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Sep 26, 2016 · 31m · 20vc

20VC: The 3 Things LPs Want To See From VCs & Why The Table Stakes For VCs Is Higher Than Ever with Judith Elsea, Co-Founder @ Weathergage Capital

Judith Elsea · 21m spoken Harry Stebbings · 8m spoken
0:00 / 0:00

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In this episode of The 20 Minute VC, host Harry Stebbings interviews Judith Elsea, Co-Founder of Weathergage Capital, on how Limited Partners evaluate venture fund managers, the importance of founder sentiment, and LP-GP dynamics across fund cycles.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 29% of the talking time here. How this is scored →

Harry as informed peer 2.0 Guest teaching 2.5 Guest disagreement 0.3 Harry pushing back 0.8
05100:0010:0020:0030:002:53–8:04 · Harry as informed peer 1/10 Judith's Career Journey and the Appeal of Venture Capital Harry asks friendly introductory questions about Judith's path into venture capital and challenges her slightly on how fund of funds avoid being seen as middlemen. Judith explains how Weathergage provides access to top-tier venture deals that individual LPs cannot access on their own.8:04–17:16 · Harry as informed peer 2/10 Evaluating VC Managers and Difference-Makers Harry prompts Judith on how LPs evaluate managers beyond cash-on-cash returns. Judith reframes the notion of social proof by explaining that LP opinion is a lagging indicator while founder opinion is the leading indicator of VC success.17:16–23:44 · Harry as informed peer 3/10 LP-GP Dynamics, Commitment Continuity, and Fundraising Harry demonstrates industry knowledge by bringing up Chad Byers' strategy of pitching LPs for Fund I to build relationships for Fund II. Judith strongly agrees and elaborates on how long-term fund dynamics differ from direct startup investments.23:46–28:57 · Harry as informed peer 2/10 Quick Fire Round with Judith Elsea Judith lightheartedly challenges the host's strict 60-second quickfire rule before discussing her favorite books and investments. The host engages in warm banter and shows familiarity with her highlighted firms.2:53–8:04 · Guest teaching 3/10 Judith's Career Journey and the Appeal of Venture Capital Harry asks friendly introductory questions about Judith's path into venture capital and challenges her slightly on how fund of funds avoid being seen as middlemen. Judith explains how Weathergage provides access to top-tier venture deals that individual LPs cannot access on their own.8:04–17:16 · Guest teaching 3/10 Evaluating VC Managers and Difference-Makers Harry prompts Judith on how LPs evaluate managers beyond cash-on-cash returns. Judith reframes the notion of social proof by explaining that LP opinion is a lagging indicator while founder opinion is the leading indicator of VC success.17:16–23:44 · Guest teaching 2/10 LP-GP Dynamics, Commitment Continuity, and Fundraising Harry demonstrates industry knowledge by bringing up Chad Byers' strategy of pitching LPs for Fund I to build relationships for Fund II. Judith strongly agrees and elaborates on how long-term fund dynamics differ from direct startup investments.23:46–28:57 · Guest teaching 2/10 Quick Fire Round with Judith Elsea Judith lightheartedly challenges the host's strict 60-second quickfire rule before discussing her favorite books and investments. The host engages in warm banter and shows familiarity with her highlighted firms.2:53–8:04 · Guest disagreement 0/10 Judith's Career Journey and the Appeal of Venture Capital Harry asks friendly introductory questions about Judith's path into venture capital and challenges her slightly on how fund of funds avoid being seen as middlemen. Judith explains how Weathergage provides access to top-tier venture deals that individual LPs cannot access on their own.8:04–17:16 · Guest disagreement 0/10 Evaluating VC Managers and Difference-Makers Harry prompts Judith on how LPs evaluate managers beyond cash-on-cash returns. Judith reframes the notion of social proof by explaining that LP opinion is a lagging indicator while founder opinion is the leading indicator of VC success.17:16–23:44 · Guest disagreement 0/10 LP-GP Dynamics, Commitment Continuity, and Fundraising Harry demonstrates industry knowledge by bringing up Chad Byers' strategy of pitching LPs for Fund I to build relationships for Fund II. Judith strongly agrees and elaborates on how long-term fund dynamics differ from direct startup investments.23:46–28:57 · Guest disagreement 1/10 Quick Fire Round with Judith Elsea Judith lightheartedly challenges the host's strict 60-second quickfire rule before discussing her favorite books and investments. The host engages in warm banter and shows familiarity with her highlighted firms.2:53–8:04 · Harry pushing back 1/10 Judith's Career Journey and the Appeal of Venture Capital Harry asks friendly introductory questions about Judith's path into venture capital and challenges her slightly on how fund of funds avoid being seen as middlemen. Judith explains how Weathergage provides access to top-tier venture deals that individual LPs cannot access on their own.8:04–17:16 · Harry pushing back 1/10 Evaluating VC Managers and Difference-Makers Harry prompts Judith on how LPs evaluate managers beyond cash-on-cash returns. Judith reframes the notion of social proof by explaining that LP opinion is a lagging indicator while founder opinion is the leading indicator of VC success.17:16–23:44 · Harry pushing back 1/10 LP-GP Dynamics, Commitment Continuity, and Fundraising Harry demonstrates industry knowledge by bringing up Chad Byers' strategy of pitching LPs for Fund I to build relationships for Fund II. Judith strongly agrees and elaborates on how long-term fund dynamics differ from direct startup investments.23:46–28:57 · Harry pushing back 0/10 Quick Fire Round with Judith Elsea Judith lightheartedly challenges the host's strict 60-second quickfire rule before discussing her favorite books and investments. The host engages in warm banter and shows familiarity with her highlighted firms.

speaking balance: gold is Harry, purple is the guest (3 minute bins)

0:00 · Harry 98.6% · guest 1.4%0:00 · Harry 98.6% · guest 1.4%3:00 · Harry 10.1% · guest 89.9%3:00 · Harry 10.1% · guest 89.9%6:00 · Harry 23.7% · guest 76.3%6:00 · Harry 23.7% · guest 76.3%9:00 · Harry 8.2% · guest 91.8%9:00 · Harry 8.2% · guest 91.8%12:00 · Harry 10.9% · guest 89.1%12:00 · Harry 10.9% · guest 89.1%15:00 · Harry 10.8% · guest 89.2%15:00 · Harry 10.8% · guest 89.2%18:00 · Harry 15% · guest 85%18:00 · Harry 15% · guest 85%21:00 · Harry 26.5% · guest 73.5%21:00 · Harry 26.5% · guest 73.5%24:00 · Harry 20% · guest 80%24:00 · Harry 20% · guest 80%27:00 · Harry 29.7% · guest 70.3%27:00 · Harry 29.7% · guest 70.3%30:00 · Harry 100% · guest 0%30:00 · Harry 100% · guest 0%
Sharpest disagreement ▶ 23:50 Judith pushes back on quickfire time limit

Judith jokingly questions Harry's ability to hold her to a 60-second answer limit, noting that no host has succeeded before.

 Hardest push from Harry ▶ 6:43 Harry questions fund of funds middleman perception

Harry directly asks Judith how her firm overcomes the traditional LP skepticism that fund of funds are merely playing a middleman game.

 Biggest teaching moment ▶ 9:41 Judith reframes social proof in VC evaluation

Judith educates Harry on how LP perception of VC brands is actually a lagging indicator, whereas founder opinion is the true leading indicator.

 Harry holds his own ▶ 21:19 Harry cites Chad Byers' LP fundraising tactic

Harry demonstrates his deep insider knowledge by referencing a specific strategy used by guest Chad Byers from Sousa regarding pitching LPs early.
the scores for every segment, with the reasoning behind each
ChapterTopicHarry as informed peerGuest teachingGuest disagreementHarry pushing backWhy
Judith's Career Journey and the Appeal of Venture Capital 1301 Harry asks friendly introductory questions about Judith's path into venture capital and challenges her slightly on how fund of funds avoid being seen as middlemen. Judith explains how Weathergage provides access to top-tier venture deals that individual LPs cannot access on their own.
Evaluating VC Managers and Difference-Makers 2301 Harry prompts Judith on how LPs evaluate managers beyond cash-on-cash returns. Judith reframes the notion of social proof by explaining that LP opinion is a lagging indicator while founder opinion is the leading indicator of VC success.
LP-GP Dynamics, Commitment Continuity, and Fundraising 3201 Harry demonstrates industry knowledge by bringing up Chad Byers' strategy of pitching LPs for Fund I to build relationships for Fund II. Judith strongly agrees and elaborates on how long-term fund dynamics differ from direct startup investments.
Quick Fire Round with Judith Elsea 2210 Judith lightheartedly challenges the host's strict 60-second quickfire rule before discussing her favorite books and investments. The host engages in warm banter and shows familiarity with her highlighted firms.

Statements from this episode (6)

Insight
Founder sentiment is the leading indicator of a VC's potency
“So we find that founders and entrepreneurs are leading opinions are the leading indicators of the relevancy and potency of a VC Find that many LPs opinion of a VC's brand is actually a lagging indicator. The most powerful form of social proof for us is the opi…”
Judith Elsea Sep 26, 2016 ▶ 9:44
Disclosure
Weathergage shares proprietary benchmarking data with VCs who pitch them
“We like to give something back in return if we can, and so the data that I just mentioned that we collect in our proprietary tool called Weathervane, we will share that data back with the people who are calling on us.”
Judith Elsea Sep 26, 2016 ▶ 15:09
Disclosure
Lack of differentiation is the main reason Weathergage rejects VC funds
“Most of the time, it's undifferentiation. We see managers who, you know, have spent some time in the field, and they have a credible record, but it's not an exemplary record after, you know, having done it for a while.”
Judith Elsea Sep 26, 2016 ▶ 16:19
Disclosure
Weathergage drops VC funds primarily when they lose relevancy with founders
“For us, when we decide to stop backing a VC firm, It's usually based on the loss of relevancy with founders, and we ask ourselves every time, how does this particular team find and win deals versus their top competitors?”
Judith Elsea Sep 26, 2016 ▶ 18:04
Insight
Many LPs are uncomfortable giving direct feedback to VC fund managers
“Many LPs are not comfortable giving feedback to GPs, and so fund managers may not have a clue how they're being perceived or why they're not a fit with a, you know, institutional manager's portfolio.”
Judith Elsea Sep 26, 2016 ▶ 23:20
Assertion Partly supported
Every partner at Felicis Ventures has at least one billion-dollar exit
“Now, each one of the Felicis partners has at least one billion dollar exit under his or her belt.”
Judith Elsea Sep 26, 2016 ▶ 28:39
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