E222: Why 90% of Managers Fail Before Fund 3

Why do ~90% of first-time managers fail before Fund II/III—and what separates durable fund builders from good investors? In this episode, I unpack that question with Conrad Shang, Founder & Managing Partner at Ensemble VC. We examine why being a great investor is necessary but not sufficient to be a great fund manager, how to build for durability across cycles, and the partnership practices that earn long-term LP trust. Conrad shares lessons from UTIMCO, Norwest, and Bain Capital Ventures; why sometimes the hardest move is sitting out frothy markets; and how Ensemble uses a team-first lens and internal data products to focus time on the few opportunities that matter. We also discuss defense tech’s shift from “taboo” to mainstream, and why communication cadence and transparency determine who survives the first four to five years—when most managers wash out.

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

• 0:00David Weisburd?

  Today, I chat with Conrad Chang, who is the Managing Partner and Co-Founder at Ensemble VC, bringing a rare perspective with experience as both an institutional limited partner and a two-time venture capitalist. At UTIMCO, he oversaw a $4 billion venture portfolio within the $81.5 billion endowment, guiding investments across diverse asset classes and regions. Previously, Conrad invested in multiple unicorns at Northwest Venture Partners and Bain Capital Ventures, earning recognition as a top fund investor. Surprisingly, the shift from tier-one VC firms to allocator is a rare shift. They have a unique vantage point.

• 0:42David Weisburd?

  What do you think GPs should know about LPs that's not intuitive being in the GPC?

• 0:48Speaker 01

  When you're a GP, you're so focused on putting one foot in front of the other. And what I mean by that is you're singularly focused on investing in one company at a time. And so in some ways, you don't have the context of seeing the forest, I think, from the trees. And that analogy can mean a bunch of different things. I think, one, I think one of the takeaways from being in that seat is being a great investor is necessary but not sufficient to being a great fund manager. Right? So you can have invested in great companies,

• 1:29Speaker 01

  but when you go and decide to start on this journey of building a fund, starting a company that happens to be a venture firm, you're trying to build something durable, you're building a team, you're obviously fundraising, finding great LPs that believe in your mission. A single investment can be a... You know, five to seven years, but when you're building a fund, you know, it's a minimum of 12 years effectively, 10 to 12 years. So the time horizon is longer. To be a great, you know, fund manager, you have to do so much more, right? You have to think about, you know, portfolio construction, right? Not just a single investment, but what that looks like in a collection of investments.

• 2:15Speaker 01

  And even before you're investing, right, you're thinking about how to build a great partnership, right? Not, not, you know, for year one or for year two, but you know, for year five, six, year 10, 12, right? For fun two, three, four, five. And so you're, you're actually doing a lot of, of like reflection. I think before you go out to go, you know, you start a fund, like you really have to believe that the world may not need another venture firm, but the world needs your, you know, you know, venture fund.

• 2:47David Weisburd?

  I like that framing, which is the GP is a business and some businesses get stuck in the short term. A little myopic, serving the next customer, if you think about the portfolio company as a, as a customer. And some businesses are focused on the long term, which is how do we build more franchises? How do we be more strategic with our time, our money and our resources? And obviously you need both. If you're just strategic, you're in the Ivy Towers, you're, you're not really getting anything done. So for GPs that are so focused on just making the next investment, what would be your one main piece of advice?

• 3:30Speaker 01

  It's easy, I think, to give advice. I think it's very difficult to live this. So I don't think we're immune from, you know, trying to balance between, you know, short term and I think long term, you know, long term goals.

• 3:44Speaker 01

  I think your LPs can actually play an important role in that, right? Given the other managers that they've invested in that may be, you know, much, you know, further out. The advice I give, you know, GPs that are thinking about this or struggling with it. I think, one, you know, LPs are more than just, you know, all money is more than just green, right? In that standpoint, right? I think your LPs, you know, you know, besides, you know, helping you, you know, give you the capital to go and back, you know, great teams. They're also there to provide this very counsel of, you know, how to think about short term and long term. And, you know, long term is really about durability.

• 4:24Speaker 01

  I've been in venture since 2009, when I was at Bank Capital Ventures, which was not frankly, a great time to be in VC, right? I mean, it was right after the financial crisis.

• 4:36Speaker 01

  You know, I was, I was worried that I, you know, I was concerned that I may not even have a job. I mean, just candidly, right?

• 4:42Speaker 01

  And I think the lesson there is, you know, venture is in some ways about survival, right? And I don't mean it in like, you know, I mean it in a very serious way in that because venture is across, you know, multiple cycles. You want to play long ball and you want to think about durability because you want to be around long enough to, you know, successfully kind of build that franchise. And I think there's an interesting data point. I may get the specific numbers wrong, but I heard Josh Koppelman talk about, you know, I think he looked at the numbers. He looked at the average VC from 1980 to, you know, 2000, right? Just kind of arbitrary data point.

• 5:26Speaker 01

  Eighty, I think it was like something like 83 or maybe it was like, you know, 80 plus percent or 90 plus percent of the profit dollars made for the average VC was made in three years. Right? And so if you weren't a VC during those three years, and it's not surprising, there's like 97 to 2000, right? Then, you know, there is no money to be made for you or for your LPs. And so that data point in itself suggests you want to be, you know, durable, right? You want to, you know, be prudent and disciplined in terms of how you invest. You know, in that moment, it's incredibly difficult. Think about 21, 22, right? Which is a great example of that. I think at the time, you know, we thought we were doing the right thing, but it was difficult because I think it was

• 6:12Speaker 01

  almost 12 months that we didn't do a single deal.

• 6:16Speaker 01

  And you're not sitting on your hands during that time. It's super frustrating because you're meeting companies. The rounds are getting done by, you know, you know, great investors. You know, they're obviously overvalued, you know, 2020 hindsight. And even at the time, and so it's really hard to look around and see all of your peers being super active. And then you just sitting on your hands and everybody's looking at you like you're the you're the crazy one like. But if you have the mentality, I think of, hey, I want to be in the business over 20 years. I want to be able to build a successful franchise, not just a, you know, I want to build a firm, not a fund.

• 6:55Speaker 01

  Then, you know, you kind of have to put your big boy in big girl pants on. And sometimes kind of sit it out or be very thoughtful about, you know, when to deploy or how to deploy.

• 7:07David Weisburd?

  It's a bit of a paradox in that all ventures driven by these extreme power laws. So there's two things you could do. You could be extremely lucky, which of course is just not a real strategy. Or you could be sit around and wait long enough for that power law to hit. And I think that's this asymmetry that gets unlocked by staying in the game, by having those shots on goal is one of the most underrated aspects. I was just speaking to Dan Ives from Wedbush, this famous public investor. And the analogy that he gave is in order to be a great public investor in the tech space, you have to be kind of average most of the time, 280 to 300.

• 7:48David Weisburd?

  And once in a while you hit this Jeff Bezos like thousand X homerun. There's actually, there's power law like dynamics in the public markets, not just in the private markets. If you had invested early in Apple as a public company or Meta or Tesla, you would have these phenomenal returns. So I think there's this paradox in that in order to hit these extreme outcomes, you do have to stay in the game. The way that you stay in the game is doing the work and also things like the boring things, portfolio construction, sizing, and just being in the game is such an underrated aspect. And it goes from when you're starting your first fund, first two, everything's against you. You don't have the track record, you don't have the LP relationships, institutional LPs

• 8:33David Weisburd?

  aren't taking a look at you. And by fund three, everything's going for you. But those four or five years is where 90% of managers at a minimum fail.

• 8:43Speaker 01

  A hundred percent. And I think here's a, I think a good example of it. You always hear, you know, you can be too early, like you can be on time, you can be, you can, you know, be late to a sector, you can be too early in a sector, right? So when I was at Northwest, you know, there, you know, ARVR, right, was a big thing and, you know, and like it didn't quite live up to expectations, right? Folks were, you know, I think largely too early. You know, for us, when we were investing out, you know, we, you know, did our first, you know, I would say pilot fund, we invested in a company called Icon. So this is 2019.

• 9:26Speaker 01

  And Icon, for those of you who may not be familiar with, is a robotics company that does 3D printing. So they 3D print homes. They wrapped up a project with Lennar, the nation's largest home builder, building a hundred homes. But they also, you know, build for the, like the DOD, right? So if you think you can, you know, build structures that are concrete and print them, you can obviously do this in a conflict zone, build walls that are bulletproof and, you know, so on and so on. And so we invested in 2019. You know, defense was, was not really a thing, right? Certainly, there might have been dual use. And in many ways, it was almost like a, like a, like a, like a knock on a company, right? Selling it to the US government. And

• 10:10David Weisburd?

  It was taboo.

• 10:11Speaker 01

  It was taboo, right? I mean, people locking themselves in buildings, if you remember, through that experience and then recognizing, you know, over time, you know, where I think really high quality people, right? People that with their feet where they were, saw opportunities and saw need to go build businesses, you know, that allowed us to go make, I think, a super impactful investment in our current fund. We were, you know, in the series A of Sironic. And then that kind of ended up further, I think, educating us, further seeing really talented people moving in to fill this great need, right? And now it's like, now it's like obvious, right? There's all these defense tech companies, but we followed Sironic with Chaos.

• 10:55Speaker 01

  We invested in an appealing software company early this year called Manifest, where the two founders were ex-palantir. The durability aspect of it, kind of back to the original question, is you have to play long ball because you don't necessarily know when the exact right time is, right? But there are certain proxies that you can do, which is seeing where high-quality talent is flowing, right? Which founding teams are the biggest talent magnets, right? That's kind of our specialty with our data platform. But if you're playing long ball, then you can kind of make those bets. And you can kind of let the world kind of catch up in some ways to where you're investing,

• 11:39Speaker 01

  where these high-quality founders are building companies.

• 11:45David Weisburd?

  I think oftentimes you hear these factors like talent, market size, traction. All these are positive, and you obviously want all of them. But where would you stack rank the flow of talent as a leading indicator of success? Is that more important than the market size? Is that more important than the traction? How would you stack rank that?

• 12:05Speaker 01

  I think it can depend on the stage, but even, I think, across stages. Like, it's kind of an easy question for us because it's a little bit on the nose, but we call ourselves Ensemble, right, for a reason. Well, it's a double entendre, I suppose. So it's about us building a great team, but the initial idea of calling ourselves Ensemble was really recognizing that it's all about the team. And that's really important. And I'll make the distinction between it's all about the founder or founders versus it's all about the team, right? I think it's an important distinction. And some people kind of put everything in one bucket. The reality of it is, is it takes a village to go create an outcome.

• 12:48Speaker 01

  And I had the good fortune of being a seed investor in Casper. I was an early investor in Udemy, and so kind of saw what it means to...

• 13:01Speaker 01

  To really require a village to go create the outcome and that extends beyond just the founders. And so for us, the most important thing is the team. And so when we look at a potential investment or we're tracking a bunch of different companies, I think there's a lot of signal, not just in the founders and where they came from, but how they think about who is their first hire, right? So is it an engineer? Is it someone on the sales side, right? Is it go to market, right? Because that speaks volume to, it's a reflection about how they think they're, how they're going to build the company. And it's also a reflection of themselves, right?

• 13:44Speaker 01

  Of trying to find folks that are complementary, right? Or the type of company that they're building, you know, very product engineering focused versus very go to market focused. And it also speaks volume of like, how do they find this person?

• 13:58Speaker 01

  Right? Is it someone that they had known for a long time, right? Is it someone that they had worked with before? Or is it, you know, they put a job posting out? I'm not saying one is really good, you know, that's a good or bad. But I think that dynamic of who's your first hire, you know, who's your first sales hire? Who's your first product engineering hire? How do you sequence that, right? What does that team look like? How are they complementary? There's so much, there's so much of a story that tells. You know, some of it you can, you can measure, right? With data and others, you, you know, you get context from meeting the founders. And so what we like to do before we invest is we actually, we like to go on site, you know? Not always, but in most cases, we like to go to their office. We like to go, you know, meet the founders and we like to go meet other folks on the team, right?

• 14:43Speaker 01

  Very organically. And that just, I think that just speaks volumes to, I think, the true reflection of a company. And I'd say particularly at the early stage.

• 14:57David Weisburd?

  Going back to your time at UTIMCO, University of Texas Endowment. As I mentioned, you went from the GPC at Bain and Northwest, Bain Capital Ventures and Northwest, to UTIMCO.

• 15:15David Weisburd?

  What were some of the lessons you learned right away, which is like, holy crap. This is why these LPs liked us, these LPs didn't like us. In other words, from the LP perspective, what is something that became immediately obvious that is not obvious to most GPs today?

• 15:32Speaker 01

  This is one that is a little bit counterintuitive, right? Think about a sports team or something in some ways, right? Like, you want to find the best absolute people in their position, right? So, you know, you look at shooting percentage or whatever it is, right? And each individual person who's highly competent is going to make a great team, right? The reality of it, I think, it doesn't quite translate, I'd say, on the venture side. And what I mean by that is the single most important factor that I observed when I was in the seat at UTIMCO was trust as the number one factor for a successful partnership, right?

• 16:15Speaker 01

  So, we go back, and I love the fact that you asked that question about the short term and long term trade offs, right? If your goal is to go build durability, right, and success, like, repeatable success, then trust is 100% the most important factor. And what I mean by trust is, I think it starts with the partnership. You know, who you decide to go in business with. In this case, it's Colin West, who I've known since 2013, right? When we were both kind of junior VCs, just having moved to the Bay Area, Colin was a friend of mine. My other co-founder, Gopi, Colin and Gopi had worked together for four or five years

• 16:58Speaker 01

  prior to us really formalizing what Ensemble is today. And that trust factor, again, starts with the partnership. You're not going to be in the same room all the time. You're going to 100% disagree on things, right? And the question is, how do you react to that in the moment?

• 17:19Speaker 01

  Right? Do you let your ego get in the way, draw a line in the sand and then defend it to the death? Right? So, you know, great for your ego, but bad for the firm. Right? I've seen situations like that where, you know, and I argue kind of the bigger, the bigger the organization, the harder it is to go is to, you know, do what's right for the organization. You have so many different personalities.

• 17:42Speaker 01

  But then that trust starts to extend to the folks that you hire. Right? And, you know, meaning you want to give them as much rope as you can. And, and you kind of like let them earn that trust and you give them, you know, more and more rope. And then it also extends to your LPs. Right? You know, how you communicate, what you know, what you share. Right? And, and even more cases, right? Your LP is not going to be in the room.

• 18:09Speaker 01

  You know, they'll make the investment, you know, you can catch up with them in meetings, newsletters, you know, like, you know, even over text, right? But the reality of it is that, that LP is entrusting you, you know, with dollars that are eventually going to go fund scholarships. Right? And they're not going to be in the same room. And, you know, how do they have that? That level of trust? That's going to extend, you know, beyond the life of, you know, this fund and, you know, certainly into the next.

• 18:35David Weisburd?

  This term trust is, is a term many LPs use. And many LPs like you who are at University of Texas will say it's even more important than, than returns.

• 18:49David Weisburd?

  Let's double click and define exactly what it means to have trust with your LP. I know it sounds extremely obvious, but what are some examples? And more importantly, what are some trade offs? So what is the skin in the game for GP to have a trusting relationship with their LPs?

• 19:04Speaker 01

  People will always think about, you know, the LP world is so, so distinct. Right? But I think having been in all these different seats, there's actually way more similarities of the relationship between, say, a founder and a GP and an LP and a GP. I actually like, I think it's, it's super consistent. And so an example of that is when you meet with the founder, how you got introduced to that founder. Right? Or how the founder gets introduced to that VC? And I think it's the same, you know, when it comes to, you know, the, the, the beginning or the commencement of an LP relationship. Right? Which is, I think in the ideal case, you're being introduced by other GPs.

• 19:46Speaker 01

  Right? That maybe that P is our investor and that VP, you know, as you've well over, you know, not three months, but over, you know, the years. And, you know, they can speak to that, that credibility and that, and that trust factor, right? So I, I kind of define this as like trust by proxy. Right? Trust is something that you cannot, or very, very difficult in most cases to establish.

• 20:16Speaker 01

  In any way outside of, of time, right? Where, where a number of interactions, right? And the way sometimes to shortcut that is what I call trust by proxy. Right? So you have a mutual connection that has deep relationships with, you know, the, you know, both other, you know, sides. It can kind of bridge that, right? Not in, not in a perfect way.

• 20:38Speaker 01

  But in a way that can help kind of, you know, build that relationship. So that's one, right? Like, what's the nature of the, of the commencement of that relationship? Right? Ideally, you, you want something through, you know, uh, you know, trust by proxy through a warm introduction. Uh, because it, because it sets off the relationship is not a transaction. Right? What, what it does is it's, it catalyzes it in a, in a relationship building exercise. And I, and I, I would really credit like, um, you know, I, you know, my experience at UtiMco, but also one of our recent hires. You know, Caroline, um, who joined us from Vista. And it's really this mentality of treating your LPs as, as a true partner.

• 21:21Speaker 01

  Right? So again, I, I kind of mentioned this earlier, but beyond capital, and that's like, everybody kind of says that, right? But what does that actually mean? You know, what it means is that it's it's it's a two way street, right? For the LP, you know, they obviously want a financial return, but they're also looking to educate themselves on, you know, specific, you know, areas that you may be investing in, right? Like, by the way, they're not just running a venture portfolio, right? And even though I was running, you know, venture at UTIMCO, I was also doing, you know, technology investments with, you know, buyout managers, right? And so like, sometimes the the GP is so narrowly focused on kind of like,

• 22:03Speaker 01

  you know, their world and then forgetting that, you know, the LP, you know, venture is important in many ways, like the alpha driver in their portfolio. But, you know, they're managing a public portfolio. They're managing a private equity portfolio. And what you're doing actually, you know, if you're investing in defense or investing in AI, right? It's going to affect the other portions of the book. And so what we do, and I think a lot of managers do, is, or certainly the best ones, will take a step back and help educate their LPs on, you know, certain areas that that they may be interested in. Our last annual meeting, you know, before Seronik became such, in many ways, on people's radar, Dino Mavrakis is the CEO

• 22:48Speaker 01

  and one of the co-founders, came and spoke at our annual meeting, right? And this was like 2024. And and so like, it kind of helped educate, I think, folks on, you know, what does it mean to, you know, what does it mean to, you know, think about shipbuilding in the US, right? What is the the challenge that the US has relative to, you know, China, right? Which has the biggest, you know, over 200 times the capacity of the US in shipbuilding. And then I'd say the street goes the other way when, you know, we're investing, you know, in a like, in real examples, we're investing in a fintech company that was basically doing like, you know, cross-border payments.

• 23:33Speaker 01

  And we know one of our LPs, actually, you know, a multifamily office based in Houston, actually owned a lot of these different kind of businesses that would be affected by it.

• 23:44Speaker 01

  And they made introduction to one of their, you know, like, you know, businesses that was not venture backed. Right. And we were able to have a conversation with them to help us understand. You know, what are the implications of, you know, cross border payments, specifically between certain corridors? Like, what does that look like? How is their business performing?

• 24:04Speaker 01

  Because ultimately, you know, the venture backed business, if it's successful, is going to kill that business. Right. And so how do they think about, you know, that threat? And so again, it goes, it goes back to, you know, thinking about building a firm, you know, with durability long ball. Having a deep partnership with your LP. And what that means tactically is like, you know, it sounds crazy, but like talking to your LPs. Right. Like making sure that there is, you know, active two way communication. Sometimes it's one way, in the sense that you are sending probably more information than they're reacting. But you have to over communicate, you know, with your LPs.

• 24:43David Weisburd?

  One of the reasons I was so excited about a conversation is because you had that two different tier one VC seats. You had the tier one LP seat. You're the customer, you are the buyer. And you, you were in the room having these conversations. And I think one of the things that GPs, when they hear you want to trust a relationship, they think, sure, great, in theory. But in reality, how does that look? If you think about it from this construct of a partnership, which I love the, the framing. I have my business partner Curtis, we sit down, we not only talk about business, once in a while we'll talk about, you know, we were both now married. We, we talk about our wives, we talk about our families.

• 25:23David Weisburd?

  Tell me where your analogy ends and maybe tell me the nuance in what it means to build a trusted relationship.

• 25:31Speaker 01

  Yeah.

• 25:33Speaker 01

  That's a great question. I, I, you know, the, the first way to answer that, again, going back to the analogy of, well, what do you, what is a, what is a founder GP relationship look like? Right. So all those questions that you asked, how would you answer that with your own founders? Right. And so if you take that lens, I think, one, it's hard to treat everybody equally. Right. Like, let's say everybody in your cap team, if you're the founder, right? Very, very difficult to treat everybody practically, right? Yeah, it doesn't work, right? But that doesn't mean that the founder does not communicate with even the, you know, .1% owner on the cap table, right? So how do they do that? They do it in ways where they over communicate, but they do it in a more scalable way, right? So they're constantly sending updates, right?

• 26:18Speaker 01

  Maybe some a monthly update or a quarterly update, right? They're giving, they're giving the opportunity for even their small folks in the cap table to, to, to be heard and to be seen, right? And, and that analogy against extends to the LP side where you may have some folks that aren't, aren't on your LPAC, maybe individual investors. But they should still, you know, be in the loop and updated. And then more importantly, you should reach out to them if you, you know, if one of them has a connection that's like quite valuable, right? Like LPs and then GP, all they want to do is be helpful, right? They don't want to be viewed as just money, right? And it's, and sometimes it's only five days out of the 365 days in a day,

• 27:01Speaker 01

  where that, you know, LP can be helpful, but in those five days,

• 27:07Speaker 01

  you know, it can be extremely, you know, valuable for the GP, right? And so I think it's, you know, taking the initiative to, you know, reach out to your LPs, you know, keep them updated. But also, you know, make sure that you're seeking, you know, their advice when you know that they have, you know, a much better knowledge base, right? You know, other like in my temp days, like you're raising a continuation fund, right? Or you're thinking about, you know, getting intel on a specific LP, maybe in Europe that wants to come in and they may have context, right? So I think it's leveraging their unique knowledge base, you know, to help you make, you know, better decisions. And then, you know, where does the analogy, you know, end? I actually do think it's really important to, you know, think about not just the,

• 27:52Speaker 01

  the professional nature of the relationship, but also a personal one, right? Again, I go back to the, the founder GP thing, right? Like it, it absolutely extends, you know, beyond just, you know, a board meeting or like, hey, did you hire the VP of Sales and I interviewed, you know, two weeks ago, right? It's, hey, I know you're about to have a kid, you know, that, that's super exciting, right? You know, you must be thinking about a bunch of different things, kind of how to, you know, how to balance that, right? Hey, you know, I know you're going through, you know, you know, a, a family, you know, personal thing, right? Like, you know, just acknowledging it and saying, hey, like, you know, it makes sense for, you know, spend time on that or something, right? Like, we're all human, right?

• 28:34Speaker 01

  Like, just like the struggles of a founder who's starting a company going from zero to one. It's the same for, you know, fund managers, right? Or, you know, having to let go of partner or whatever it is. Not all your LPs are going to be equipped, right? To be that, that coach. But you'll know the, you know, the few that you have a very deep, you know, personal connection with, where it's okay, I think, to, I think, to share some of this, right? And you have to be thoughtful, like, about, you know, what it, what it makes sense to share. And so it's never like, I'm going to share everything, or I'm going to share nothing, right? That's not the framework, right? The framework is like, there's something in between. And I think a lot of folks take the mentality of one or the other, right? And it's, it's probably somewhere in between.

• 29:17Speaker 01

  And I would probably say it's probably a little bit more towards being open. Again, it's not to everybody who's an LP in your fund, right? You know, I think it's to a handful of folks that they may not even be your biggest check, but ones that, you know, you, you have a relationship with, that you can be open with. Because the reality of it is, everybody's aligned, right? So, you know, your LPs in your fund for, again, at least 12 years, right? Whether or not they decide to come in, you know, the next fund or not, you have to earn that. But, you know, if they're, if they're in your fund, they're, you know, it's a, it's a, it's a marriage for 12 years minimum.

• 29:55David Weisburd?

  These are the conversations not many people have, certainly not, not through podcasts. But I think this is where the relationship alpha is, like where the truth lies. One of the most prevalent memes in asset allocation today is that LPs are choosing to back fewer managers and more, more let behind fewer arrows, to, to use the Google analogy. So there's this pressure to cut managers. How do managers balance the desire to have a trusted, long-term, sustainable relationship with LPs? While also, you know, at the same time where in the market, LPs are looking to chop managers? And how do you thread that needle? What are some best practices?

• 30:40Speaker 01

  That's obviously, I think, top of mind for folks. There's no silver bullet on any of this. My, my perspective on this, and it's, you know, I kind of put my old Yatimko hat on, but also, you know, the ensemble hat at the same time. And the way I would answer this is it is what it is, right? Meaning like if you have an issue, whether it's, you know, performance or, you know, within the organization, like it's happened, right? It's the reality of it. And it's not the fact that like something like this surfaced, because that happens to every firm, right? It's, it's, it's really the question of how do you address it? And then how do you communicate it?

• 31:25Speaker 01

  Um, and I think like the, you know, I think the advice I would give myself and I give others is, you know, I think understanding the like, one, that I think the gravity of what it is, right? Uh, and so you obviously don't want to communicate like every little thing, right? Um, to um, your LPs, not because you're not trying, you know, you want to avoid being transparent. But two, like you want them engaged on the things that are the most important, right? And if they have, you know, if they're managing, you know, I think you, Tim Kier had, I, I think it was like 16 Corvette VC managers and then some other, you know, legacy ones. If everybody is like, you know, every time, you know, I stubbed my toe or something, right?

• 32:06Speaker 01

  And I'm communicating that, um, the LP doesn't know when to engage on the things that are more important. And so there, there is a threshold of importance, right? Um, and as an example, right, like, you know, um, you know, there's probably a lot of, you know, even at a small firm, there, you know, there can be turnover at, uh, at the junior level, right? So like, do I communicate that? Do I not, right? You know, I don't, I'm not sure that that meets kind of the threshold, right? But if it's someone more senior, then obviously like, uh, that affects, you know, economics, it affects, um, you know, maybe some strategy things. So that may be something to, you know, communicate, um, you know, with your LPs. And then tactically, what, what you may want to do, right?

• 32:48Speaker 01

  Just like a founder manages his or her board, you may want to have this conversation, you know, one, you know, one on one initially, right? With the LPs that you have a very good relationship with, right? Uh, that you have this level of trust, right? And see how they react. Uh, and then, you know, and then bring them into the circle of trust where they're already in the circle of trust. And as you need to communicate that with other folks, they can help facilitate that or certainly give you advice, right? Meaning, you know, it's a serious issue for the firm and, and, you know, you think it's like, You know, the most important thing going on in your life and in the world globally, right? Because it's the first time you've come up with, you've run across this. The reality of is, you know, for the LPs that have been in the business a long time, they see this, this is actually a more

• 33:32Speaker 01

  common issue, right? And so they can actually give you counsel on, you know, how how serious this actually is and, you know, what to do in this situation. Again, you think about a founder, right? Who, you know, is in a situation of like, hey, you know, had this co-founder, right? You know, it's not working out. Oh, my God, like, I'm like stressing out about this. I don't know what to do. Like, this could kill the business. The reality of it is, if you look at, if you're, if you're a GP and you've invested over, you know, many, many companies across, you know, cycles, like you, this has happened, you know, more than a few times, right? In your broad portfolio. And so you can actually have the data and the, you know, case studies to suggest, hey, like, this is kind of how you might want to manage this, right? Just like GPs have a

• 34:16Speaker 01

  portfolio of founders, you know, the best LPs also have a portfolio of VCs that they can pull from and draw, you know, experiences from. I think that's probably like selectively, I think, seeking counsel with the folks that, you know, you trust very, very deeply.

• 34:34David Weisburd?

  To summarize, one is you don't want to be like the girl who cried wolf. You don't have to send every, every day. And you're going to seem like you're not able to regulate your own emotions. You want, but you do want more transparency. So probably the default human benchmark to of communication is probably lower than the ideal one. So for some reason, GPs on average are way below their kind of optimal level of communication. And also, you want to make sure that your communication and the narrative that you're putting out, even if it's transparent, that you explain it in the right way. And you might want to test that on a couple trusted circle before you kind of blast it out to 150 LPs.

• 35:18Speaker 01

  Yeah, absolutely. I go back to, you know,

• 35:23Speaker 01

  What are the best practices that you would give a founder on communication? Right? And you know, it should be similar to how you communicate with your LPs. It really shouldn't be that different, right? I mean, there's a little bit of nuance to it. But at the end of the day, you know, you want your founder to not text you on every little thing that, you know, is an issue that comes up in the business. You know, surface the ones that are relevant, you know, maybe on a quarterly basis, right? With, you know, in this, you know, you'd like to have that discussion one-on-one prior to the board meeting. Right? If it really warrants it. And you also want that founder to have a plan of action.

• 36:03Speaker 01

  Right? In advance, you know, not, not, not ask you, hey, what are I doing this for this problem, but say, here's the problem. This is my course of action.

• 36:12Speaker 01

  You know, am I missing something? Right? What is your? Feedback on the course of action that I'm planning to pursue?

• 36:19David Weisburd?

  One of these. Things that I've been thinking about is this concept of rooting things. So rooting investment thesis. So. Everybody might make the same buy decision to buy Bitcoin, but if I spent a year thinking about why, when it goes up and down, I'm not going to sell. So it's great if you bought Bitcoin a hundred dollars. If it goes up to 200 and then goes down to 140 and you sold. Then you gave up the other, you know, a hundred twenty thousand dollars, the other, you know, the, the thousand X. And I think this rootedness is also applies to relationships and LPs. If you assume that on a long enough time horizon. And I've literally talked to Jonathan Gray from Blackstone, Cliff Asness from AQR about this very topic.

• 37:02David Weisburd?

  If Cliff Asness and Jonathan Gray have had issues in their franchise, I guarantee with enough time. Any GP on this planet will have those issues. And the way that they, they handled it also by over communicating, meeting with LPs, but I would also add. Kind of the subtext of what they were saying is they built this trust also over time ahead of that. So if you think about it as the trust and the relationship as a tree trunk. You could strengthen the roots of that tree trunk through trust ahead of the crisis. Because just, and no one wants to be transactionalized. And if you're only talking to your LPs. When you need them or when there's a crisis, it's not going to feel good for them. And you're you're likely on that chopping block that we talked about. But if you build that relationship ahead of time, not only will they maybe not

• 37:48David Weisburd?

  take capital from you, if there's a good market opportunity, the smart LPs, the very top, top hotel LPs might even double down on you and allow you to actually, you know, build, build, build your alpha and build your franchise during difficult times.

• 38:03Speaker 01

  It's easy to, you know, sometimes say these things. This is very hard to do in practice, right? So it's not like, oh, there's like a, there's an instruction manual. You do this and you do this at this cadence. I think it's just, if you just think about it, right, as a priority for the firm,

• 38:20Speaker 01

  then, you know, you it'll naturally kind of follow, you know, some of the things that you do, right? It's it's it's an aspiration, I guess, in some ways, right? You kind of have to aspire to build partnerships with your LPs, even if some of those don't look like that today. Right? And then the second thing I'd say, and look, I I was I was guilty as this, guilty of this when I was at UTIMCO as well, right? Like, you know, I'm not, I'm not casting stones on, on, on anybody here.

• 38:48Speaker 01

  But you you may over communicate, you may do everything to try to establish a great relationship with your LP, but that LP may just not reciprocate. That's going to happen, right? That's okay, right? But I think like, again, if you're thinking about playing long ball and durability,

• 39:08Speaker 01

  you just kind of have to go the extra effort to recognize that, hey, they're, you know, they're managing a bunch of stuff, not just your fund and not just venture. And so you may be sending them all this, you know, all these different materials, you know, asking to catch up when you visit, you know, you know, wherever they're based and they may not, you know, get back to you. That's okay, right? I think making the effort, you know, making sure that you're thinking of them is in itself, I think. Um, what it means to be a good, you know, a good partner, right? Say all this stuff and I think some people's reaction is like, well, I tried that, right? But I'm not getting any love back. And that's happened to us also. But every now and then, you know, you'll get a note and say, hey, you know,

• 39:51Speaker 01

  like we, you know, one of the things that we pride ourselves on since we, since we started was we will write a mid-year letter. Right? Like, and it's, you know, the first one, it was, you know, it took like months to write it because we never wrote one of these before. It actually wasn't that, it was like, okay, when I go back and read it. Uh, but we've make it, we've made the effort to write a mid-year letter every single year. And then, you know, what's the greatest feeling in the world is when some, you know, someone that you reached out to multiple times doesn't respond. But on this latest one, you know, they say, hey, like, you know, great, great mid-year letter, right? Really enjoyed reading it. Right? And so like,

• 40:29Speaker 01

  it's, it's, you, you kind of have to, you, you get credit for being active and being thoughtful and, and, and, and being consistent. Right? You'll get feedback occasionally, probably not as much as you would like. Um, but you know, you should make sure that you're always acting like you're thinking of them. Right? I think that's, that's kind of like an, like a, I don't know, like one principle to, to, to think about.

• 40:55David Weisburd?

  So Ra- Rahul McDowell, he's one of the greatest fundraisers alive, if, if not the greatest, he's raised ninety-nine billion dollars. And he tells a story on the podcast I did with him in that he talked to one of a one point two billion dollar foundation. The CIO told him that just that past year, he got nine hundred thirty-four voicemails, not calls, but voicemails from managers, not in his portfolio and not even talking to him about investing, about how he should invest. And this is just this very, I guess visceral way of, of showing how busy LPs are, how overwhelmed they are. It truly is oftentimes not you, it, it's them, not you.

• 41:38David Weisburd?

  Did you find, you were at UTEMCO, which in many ways is, is today, I think it has 60, maybe 70 billion. It's endowment, it's one of, if not the most coveted LPs in the world. Tell me about your lived experience as a LP at such a prominent endowment.

• 41:58Speaker 01

  So I joined, you know, right a little bit before the new CIO Britt Harris joined. Britt was actually in our office, I don't know, like a month ago. And he had come, you know, from TRS, which is the Teachers Retirement System of Texas. And so I think one of the things that I really give, you know, Britt a lot of credit is, you know, I think further institutionalizing what was already a great endowment. And what I mean by that is the way that you operate a, you know, $2 billion endowment versus a, you know,

• 42:40Speaker 01

  $60 or $70 billion endowment, right, like intuitively has to be different. One of the exciting things about UTEMCO is that the, that the size of the endowment grew very, very dramatically over, you know, the last, I don't know, 20, 30 years, right? And there's, you know, there's a lot of history to it. But, you know, some of it, you know, being in Texas was, you know, money coming from the Permian Basin, right? Like just some random historical context there. And so UTEMCO had this really amazing opportunity and task of not being short on cash and cash inflows, but making sure that it was being, you know, invested, you know, at scale,

• 43:25Speaker 01

  but in a very thoughtful and strategic way. And to do it, you know, actually relatively quickly, right? And you know, as that endowment, I think, you know, grew, um, you know, I think the UTIMCO board, I think rightly recognized the need to really institutionalize and really help, you know, evolve the the endowment from, you know, smaller endowment to, you know, one that, you know, frankly rivals the size of like a pension fund, right? I think UTIMCO is like number one or number two, depending on how you, you know, it's, you know, like how you measure it. Uh, but effectively, it's like one of the, you know, it's like the like largest endowment in the world. And so, you know, when I was there, um, I was kind of thinking about,

• 44:09Speaker 01

  you know, what processes that we want to apply, you know, across UTIMCO, um, to bring, you know, an additional level of rigor, but also, um, a way to invest more repeatedly and consistently. Right? And and you know, what what that tends to mean is like, I think, formalizing, you know, the investment process, um, you know, how opportunities got surfaced. Um, you know, you know, as the organization grew, making sure that everybody in different parts of the organization um, were informed on, you know, what was coming down the pipeline, right? Again, you know, an endowment is not just venture, right? Not everybody who sits around the table is um, is equally versed in what that means, how to invest.

• 44:54Speaker 01

  Not everybody's heard of Sequoia, right? And so making sure that there is a mechanism in place to, you know, get everybody on the same page. Um, and, you know, in in some ways, kind of standardize, you know, that that process. Yeah, at the time, you know, um, you know, whenever you put new process in place, you know, and you're learning and you're figuring things out, um, doing something new, like it, there are moments where it's not that fun, right? Uh, but you know, now that I, you know, I, you know, I'm in the seat at Ensemble, you know, founded the, you know, co-founded the firm. It's really important to put process in place, right?

• 45:34Speaker 01

  So you're not collecting a bunch of shiny objects for one thing, right? And then two, you can have repeatability in your performance, right? And the grandest scale, it's an endowment, like the endowment is going to live, you know, beyond me, beyond you, beyond my kids, you know, everybody's kids for generations. That's the hope, right? And so the time horizon is almost infinite. And so we have to, you know, in order to fund, you know, my scholarship and then, you know, maybe my kids will go to UT on a full ride too. You have to create like repeatability, you know, consistency. And that was kind of an important lesson that we applied to Ensemble. So, you know, we're a, you know, I kind of bucket ourselves as an emerging manager, right?

• 46:18Speaker 01

  But when we've, you know, put together Ensemble, we always had the mentality, again, of being aspirationally like institutional, right? And so taking some of the lessons, you know, not from like, you know, True Ventures Fund One, but from True Ventures Fund Five, right? And saying, well, you know, how do we look more like them? How do we avoid, you know, maybe some hard lessons? And so how do we make ourselves institutional?

• 46:41David Weisburd?

  Vinod Khosla popularized a zero million dollar business versus zero billion dollar business, how they functioned from day one. And you did see a simulation of dozens, if not hundreds of funds, venture funds at UTIMCO, including some of the best funds in the world. What were some practices that the very top GPs or the GPs that made it, let's just define it in the outcome? What did they do from the very beginning that was different from the ones that were even second or third quartile?

• 47:17Speaker 01

  The best managers were the ones that could give you a sense of, you know, what they were looking at, how they saw the world in a given moment, right? So that goes back to like over-communicating and transparency.

• 47:32Speaker 01

  So I'd say that's kind of, you know, the outcome of it was, you know, knowing kind of where folks were spending time, how they kind of thought about the world. You may not, you know, agree with it or, you know, you may have questions about it, but you had a sense of like who they were and like how they were thinking about things. I think the second thing that

• 47:51Speaker 01

  The best managers did was, you know, I think go out of their way to, um, to make sure that you knew what they were thinking. You know, meaning that they would travel, you know, countless managers would make the effort to travel, you know, down to Austin. Austin's a great place, right? Uh, but some of our managers were in Berlin or, or, you know, Tel Aviv. But they would make that trip, uh, be very proactive about, um, you know, certainly you could read it. And in a, you know, mid-year letter or, or an update, but more importantly, to build on that relationship, that personal relationship. And that takes effort. So I think the best managers did that.

• 48:30Speaker 01

  And then I, I think three, the, the best managers also made sure that the LP relationship was with the firm. In addition to maybe having a, a strong, you know, like a close relationship with a specific partner. And so when I would go and, and visit specific managers, I'd have the opportunity to go meet with like, you know, multiple folks on the team. Right? I'd have exposure to the whole partnership. I'd meet with folks. Uh, and you know, that way you can kind of, the LP has a sense of, you know, how is this, how are these, you know? How is this partnership functioning? Right? Are folks on the same page? Uh, you know, how are they, and how are they complimentary? Not when you're diligencing them. Whether or not to re-up in this fund or to invest in the fund. But you know, how they're, you know, working together, you know, after you've committed to the fund, right?

• 49:15Speaker 01

  As they're deploying the fund. But those are just, I think, some of the ways that, um. You know, GPs I think have, you know, like thoughtfully, I think worked with, um, you know, some of their LPs.

• 49:27David Weisburd?

  It's downstream of this partnership mentality. If you have a true partner, you're not going to send them a letter. And you're going to make an effort to actually meet with them.

• 49:38Speaker 01

  And again, like, this is a hard thing to do. I'm not, again, it's, it sounds like, oh, like you listen to this, like, oh, of course, like, but Conrad, like, you know? I'm a solo GP, right? Or Conrad, uh, you know, there's like three people on the team, right? Like, we had to experience all this also. And, you know, there's some times where we probably could communicate, you know, communicated better, could have done things better.

• 50:03Speaker 01

  The reality of it is like, again, this is aspirational, right? So you have to make this a priority and kind of work towards best in class. Right, but if you're not thinking about it, then you're not like, you know, it's like you go to the gym like, you know, and you're not working a specific muscle continuously. There's no expectation that like you're gonna, you know, you know, run faster when you go on the track or something, right? You can't have to constantly cultivate this, even knowing that, you know, this isn't gonna like, excellence is not overnight, right? It's this mentality and we kind of, we practice this ourselves. I think a lot of the credit goes to Gopi, who's my other co-founder, who's our head of data science, head of engineering,

• 50:48Speaker 01

  of taking this like mentality of building software, right? Which is like, V1 is not gonna be like lights out, right? V1 is probably gonna be, it may be pretty crappy, right? But we're gonna constantly iterate. It's not a point in time, and this is kind of it. This is a constant iteration. And our aspiration is to get to like V-infinite, where every version of it will continuously be better. I know for a fact, next week, we're gonna be better. The product's gonna be better than the week before. And next year, it's gonna be like dramatically different. And so we have that mentality, not just in us building product for, you know, for ensemble, but ideally in how we're managing like, you know, marketing, how we're managing,

• 51:31Speaker 01

  you know, managing relationships with our LPs, like we're nowhere, we know we're not the best. We're far from it, I think, in a lot of different ways. But we're constantly looking inward and saying, hey, like, what can we do better? And then having the expectation that a lot of the things we do aren't gonna work, and they may fail. But that's not an excuse not to constantly try to, you know, try new things, you know, to push the boundaries and do better.

• 51:58David Weisburd?

  If you think about it, all venture performance or any asset class is relative. If you think of this as relationship alpha, so you have your returns, you have your information alpha, you have this relationship alpha, a little bit goes a long way. If your peer group is never flying to, maybe Austin's a little bit easier, but maybe it's North Dakota or Alaska and you're flying once a year, that goes a long way. So a little bit goes a long way as well. So let's talk about Ensemble, your fund. A mutual friend told me that you have a 12x mark on your Fund One. First of all, is that true? And two is, tell me about how you went about constructing Fund One.

• 52:37Speaker 01

  Well, one, yes, like we're very proud of the performance in our Fund One. It was our pilot fund. And, you know, we had the great fortune and maybe misfortune of like, of, you know, having a very novel concept at the time when we raised our first fund in 2018, which was around this idea that you could bring a product engineering, you know, culture and mindset to a venture fund, right? So, you know, obviously that means, you know, being data driven, but really having this very different approach of in order to get better, right? We're going to go build software, we're going to go build product, right? We're not going to throw more people at it.

• 53:21Speaker 01

  Like, we're not going to, we're not going to, we want to grow exponentially or step function through software versus grow linearly through, you know, people. And so at the time, right, the use of software and data was, you know, not super obvious. And so it was a very difficult fund to raise, right? Kind of passed the hat. It was a very, it was also a small fund. But, you know, we had the opportunity to go incubate this actually within Coffin Fellows to really experiment, you know, test this out. And our sole objective

• 53:59Speaker 01

  In that phone one was to really prove that we could use data and use software and product in a way that could significantly change how a venture firm would function. And then in turn, deliver better performance than, you know, like, you know, the typical venture fund. Right. So that was kind of the thesis, right? Could we radically, you know, implement more product engineering into a venture firm? You know, did we expect it to be, you know, like a 12x fund? And hopefully, like, you know, you know, greater than that, which we think it can, given some of our positions.

• 54:41Speaker 01

  It's it outperformed our kind of wildest imagination, right? Of, you know, of very, very specifically, you know, finding great teams, right? Not just great founders, you know, early, right? Through a bunch of different signal that we could measure and track. And then also use that early advantage to translate into collaboration with other funds and and then earning access, right? And so that was the thesis that we proved. We had 12 investments. I think it was like five or six of the 12 ended up, you know, being, ended up companies being valued over a billion. Right. So we had, you know, you know, big, you know, zoom in that portfolio as an example.

• 55:25Speaker 01

  We have Pro, which is a Robin of India in that portfolio. And so that was, I think, the initial, you know, proof of concept. That allowed us to go think about, you know, the natural question after that is, well, how do you scale this strategy? Right? Can you scale this strategy? Right? When, you know, you're writing bigger checks? Can you actually earn bigger access? Right? You know, can you actually collaborate with other funds? Like, you know, you know, can you have this kind of repeat hit rate in the next fund? And so that thesis around using data and product and engineering has evolved significantly,

• 56:06Speaker 01

  you know, since our fund one. And the best reflection of that is from, you know, the founders were now a team of 12. Half of the folks on the team are data scientists and engineers. And then the other half are investors and like folks in operations. So people kind of say, oh, well, you know, every fund is a data-driven fund now. Like, I hope that's the case, right? Because I think that'll actually deliver better allocation of capital. So I want more and more folks to be data-driven.

• 56:39Speaker 01

  But, you know, two, like, there is a spectrum of what it means to be product engineering-focused, you know, fund. And, you know, we've extended, I think, that software advantage into every aspect of the venture fund. So not just on the sourcing side, but also in the winning and value-add side. We've built products to help our founders access customers, you know, find great people to hire, and then, you know, other functions as well.

• 57:06David Weisburd?

  Give me a very specific example of how data helps you make better investments.

• 57:12Speaker 01

  The simplest way to describe it is thinking about how venture has been done, you know, since the very beginning, right? And the evolution of that, and maybe the minimal evolution of that, which is historically, you know, when venture first started, you know, you put your firm on Sand Hill Road, right? And, you know, founders, you know, there weren't that many firms. And so, you know, founders would, you know, find out about X firm and go visit you, right? Over time, that's evolved to, you know, more nodes, right, in other cities and other places. And, you know, founders don't necessarily just come to specific firms, but you basically find opportunities based on folks in your immediate network.

• 57:56Speaker 01

  So maybe you used to work at Stripe, or maybe, you know, you've been in venture for, you know, X number of years. You know, had companies went public, and so you're backing those, the folks that are leaving those companies, right? But it tends to be a very, kind of, you know, finite network of folks. And you really don't know where to hunt. And so you're, you know, think of it almost like a random walk. You're top of funnel, and you're meeting a bunch of folks. And, you know, very few of them end up translating into investments.

• 58:28Speaker 01

  And the headline of that, and I always found this really odd, is, you know, VCs would always say, hey, you know, hey, you know, now it's not you, Tim, like, hey, Mr. LP, you know, I met 10,000 companies or 1,000 companies last year, right? And I made one, you know, I made one or two investments, right, out of meeting, you know, 1,000 companies. And you're like, you know, and they're like, they're so proud because it demonstrates the rigor that they have. And, you know, how, how high a bar that they have. The reality of it is that conversion is pretty bad. If you, if you think of any other, you know, sales organization, right, you get fired, right? If you had to meet 1,000 people and you sign up one customer or, you know, like, like a P firm doesn't work like that, right?

• 59:12Speaker 01

  And so the question is, is well, how do you actually change that funnel very dramatically? Right? Because the reality of it is you don't want to be spending time aimlessly meeting folks, right? Even folks that get recommended to you, right? Because you still have that conversion rate. The reality of it is you want to redistribute your time, right? From the low value activities of first meetings to the high value activities of building the relationship, finding them early, and then positioning yourself to win what is, you know, very, very competitive, you know, deals. And so it's shifting kind of what that funnel looks like from, you know, a pyramid to maybe, you know, a diamond in terms of like time allocation. And so what we've done is build a platform internally, we call it Unity.

• 59:58Speaker 01

  We have offshoot products called Discovery, you know, we have a value add product called GTM 2.0. There's multiple products that we have internally.

• 1:00:07Speaker 01

  But within Unity, what we're trying to do is dramatically change, you know, where time is spent, right? So if you can actually refocus all of your energy on a smaller set of opportunities that have a higher probability of generating, you know, a big outcome, right? Not a guarantee, right? Then you could fundamentally reallocate all of your time to, you know, diligencing these opportunities, you know, and, and also, you know, winning them. And so the question is like, well, what is that? What is that? What does that look like? And so for us, you know, that means not just having a box checking exercise of, hey, we, you know, we use chat GPT or we buy a bunch of data from so and so that anybody can do, right?

• 1:00:51Speaker 01

  It means, you know, building things, you know, vertically integrating, right? So building our own product internally, right? Like, we don't, you know, there's nowhere else to get kind of what we do, right? Because we've actually built all the infrastructure internally, right? Not just, you know, the application layer.

• 1:01:11Speaker 01

  And that also means fundamentally building new process in the firm. Right? So how we meet as a team and how we run our process looks very, very different than what I did at Northwest and also being capital. We run it like, like a software company, right? Every month we know what opportunities that we're going to be focused on. We're probably 70% outbound as a result of that. And then I'd say the latest kind of evolution of the firm is we've actually changed how we've hired. Right? And so that's probably the biggest distinction between,

• 1:01:46Speaker 01

  you know, at least outside looking in of what it means to be a, you know, a data driven fund, is that we fundamentally re-architected what the organization looks like. So not only is our, is my co-founder, one of my co-founders, you know, had, you know, head of data science, head of engineering, right? Gopi came from IBM Watson. But we've hired, our most recent hires have been, you know, two of which have been on the engineering side. Right? And so half of us are on the engineering and data science side, right? It's not a box checking exercise to say, okay, hey, you know, we have the enterprise license for chat GPT and we hired a data scientist, right? Like, we're good to go. Like, we're data driven and we're going to have the advantage, right? The reality of it is like you're constantly iterating, you're constantly building new product.

• 1:02:31Speaker 01

  And, you know, the new product that we'll release at the end of the year, like we just thought about six months ago. Right, or even three months ago. And so we're constantly like, you know, innovating and building new things internally. You know, versus, you know, like waiting for ChatGPT to release, you know, ChatGPT five and, you know, or doing a deep research report or something, right? Like, great, like, anybody can go do that. Right? It's fundamentally changing how your investment processes, your decision process, and then what your organization looks like.

• 1:03:04David Weisburd?

  Give me some of your secret sauce. What is some data that you're looking at? That narrows down your top of funnel dramatically that you look for investing at the early stage?

• 1:03:15Speaker 01

  People always ask that. I'll give you a couple of examples of it. It's not like a Harvard Business School study, right? Which is, you know, uh, you know, the person that's like, you know, left-handed that went to Stanford, that, you know, uh, you know, came from, you know, uh, an immigrant family is going to be like, you know, the amazing founder, right? Like, it's not formulaic like that. The reality of it is, there's a bunch of different signal. Think of it as like stacking alphas, right? Where each individual signal may not be that relevant. But the, the amalgamation of multiple signals actually drives meaningful alpha. So that's like point one, just in terms of like philosophy. The second one, I think, is contextualization.

• 1:03:59Speaker 01

  And that's the, what, you know, LLMs and what AI has really helped accelerate for us. Meaning, you know, if you're building a company, uh, that's in the consumer world versus building something in the healthcare world, selling to, you know, health, health systems, how you build that team will look dramatically different. Right? You could, each team could be very, very high quality. You know, both founders could have, you know, come from, I don't know, like Stripe or something, right? But how you build that team out and what that team looks like, and maybe what your co-founders will look like, will look dramatically different. Right? And it's intuitive because you go to market motion for a consumer company is very different than, you know,

• 1:04:40Speaker 01

  you know, a healthcare AI company selling into health systems, right? And so. Because we built the infrastructure, all of our data is not just a stacking of much different signals, but it's the contextualization and knowing and understanding what a company does, right? So saying, hey, this is a great team, but not a great team for a consumer company, right? Or hey, this is actually a great team within healthcare, within the AI, and also relative to the stage, like you have to contextualize it. So that's kind of like, like I offer that because it's an important framework, right? And then like on the specifics, like one example that you can actually track and measure

• 1:05:23Speaker 01

  that folks kind of use intuitively, and I mentioned this earlier is like, did people on the team work together in the past, right? And so like, you know, what will happen in traditional sense is you'll meet a founder and then you'll maybe meet the head of engineering and be like, oh, like awesome, like, oh, like, no wonder there's great chemistry that they, you know, seem to work well as a team because they had worked together for four or five years, maybe not in the last job, but you know, in a prior job at like Facebook or something, right? So you're like, oh, that that actually is great. That makes a lot of sense, right? There's probably less team risk there because, you know, they've known each other, they've worked each other, they kind of know every, you know, the skeletons in their closets or something, right?

• 1:06:08Speaker 01

  But it's kind of, it's like, you know, ex ante, right? Ex, you know, after the fact of you meeting the founder. What we've done, and it's not the only thing we look at, and sometimes it's less important. But, you know, when founders choose to come together to work together, right? Or their first, second, third hires are folks that they had worked together in the past. There's a lot of interesting signal, right? You know, where, you know, A players, you know, tend to want to work together again because they have the context of knowing, you know, how people, you know, work in high-pressure environments, right? When the company's growing really quickly, right? Where they're they're handpicking, right? The best within a certain group, right?

• 1:06:51Speaker 01

  We like, we do a fair amount of, you know, you know, A and D or like, you know, like defense investing under the bottom bill of deep tech. And you see, you know, folks at Anduril kind of leave together and, you know, and, you know, pockets, right? Anduril probably may not love that, right? But you're seeing, you know, someone who's leaving as a founder, being very selective about the folks that they're bringing on to the team, right? Maybe an old colleague, not in the same group as this other group at Anduril. Like, we've seen that, you know, across the board. The reality of it is like, you can actually measure that, right? The challenge is, is that a human just can't do

• 1:07:32Speaker 01

  that at scale, right? But, you know, building a product, you can measure that one attribute, but you can also look at a thousand attributes. And you can do that across, you know, 100,000 companies. And you could do that across, you know, you know, 30, 40, 50 million people, right? Because the beauty of, of, you know, software infrastructure is that it's infinitely customizable and it's infinitely scalable, right? So we don't have to go hire and build a giant team, right? Which is like, people are linear, right? Where software and, you know, and data, you know, can be exponential. And it's, at the very least, it's a step function. And so that's kind of our framework of how we solve problems.

• 1:08:15David Weisburd?

  Awesome. Well, this has been fascinating conversation. Appreciate you jumping on and look, looking forward to continuing this conversation live.

• 1:08:22Speaker 01

  This is great. Thanks, David.

• 1:08:24David Weisburd?

  Thanks for listening to my conversation. If you enjoyed this episode, please share with a friend. This helps us grow, also provides the very best feedback when we review the episode's analytics. Thank you for your support.