that from something that's not naturally in its state into something that is now organized. Well, there was a rationalization. Rationalization is you're taking something that is not rational, and you're actually forcing it into becoming something that it is not, which is rational.

• 35:54Speaker 02

  In other words, rationalization is just the thing that we make up in our head to explain why we feel the way we feel. The most important thing to remember is that if you want to get to yes, it's desire minus fear. But desire and fear are both emotional states. They're both ethical states. And you have to win the hearts and bodies of the people and get them to a place where they are not instinctively scared, they trust you, and they have an emotional desire or ethical desire to do this, then the logic will follow. And the logic just helps define or helps justify the decision they want to make. So the first mistake that

• 36:39Speaker 02

  everybody makes is that they think that the logic is where you're winning it. The logic actually is an output of a successful sales pitch, not the input.

• 36:50Patrick O'Shaughnessy?

  If I try to take that very helpful insight and put it in terms of what you said earlier, is it fair to say that in your equation of differentiation, fear is complications, track record is rationalization, and that differentiation is really the remainder, is like all this desire stuff?

• 37:09Speaker 02

  Well, that's pretty good, actually. I think that gets you to quite a great description. Yeah, I love this. I've spent maybe 15, 20 years talking about tracker, place differentiation divided by complexity of thought, and it's a trinity, just like any other trinity, size, speed, and terms, logos, ethos, pathos. And yeah, yeah, it does fit in that.

• 37:27Patrick O'Shaughnessy?

  After doing this in so many different, interesting ways, and seeing others do it in so many interesting ways, is there anything we've left on the table about the process and purpose of really good fundraising in a business that I haven't asked about?

• 37:40Speaker 02

  The tactical part is, what kind of person are you? What kind of person do you want to represent you? Are you looking for a salesman, a service provider? Are you looking for a Secretary of State? And what is a Secretary of State? Secretary of State's one of the most powerful people in the cabinet, who actually is the one department where you actually don't have control over the constituents. You have control as a president over the treasury. You do have control over energy. You do have control over health and human services. You do have control over national security, because you have control budgets, you control influence. You do not have control over China. You do not have control over the UK. So therefore, you have to have a Secretary of State that actually allows you

• 38:21Speaker 02

  to interact with them and helps you create that and can represent you when you're not there. That's what a great fundraiser is, when you can send that person in and say, ah, this person is here. I know you speak for the president. And that's really hard to do. And it's fascinating how many people get this wrong. It's fascinating how, when somebody asks you, well, what kind of Secretary of State am I looking for? I always say to them, well, what is the first impression you want people to make when you're not in the room? So if you think about presidents of the United States, President Nixon, he had Kissinger, kind of that look and feel of real politic. You take a look at President Clinton, he had Madeleine Albright, policy wonk of the highest order, United Nations

• 39:02Speaker 02

  ambassador, incredible reputation of having the deepest international policy experience ever, exactly the image that President Clinton wanted. And then you take a look at Barack Obama. Barack Obama, he just looks and says, well, you know what? I want to be change that you can believe in. I want to be inspirational. And he also has very little foreign experience. So he hires his opponent to show he can cross the bridge, and also happens to be one of the most experienced people to ever sit in that chair, Hillary Clinton. It's just a hard, so who do I want you to see? And that person has to be of industry. So when I meet somebody who says, well, the reason why I could be such a great fundraiser as an investment banker, as an ex-deal partner, is because I understand the system, I look

• 39:46Speaker 02

  and go, that's exactly the wrong person. The person that you want as Secretary of State is someone who actually understands the language and what's going on. If you don't understand what's going on in the Middle East as Secretary of State, but you understand policy and how the president thinks, that's not so helpful. If you don't understand what's going on in Asia, and how all that dynamic works, and the culture and the politics, it's not so helpful to the president. But you understand what the president wants, great. But you have to understand what they want. And that intersection of who they are and what you are is the intersection of what a great investor relations professional is.

• 40:21Patrick O'Shaughnessy?

  Now, speaking to the people that want to go be the Secretary of State, not the people that want to hire them, but the people that could be that representative, what should they look for in a leader to go work for?

• 40:33Speaker 02

  It depends on what your ambition is. In the end, the easy way to think about is what kind of candidate do you want to support? There are people in the world, and I'm not judgmental about this, who say, look, I just want to be on a winning team. And there are candidates who are really strong candidates, who aren't necessarily people that, giving them substantial sums of resources, are going to do great in this world. But they're great candidates, and great candidates allow you to get elected. And when you're elected, there are benefits to the Secretary of State, period. I mean, in other words, the more powerful your candidate, the more powerful the Secretary of State. In some

• 41:16Speaker 02

  ways, many people who have these fundraising jobs, myself included, one of the humiliations that we need to commit to is that we really are only as great as the people we represent. That I, when I was at my peak as a fundraiser, still am representing somebody else's greatness. And that's really important. So you have to then say, is it worth it to make the sacrifice and the ego deprivation for this candidate? And at different stages in your career, and at different stages of your life, and different stages of your egoic development, you'll make different decisions. You'll say, look, I want to make a lot of money for me and my family, so I'm going to find the best candidate who I can monetize. I want to be

• 41:58Speaker 02

  in a powerful place. And there are other places to say, look, I really actually want to try to attract resources to this individual, because this individual is a candidate who I really believe in. And I'm okay if we only have a small amount of resources, because I'm doing something that I believe in. And if you can find both, then you hit the jackpot. It's a little bit like marriage or careers in general. Why does everybody get married when 50% or more of people don't stay married? And actually, maybe 75% of people shouldn't be. It's because when it works out, it's one of the most magnificent things that

• 42:38Speaker 02

  life can possibly give you. So the payout's great. It's a little bit like jobs. When you find that candidate who is magnificent in their ability to attract capital and develop relationships, and they happen to be somebody who also is somebody who you ethically and emotionally just adore and want to see do well, that's like winning the lottery. But unlike a bad marriage, it's not a binary experience. My experience is that to be a Secretary of State, be a head of investor relations, you have many powerful benefits and great intrinsic joys. Because

• 43:22Speaker 02

  the flip side of it is, is that if you enjoy the job, you do like your job, you enjoy the job of curiosity and meeting people and learning. Well, if you like traveling a lot, frankly, if you like interacting with people and playing the game of discovery of the person, and this is about as good a job as exists, because you get to play the exploration of people every minute of every day. When you're a Secretary of State or you're head of investor relations and you're meeting all these people, you sometimes get some great intellectual stimulation, but you always get a opportunity to actually engage at the coalface of the human condition. And

• 44:04Speaker 02

  it's amazing what you get to experience. And, you know, I'd say that this is true for anybody who's done this job for a long time, or the job that I used to do for a long time, is that you make some incredible friendships. Because by definition, if you spend all this time trying to get to the other side of trust, well, what is the other dividend? It's not the money that you actually were able to attract. It's that you actually became friends with the person. It cannot be any other way. If you're authentically developing trust, then you're authentically creating a friendship.

• 44:33Patrick O'Shaughnessy?

  If you think about your whole set of experience doing stuff like this, you were talking about this idea of inner games before we started recording, you're being interested in the inner game of interesting, exceptional people. How would you describe your own version of that? Like, what has the inner game been like for you across this period?

• 44:53Speaker 02

  The inner game of fundraising is really about putting the person in the room as the center of all conversation, that I actually don't exist but for the fact that I'm in your mind at this moment in time. I actually am just an object in your mind. And that object in your mind is being processed by all the stuff that is Patrick O'Shaughnessy. And so now that I'm living in your mind, what can I do to, in this case, make myself interesting, make myself

• 45:32Speaker 02

  compelling, make myself somebody you want to meet again, make myself somebody that you are satisfied that you actually invited onto your podcast? Because I'm inside your mind, and what is going on inside of there? And when I look at you, I see such a deep curiosity. I see incredible patience as well. You're allowing me to have these long-form explanations. So when I'm talking to you, I really, myself, don't even exist over here as much as I exist inside your head. And that's the inner game of the highest level of persuasion. Mentalists do this. They get inside your head. Hypnotists do this. Psychologists do this. Anybody who's engaged in a mental

• 46:13Speaker 02

  discussion, if they're really good, they're not just saying, here's what I am. It's like, who are you? And how do I address you in a way that actually is satisfying to you? And I hope I've done that in today's podcast.

• 46:28Patrick O'Shaughnessy?

  Thank you to my traditional closing question for everyone. What is the kindest thing that anyone's ever done for you?

• 46:34Speaker 02

  First of all, thank you for asking it, because it opens up such a cornucopia of gratitude in my life. Because there's no way I'd be where I am today without the charity of others. And so the hardest part was finding that one moment. When I thought about the nicest thing, I thought, you know what? It's actually the body of work of niceness. And that has to be my wife. The body of work of things that she does for me that is kind and nice. So the nicest thing she's done for me is support me and all of the lunacy that actually is connected to being a fundraiser, and how hard it is, and physically how difficult it is. But I'll tell you that the one story that about my wife. So I'm 58 years old, and so eight years ago, I had my 50th birthday.

• 47:19Speaker 02

  And I was born 1967, and so I grew up loving 80s and 70s rock bands. And my favorite rock band is a band called Styx. And so on my 50th birthday, and I happen to play guitar. And so she got a band to play, and I happened to be able to play several Styx songs on my guitar. And so they called me up on stage and said, well, your 50th birthday, you know, why don't we have John come up and play one of his favorite Styx songs? And so I'm like, great. They opened up the guitar case, and my wife got me an autographed guitar from every band member of Styx. And then inside there was actually tickets to the next show, and I got, and she got me backstage passes so I can meet the band.

• 48:04Patrick O'Shaughnessy?

  Amazing.

• 48:04Speaker 02

  Oh, amazing. And it's the nicest thing to this day that anybody's ever done for me. It was incredible, because not only was it such a rare gift to give somebody, but she had to go figure this out, and she had to have the resources to go do this. And by the way, just so you know, not only did she get me on stage to play a Styx song with this band, but my brother, my younger brother, who's five years younger than me, plays piano, she got him to learn the song on piano, it's Come Sail Away. So my brother gets on stage, starts playing the piano, and I'm laughing like, oh, my God, my brother's a very busy guy. Like, wow, I'm sorry that you had to learn this. And so the whole thing was an expression of love, but it was an identity of me. It was a celebration of me. You can't ever take that away.

• 48:48Patrick O'Shaughnessy?

  Beautiful. Wonderful place to close. You've told us a lot today. Thanks so much for your time.

• 48:51Speaker 02

  Well, thank you. It was great to be here.

• 48:54Patrick O'Shaughnessy?

  If you enjoyed this episode, visit colossus.com. You'll find every episode of this podcast complete with hand-edited transcripts. You can also subscribe to Colossus, our quarterly print, digital, and private audio publication, featuring in-depth profiles of the founders, investors, and companies that we admire most. Learn more at colossus.com/subscribe.

• 49:33Patrick O'Shaughnessy?

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