Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20VC: Why The Whole Industry Is Backward Looking, The Best Funds Are Entrepreneur Led and Venture Is All About Access with Alex Bangash, Founder @ Trusted Insight About this episode Alex Bangash is a Managing Director @ Rumson Group where he helps his clients invest in some of the best performing funds around the world. Alex has done just that having made over 50 investments into funds across the globe. If that was not enough he is also the founder of Trusted Insight, the worlds largest platform for institutional investors and backing from the first investors or founder @ Facebook, LinkedIn, Mint and Match.com. In Today’s Episode You Will Learn: 1.) How Alex made his way into the world of investing in VC funds? 2.) Why does Alex believe the whole finance industry is backward looking? Is this why he thinks there is so much VC churn? 3.) Why does Alex believe VC is always about access? Is this why Alex has such a strong preference for funds that are also platforms? 4.) Why does Alex believe true early stage is getting smaller and smaller? How does his return expectations differ according to the size of the fund? 5.) What happens when funds do not go to plan or do not have notable exits to raise fund II? What happens then? Items Mentioned In Today’s Show: Alex’s Fave Book: Ben Horowitz: Hard Thing About Hard Things, Peter Thiel: Zero To One Alex’s Fave Blog or Newsletter: Paul Graham As always you can follow The Twenty Minute VC, Harry and Alex on Twitter here! If you would like to see a more colourful side to Harry with many a mojito session, you can follow him on Snapchat here! This episode was brought to you by DesignCrowd, the online marketplace for custom graphic, logo and web design that helps startups, entrepreneurs, web developers and agencies outsource design projects to designers from around the world. How Does It Work? Once you have launched your brief, designers will begin submitting quality designs for you to review. With some constructive feedback, you can quickly generate a large gallery of designs that really do fit your needs. You can have exactly what you need within just three days. Once you have selected your favourite design, you will be sent all the files you require to update your branding. If you don’t like any of the submitted designs, then DesignCrowd offers a money back guarantee. So checkout designcrowd.com/VC and enter the promo code VC100 to get an astonishing $100 off your next project.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Harry Stebbings? You are listening to the 20 Minute VC with your host Harry Stebbings and you can find me on Snapchat at H Stebbings. Now, on Monday's show, we discussed what are venture returns and how to measure them from the VC's perspective with Jeff Busgang at Flybridge. So today, I thought we'd switch sides of the table and speak to a leading LP, that's a limited partner, people who invest in VC funds, to discuss what he thinks. Therefore, I'm delighted to welcome Alex Bangash, Managing Director at The Rumson Group, where he helps his clients invest in some of the best performing funds. And Alex has done just that, having made over 50 investments into funds across the globe. And if that wasn't enough, he's also the founder of Trusted Insight, the world's largest platform for institutional investors.
0:44 Harry Stebbings? And they have backing from the first investors or founders of Facebook, LinkedIn, Mint.com and Match.com. I also want to say a special thank you to my good friend Jason Lemkin at Sasta for making the intro to Alex today. Very grateful for that and without which the interview could not have happened. But before we dive into the world of investing in VC funds with Alex, you must check out Design Crowd, the online marketplace for all things design, from custom graphics to logos to web design. Hey, they even do big brands like HTC and Virgin Active, who've used them for t-shirts to billboard design. So how does it work? Well, you launch a project, designers begin submitting quality designs for each review. You then quickly generate a large gallery of designs that fit your needs.
1:29 Harry Stebbings? Once you select your favourite design, they'll be sent to you and all of this can happen in just three days. Much better and more reasonable than an agency. Hey, and perfect for small businesses and entrepreneurs looking for fast response times and reasonable pricing. So head over to designcrowd.com/vc and enter the promo code VC100 for an incredible $100 off. But enough from me, so it's now time to welcome Alex Bangash, co-founder at Trusted Insight.
2:01 Speaker 01 You have now arrived at your destination.
2:04 Harry Stebbings? Alex, it's such a pleasure to have you on the 20 Minute VC. Thank you so much for joining me today.
2:09 Speaker 02 Thank you for having me, Harry. This is a privilege.
2:13 Harry Stebbings? Now, I'd love to get the ball rolling today by discussing how you came to be an LP and then what made you decide to found Trusted Insight? So what's the origin story for you?
2:23 Speaker 02 So I think for me, it was just circumstances where I had first thought of
2:36 Speaker 02 first thought of joining venture capital.
2:40 Speaker 02 But at that time, this was around 2001, 2002, there was no venture capital happening. So when I talked to some of my mentors at that time, some of the people in the industry, they said, gee, Alex, why don't you consider looking at what the LPs think of this market? And then when I started talking with the LPs, I found that if I brought to bear my technical and operational expertise in that field, I would have a differentiated approach this way VC. I spent close to a decade at Bell Labs, working in different technologies.
3:25 Speaker 02 Many VCs have similar backgrounds as me, but very few LPs had the background in context that I had for technology investing.
3:37 Harry Stebbings? Would you say that's changed over time? Or do you think LPs still are fundamentally rooted in financial backgrounds over operational backgrounds?
3:45 Speaker 02 I would say there are definitely some exceptions, but by and large, that is still true.
3:53 Harry Stebbings? Do you think that's a problem for the industry?
3:55 Speaker 02 No, I don't think it's a problem for the industry. It is probably a bigger problem.
4:02 Speaker 02 Uh, which is that, uh, the entire, I would say, the entire finance industry is backward looking and not forward looking. I would say, um, that there are some philosophical issues in, in how we think about investments and, and our biases in that everything is backward looking, whereas, you know, the future is very different than the past.
4:30 Harry Stebbings? What do you think of the philosophical issues associated with investing today then?
4:34 Speaker 02 One of the key terms of philosoph- of venture is that venture is, um, is a highly persistent asset class that the, the, um, the top VCs or top brands will continue to do well. N- now, if you look at, you know, just pick, just pick the Forbes Midas List, for instance, and you will see that four out of the top ten VCs, Steve Anderson, Chris Saka, George Coppola and Peter Thiel, in, in that they didn't have firms, uh, ten years ago, right? Even, even Andreessen Horowitz wasn't around ten years ago, right? So for
5:14 Speaker 02 all this talk of receiving increasingly persistent, um, the, the reality is, um, it's not. And the reality is that there is a huge churn in venture capital, but it's incredibly hard to figure where the puck is going. And I think there are kind of, uh, two reasons for this. And I'll tie this back to what, what you had said before, right? About technical expertise. So if you take, you know, if you take some of the best new funds that came in the last decade, say, Founders Fund, First Round Capital, lowercase
5:55 Speaker 02 Y Combinator, all of these firms are entrepreneur focused and entrepreneur led funds. Uh, for LPs to identify these such funds very early is incredibly, incredibly hard because they don't have prior relationships with funds like these. Additionally, these funds don't, these firms don't have an attributable track record, quite a prerequisite for many, uh, in LPs to invest in something. So so that is that is, you know, that that is one kind of philosophical um issue
6:35 Speaker 02 that is at the forefront of the of the changes. So many of the newer newer firms, um not all, you know, there are exceptions. So Foundry, First, um um Union Square, Spark, they all came out of existing amazing firms. Um so and there is nothing wrong with that. I think those firms um um deserve the amazing success that they have and it's those firms, it is easier to identify. But the entrepreneur-led models, which by the way tend to do, you know, um the most the most disruptive new models are very hard for institutional investors to identify.
7:17 Harry Stebbings? Um hum. And you said there about identifying where the puck is going, uh and and that that's your job, um which which I'm intrigued then to dive into because you've said before um about kind of what managers do well. So I'd love to hear the commonalities you've seen in the types of managers that do well and why they do well.
7:37 Speaker 02 I think the biggest change that has actually happened in the last ten years, um we saw this around two thousand five. Today, the entrepreneurs are picking the managers. This is in stark contrast to any other asset class. So in any other classic class, you can look at a great manager and you can assess their ability to pick securities. Okay, so it's a security selection. So venture is so hard because the security is picking the manager. So it's inverted in terms of asset classes. And um you you know, in in some sense, you you can get in
8:19 Speaker 02 public markets, you can get an edge if you if you have informations that others don't have, in which case it is illegal to have information that others don't have. In private markets, you can have proprietary access, you can have entrepreneurs, like the information is available, is not available to anyone, and when it's available, everybody has it. So a good example is WhatsApp. WhatsApp was not, you know, everybody knew that WhatsApp was a great company, right? But WhatsApp chose Sequoia and no one else. Similarly, as you've seen in the movie Social Network, Mark Zuckerberg chooses one firm and chooses,
9:04 Speaker 02 doesn't choose another. So, so it's, you know, the security is picking the manager. Obviously, there is some room for security selection within that, but, you know, of the hundred amazing companies that pick you, you know, maybe then there is room, twenty percent or thirty percent room for you to pick, right? But a lot of it is, is being picked by the best companies.
9:28 Harry Stebbings? So I'm intrigued, when you look at emerging fund managers, is one of the core tenets that you look for, an ability to get into these deals in the, in the belief that actually venture so much now isn't about picking, but about just pure access alone?
9:43 Speaker 02 Yeah, venture has always been about access. So one of our, you know, one of the famous folks in the industry has said venture is not an asset class, it is an access class, right? But that, that access class is now even, you know, it's even more transparent. You know, when an entrepreneur doesn't like somebody, he tweets about them, you know, he puts it on his blog, hey, this VC pulled a term sheet. So it's much more transparent, and that's why you have seen a number of funds in recent first round founders fund, but, but many being, being friends of entrepreneurs rather than, you know, having adversarial
10:25 Speaker 02 relationships, which was much more common in the eighties and nineties.
10:30 Harry Stebbings? Absolutely. And we, we spoke there about kind of transparency within the ecosystem. And, and one thing Naval Ravikant is very keen on is opening up the earlier stages of fundraising with Angel List. Do you think Angel List will, will fundamentally change the transparent nature of the VC and early stage funding environment?
10:47 Speaker 02 I think, you know, Angel List and others, so there is a structural advantage that platforms like Angel List, NY Combinator, and Entrepreneur First and others have. So, you know, we do see, and this is kind of what you, you know, we were alluding to. Venture Now has done quite well and everything is looking good. In most asset classes, a third to a quarter of managers lose money. In venture, that could be depending on the vintage, that could be half, two thirds of the managers.
11:28 Speaker 02 Now, today, it looks like everybody is making money, but when the tide comes down, it will not look so well. So, we think some of the best managers will actually be platforms like Angel List. Now, I'm a big fan of Naval. Angel List is arguably much further ahead than anybody else. But this is still the beginning. We think there'll be many, many, you know, many amazing platforms. It's just like when you look at social networking, right? It didn't start and end with Friendster or MySpace or Facebook or WhatsApp. You know, now there is Snapchat, right?
12:09 Speaker 02 So, there'll always be, there'll always be innovation there. You know, there are a few people who say, oh, well, this is the end. You know, after Twitter and Facebook, social networking is done. It's never done. It always, it's always evolving. And the next big wave, as we talked about, AI is almost as fundamentally disruptive as the web was. So, you know, with AI and APIs, we are entering this brand new era where a lot of very, very significant companies are going to be built. And some of those will also be in the investing space.
12:48 Harry Stebbings? Absolutely. And I want to discuss something there which you touched on. It's something that's not often touched on in the industry that we live in of hype and excitement. Uh. Often we see, you know, fund managers like Chris Sack who smash it. But there's also fund managers in the turning tides which don't smash it and do lose the money, as you said, sometimes half or two thirds. It it. What happens to managers who don't smash it? Is it a, you know, can you raise again? Is it that simple? Or is it a return to another bigger fund? What's the roadmap for them from there?
13:19 Speaker 02 This is a very um interesting dynamic is that um, you know, we talked about the big funds and the smaller funds. So unfortunately, the the the dynamic of our industry is such that amongst the established managers, if you are a traditional, quote unquote, VC, um, not a incubator accelerator, post accelerator. What is, what's that, what's actually happening is that um, you, there is always this theory of a bigger fool. So um, what happens to them is that they might not be smashing it. But then, but because they're established, they are in the palette of managers from which people choose.
14:02 Speaker 02 So um, they might do some investors, but uh, another set of investors, um, another, a different type of institutional investors. You know, they might have endowments and foundations, they move to pensions and insurance companies. They might have pensions and insurance companies, they might go to European investors. They might lose their European investors, they go to Middle Eastern investors. So there's always somebody else. And it also goes to return expectations, like, like you were saying, right? So venture, in some sense, um, the return expectation of venture used to be three to five X and above. And now there are folks in the industry that are perfectly fine with a two X net return.
14:44 Speaker 02 Because internally, their return expectations are much, much lower. That's kind of what, what has happened.
14:51 Harry Stebbings? Mm hmm. And I I'm always intrigued there when we said about those that smash it and and those that don't. What about second time funds where it's very difficult to tell if someone smashed it or they haven't smashed it? Um, because there's real, no real exits and hopefully no, none that've fallen off the side of the cliff, so to speak. So how do you judge a first, a first time fund manager's second raise?
15:14 Speaker 02 So in a lot of sense, you know, um it's almost the same as a company, right? It's like, how do you select your best and select the best syndicate? And typically, you select the best syndicate of two types of people. One, A, that they can give you signal, and B, um they have deep pockets. So if you haven't made enough progress, they can follow on. So typically, it's the same with venture funds. So when you um uh when you choose a partner, an institutional partner, they know enough. Where they will say, okay, in two years, um I will recommit to you. Um with the understanding that you will not have had exits, with the understanding that some of your
15:59 Speaker 02 underlying investments would not have shown a lot of progress. Even the ones, the the managers that have smashed it, it was not evident in two years that they would be the best managers. So in in some cases, um you know, uh I have seen quite the opposite. Most people um get very uh very concerned and tend to not free up. Managers, VC managers, have a choice of sophisticated investors. They should pick those that that are willing to support them over multiple fund cycles.
16:32 Harry Stebbings? Absolutely, and and I'm intrigued, before we dive into a quickfire. Uh we spoke about the this kind of seed funds and the early entrepreneurial funds of your lower cases, your soft texts. Uh and and now they're all much bigger funds, they've gone upscale in the venture world. So what do you make of the scaling up of of these funds? And is this a continued trend that we'll continue to see? Or do you see benefits in remaining true to your core pre-seed and seed investment thesis?
17:00 Speaker 02 You know, in every asset class, in every sector, the best returns are always uh in places where others can't invest. What happens is that, you know, smaller funds raise larger uh larger funds, smaller managers.
17:16 Speaker 02 Uh. They then tend to compete for the same deals. They might be, you know, they might be putting smaller checks. But they are in the same series A or D. Uh. Many of the series A or B that you're seeing today. Um. Are actually very similar to what series C or D used to be five to ten years ago. We are witnessing series A of anywhere from fifteen to a hundred million dollars. Uh. So even the smaller funds are now being a part of these later stage rounds. Early stage venture capital is now defined by uh rounds. Um. Which which incubators are doing where they take money in return for helping start the company accelerators.
18:01 Speaker 02 Where they take uh the VC model and also post accelerators. Along those lines, there's there are angel and and seed rounds and post seed. So almost the series A has become uh the fourth or fifth institutional round. At least my feeling, uh where I see that i- is that that is the best place to invest. Um. Um. You know, uh there was close to forty billion raised last year, fourteen, fifteen billion in Q one. Ninety per- ninety to ninety five percent of that is not going into true early stage. A true early stage is getting smaller and smaller. Uh. So investors are investing.
18:46 Speaker 02 Not the institu- institutional investors are not in investing in starting companies, which venture capital used to be. They are investing in growing companies. That has been a fundamental structural shift.
18:59 Harry Stebbings? Now, I I I want to touch on, because you mentioned returns there, and I I do have a question from a contemporary of yours in in Michael Kim at Sandana. And and he wanted to know, with regards to expectations, do you have the same uh return profile and expectations for your larger funds as you do for your smaller funds?
19:17 Speaker 02 Absolutely not, yeah. My thinking is that if a smaller fund is worthy to be invested in, um, they should have a shot at five to ten X. I know it sounds ridiculous, um, but actually it is really, really possible. A forty million dollar fund, which has a portfolio of fifteen companies and they own fifteen to twenty companies and they own, uh, you know, fifteen percent or twenty percent of, um, those companies and, um, are able to, you know, but as you can see, if they have one or two multibillion dollar exits, you're suddenly talking of a very, very large multiple. From a statistical standpoint
20:00 Speaker 02 and from just a model standpoint, those kinds of things become very, very possible, even if you assume a very high loss. So tha- that's where we think the true venture is. In, in fact, and this goes back to the LP landscape, um, you know, so some of these smaller funds, um, you know, and I would categorize it's not just all small funds, right? It has to be the best of the small ones. So if your loss rate is very low and you have no shot at investing in amazing companies, it is a very bad investment. But if you are dominant and you're not competing, you know, the, the, the nice thing I like
20:43 Speaker 02 about some of these small funds is that they don't compete in their sector, in their geography, in their stage. They don't compete with Sequoia, Excel, Benchmark and Intriessen. So they are dominant. They will never lose to them because they will never compete with them. And, and then when you get one of the big hits, you know, your fund is spectacular. That is the key, that some of these models will, will perform much, much better.
21:11 Speaker 02 Mind you, all small funds will not do well. So it is just, it is the ones that will, they are uh structured to perform well.
21:20 Harry Stebbings? Um. Absolutely. And and I I wanna finish then on a quick fire round, uh where I say a short statement and then you give me your immediate thoughts. How does that sound?
21:29 Speaker 02 That sounds great.
21:30 Harry Stebbings? Okay, so let's start off with the biggest challenge for you in your role.
21:34 Speaker 02 Uh you know, the the biggest challenge for me in my role is always finding amazing people and and avoiding um you know, avoiding the ones that um that are not good. So whether it's employees or folks we can invest with or folks, um you know, so it's always that, that's the, that's the cases. Um. How do you find the best of the best? Um. And at the end of the day, it's, it's all about the, uh the people that you work with.
22:04 Harry Stebbings? And and what would you like to see change in the world of LPs?
22:07 Speaker 02 You know, I think there's more openness to newer ideas and newer models. As Gandhi said, be the, be the change that you want to see in the world. So, you know, um we are doing it. That's why we built Trusted Insight. We are the network for institutional investors which increases transparencies, which automates um workflow, a world which is more forward-thinking, not anchored in past tenets uh and notions that are no longer relevant.
22:39 Harry Stebbings? And and then what's your favorite blog or newsletter? What's your must-reads when it comes in?
22:44 Speaker 02 I like authentic stuff. I I like authentic uh things and also changes with with time, alright? So on the one hand, I I think some of the most authentic things that I've been see seeing in the past decade um started with with with Fred Wilson, Paul Graham. I think Paul Graham has had a lot of impact on on the way I look at startups and and and things. Um. And then I I think of all the the folks, I think very few people can match the intellectual firepower and and the, and the um in literally the the contrarian thinking of Peter Thiel. So
23:27 Speaker 02 and Peter doesn't do a blog per se, but you know, he's done his books and his lectures at Stanford. And so I think Peter is probably the one, if not the most significant, one of the most, the most original thinkers of technology in our times. And I think that's why he has been so successful in places which are where others have not. He does the meta thinking, he does the think, thinking about thinking, about venture and, and technology. So I, I think, you know, Peter's been a great influence. Ben Horowitz is, is an amazing thinker about execution. Two of the newer folks, and this also tells you, right, if I look at what's
24:10 Speaker 02 going, right, so, so today I have to keep up, right? So that's why I follow Justin Cahn on Snapchat, right? So it's not just, it's not just the thinking, but the, but the delivery of the thinking. And I follow and I'm influenced by Jason Lemkin on, on Saster. So, so it's, it's, you know, on, on, in OnCora. So it's where, you know, how things are changing. It's not just the thinking, but the delivery of that thinking, right? It's no longer a blog or a tweet, right? It's Quora and Snapchat.
24:45 Harry Stebbings? Well, with Jason Lemkin, you've left the best till the very end. So I have to leave it there. But Alex, thank you so much for joining me on the show today. I seriously really, really enjoyed the deep dive and it was really nice for me to have a chat just about the landscape as a whole with you. So thank you so much for joining me today.
24:59 Speaker 02 Thank you, Harry. Thank you. Thank you for the privilege.
25:04 Harry Stebbings? Wow. As a VC nerd, that really was so much fun for me and such a huge hand to Alex for giving up his time today for joining us on the show and amazing to hear his insights into the industry. And if you're loving all things from us at the 20 Minute VC, then you can add me on Snapchat at H Stebbings. I'd absolutely love to see you there. Or you can sign up for the newsletter on the 20minutevc.com so you never have to miss an episode or an update from us. And talking of sites there, how's your site design looking? How's your overall approach to design looking? Well, that's where Design Crowd come in. With their 500,000 registered designers, they bring their creative flair and designability to develop your logo, website design, business cards.
25:43 Harry Stebbings? Hey, they even do T-shirts and all you have to do is launch a project, gather a gallery of designs that you really like. And then, once you've selected your favourites, all the files will be sent to you. And even better, all of this can happen in just three days. Perfect for entrepreneurs and small businesses who need quick turnaround times. And you can check this out on designcrowd.com/VC and enter the promo code VC100 for an incredible $100 off. As always, we so appreciate your support and for tuning into the show today and are very excited to bring you Friday's episode with David Halagason at Unity.
Previous 20VC: Flybridge's Jeff Bussgang on Why It Is Not All About Unit Economics & Why VCs Are Big Data Decision Makers Next 20VC: Unity 3D's David Helgason on Building a $bn Business, Getting Funded By Sequoia and Powering The Pokemon Revolution Page updated October 26, 2026 · transcript and summary are machine-generated
