The Exchanges

Q I want to go back to the LP process before we leave that. How did you get the majority of your LP introductions? Was it warm intros? Was it direct outreach? How did you approach that?

A Before I started the process, I spoke to our mutual friend, Semel Shah. And Semel said, the only people that are going to invest in your first fund are people that know you. And I was like, well, why won't, you know, I invest in founders all the time that I don't know. He goes, this is different. And he was almost a hundred percent correct. Like every single LP in fund one is someone that I knew personally over my prior You know, years and years in and around the early stage tech ecosystem. And if they weren't an LP I knew before the fund one process, they came from an intro from an LP who said yes to fund one and then introduced me to somebody else. Yeah. And so that has continued to be the case for fund two as well.

AI assessment note: “every single LP in fund one is someone that I knew personally”

Q You can get that pretty easily bluntly if you have a good network. Um, 20? Uncomfortable. You're too large really for those institutions really to start stacking up and making a difference. And you're too small for really other institutions to Want to invest at that stage without hitting, you know, 10, 20% thresholds. Why did you choose 20, and is that not the hardest fund size to raise for?

A 20 is definitely not the easiest fund size to raise for, I'll put it that way. But really it came down to, I'm trying to build a firm over the next 20 to 25 years, and I wanted fund two to be an iterative step up from fund one. And I felt like going from eight and a half, eight, six, whatever fund one was, to 20 allowed me to incrementally increase my check size in such a way that I was very comfortable doing so. LPs don't require a major leap of faith to believe that I can go from writing A 325 K check to writing a 425 K check on average from owning four, 4.2% on average to owning five and a quarter to five and a half percent on average. This is, these are baby steps in terms of increases that I felt like were very easily underwritable. Now, in terms of LP type, yes, that fund size definitely Plays below the sort of normal threshold of institutional LPs. I generally think 40, really 50 is kind of the floor for a lot of those, a lot of those, uh, those groups. And so I'm living in a world of smaller fund of funds and family offices and high net worth individuals who sort of look and act like a family office, but they don't have a family office sort of entity created yet. And that's generally the majority of LPs that I'm spending time with.

AI assessment note: “it came down to, I'm trying to build a firm over the next 20 to 25 years”

Q You can get that pretty easily bluntly if you have a good network. Um, 20? Uncomfortable. You're too large really for those institutions really to start stacking up and making a difference. And you're too small for really other institutions to Want to invest at that stage without hitting, you know, 10, 20% thresholds. Why did you choose 20, and is that not the hardest fund size to raise for?

A 20 is definitely not the easiest fund size to raise for, I'll put it that way. But really it came down to, I'm trying to build a firm over the next 20 to 25 years, and I wanted fund two to be an iterative step up from fund one. And I felt like going from eight and a half, eight, six, whatever fund one was, to 20 allowed me to incrementally increase my check size in such a way that I was very comfortable doing so. LPs don't require a major leap of faith to believe that I can go from writing A 325 K check to writing a 425 K check on average from owning four, 4.2% on average to owning five and a quarter to five and a half percent on average. This is, these are baby steps in terms of increases that I felt like were very easily underwritable. Now, in terms of LP type, yes, that fund size definitely Plays below the sort of normal threshold of institutional LPs. I generally think 40, really 50 is kind of the floor for a lot of those, a lot of those, uh, those groups. And so I'm living in a world of smaller fund of funds and family offices and high net worth individuals who sort of look and act like a family office, but they don't have a family office sort of entity created yet. And that's generally the majority of LPs that I'm spending time with.

AI assessment note: “20 is definitely not the easiest fund size to raise for, I'll put it that way.”

Q I want to start on, ah, Looking Glass. What is the fun size, and why did you decide that as the optimal size?

A Sure. So the, the fund that I'm currently investing out of now is a twenty million dollar target. And really the, really I chose that size because I felt like it was incremental from fund one. So fund one was a little over eight and a half million dollars, generally investing 300 to 400 K into pre-seed and very early seed rounds. So really 750 K to three million dollar rounds. And so I felt like the step up from eight and a half to 20 Was iterative enough for me to essentially go from 300 to 500 K really 400 to 500 K sort of incremental step up in check size. Allow me to invest in 30 companies versus 24, but still maintain the exact same entry point.

AI assessment note: “the fund that I'm currently investing out of now is a twenty million dollar target”

Q Okay, so I am, I'm loving this already because I'm just going for it. Okay, so we have 24 companies in fund one. That's a pre-seed fund. Man, that's very, very constrained in terms of number of companies. Do you think you can do a pre-seed fund with that few companies being 24?

A I think you can, if the ownership is sufficiently high enough. My goal with the fund was to make sure that every investment can move the needle and return the fund with a billion dollar outcome. So fundamentally, I believe if you're investing out of a fifty million dollar fund or smaller, a billion dollar outcome has to return the fund or this job becomes even harder than it already is. So You know, all things considered, I would have rather had more like 27 companies than 24, but I was operating within the constraints of a smaller, smaller fund size. But with fund one, I need to own 86 bips at exit of a billion dollar outcome to return the fund. My average ownership was close to four percent on average at entry across fund one. So even if I get diluted by 6065%, which I expect to over the life of that investment, I'll still own well north of 85 bips. In fact, if I get diluted by 60%, I'll actually own like 1.7%. So a billion dollar outcome, two X's my fund out of fund one.

AI assessment note: “I think you can, if the ownership is sufficiently high enough.”

Q Okay, so I am, I'm loving this already because I'm just going for it. Okay, so we have 24 companies in fund one. That's a pre-seed fund. Man, that's very, very constrained in terms of number of companies. Do you think you can do a pre-seed fund with that few companies being 24?

A I think you can, if the ownership is sufficiently high enough. My goal with the fund was to make sure that every investment can move the needle and return the fund with a billion dollar outcome. So fundamentally, I believe if you're investing out of a fifty million dollar fund or smaller, a billion dollar outcome has to return the fund or this job becomes even harder than it already is. So You know, all things considered, I would have rather had more like 27 companies than 24, but I was operating within the constraints of a smaller, smaller fund size. But with fund one, I need to own 86 bips at exit of a billion dollar outcome to return the fund. My average ownership was close to four percent on average at entry across fund one. So even if I get diluted by 6065%, which I expect to over the life of that investment, I'll still own well north of 85 bips. In fact, if I get diluted by 60%, I'll actually own like 1.7%. So a billion dollar outcome, two X's my fund out of fund one.

AI assessment note: “I think you can, if the ownership is sufficiently high enough.”

Q Well, we're gonna start with a little bit of context. So tell me, how did you make your foray into the world of Venture and make those first moves?

A Yeah. I mean, it started, honestly, I joined Twitter in 2009, which feels like a, an epically long time ago, given worth, you know, the Twitter products it's today with Elon owning it, but that was my entry point into understanding the world of venture. And so I just started following dozens and dozens of VCs on that platform, going back and forth with them when I had like 200 followers and use that as a platform for the eventually cold emailing hundreds of investors. And trying to figure out how to move from traditional finance to venture and ultimately, um, ended up working for Chris Saka and lowercase capital while I was in business school off of a cold email to Chris and then diligently annoying and following up with him until he caved and gave me some work to do basically.

AI assessment note: “ended up working for Chris Saka and lowercase capital while I was in business school”

Q Wow. Ok. And, and you don't find your check size uncomfortable in terms of, like, unfriendly. The thing I worry about with the three to 500 range is, like, it's a lot of angel checks in that one bulk, and you're not really big enough to also take more than 60, 70% of the round. Do you see what I mean?

A I haven't found it to be a challenging check size. So I said in fund one ranges were seven, 50 K to three and a half million dollar is four million dollar round sizes. Um, I got what I was looking for in virtually every single investment. Um, out of fund two, the round sizes have been one and a half to two and a half, and I've gotten the allocation that I wanted in every single one. And I don't think it's that unfriendly. Like I've been, I've come into rounds with a 300 to 400 K check after there was already a lead who set terms in a couple instances. So it didn't prevent me from getting what I was looking for. I think A quintessential round for me would be one and a half to two million dollars at a six to 10 post. That's like down the middle of the fairway, you know, structure for me. And if I want to write a 500 K check. If there's a 1.75 million dollar round and they already have a quote unquote traditional lead who's taken a million, I can still get 300 to 500 K and it's on me to compel that founder to give me that allocation. It's on me to sell them on why I should have that much of the remaining 750 K. If the investor who's leading the round introduced me to the company, then I have a leg up and I'm not bashful about preemptively having founders give references to other founders. It's a key part of my strategy. It's a key part of why I'm investing in a thematic way is tha…

AI assessment note: “I haven't found it to be a challenging check size.”

Q What have you changed your mind on in the last 12 months?

A The number one thing I've changed my mind on is signaling as relates to who is involved in your round. I used to be very, very averse to multi-stage firms being involved early with smaller checks. And I thought that there was signaling risk and I thought, oh, well, if you have this family office in versus other investor, then the optics of that don't look great because nobody knows who they are. And what the last 12 months have shown me is raise capital from reputable, reliable sources that align with your ethical standards. And that are providing clean terms. And it almost beyond that, it almost doesn't matter, at least in this current venture climate, who you raise from, because raising it all is an accomplishment right now. And so to me, yes, all else being equal, you'd rather have, you know, tier one investor involved. They provide great optics, great signal, et cetera, et cetera. But like the signaling risk of certain investors being involved in my mind is completely out the window because ultimately you can overcome that with good execution.

AI assessment note: “The number one thing I've changed my mind on is signaling as relates to who”

Q remote, 50 K check, some of my, like, on paper, definitely, best investments. Um, I always went for two 50, like, broke the rules there, and they're the ones which were bangers, and my two fifties are like, Yeah, I'm sure they'll be fine, but actually the exceptions is where I've seen the alpha. Do you worry about that, and how do you think about if you should make exceptions?

A So I do think that having this set of rules allows for when you do want to make an exception, it's very clear why you're making that exception, right? Like the more constraints you put in place, the fact that when you do want to, or need to make an exception, like it means that it's reached some level that. You thought might be previously unattainable. So for instance, in fund one, I have an investment that I made that was outside of my valuation range, a touch, but still outside of my valuation range, the round size got larger after I had committed. I wasn't going to back out. I still got my 300 K allocation by the way, but the round size got larger after I committed a bunch of people piled in. I wasn't going to tell the founder, oh, sorry, I'm not in anymore because you raised Four and a half instead of three, right? Like if anything, the optics were, this deal was even more compelling now than it was when I said yes. And this team is by far the best executing team I've ever worked with in a decade of being in venture, like bar none. And so I obviously am very happy, happy that I didn't compromise on, you know, my valuation rules and I stuck to stuck to that. Yes.

AI assessment note: “having this set of rules allows for when you do want to make an exception”

Q On the fun raise, before we kind of go to actually like being on the battlefield, so to speak, what docs do you have ready? How do you think about the materials that you need to get in place to go out and raise?

A That's a big lesson learned from fun one. I started having conversations and people were like, send me sub docs. I was like, oh no, I don't have sub docs ready. I was just like in a unbridled enthusiasm phase of having conversations. And I thought processes were going to take a lot longer than they did on fund one, um, when I was out in market. And so now I've given my sort of background operating at Anchorage capital before starting looking glass, sort of the most institutional of institutional places. I err on the side of formality in terms of data room and materials and I write an investment memo for every single investment I make, even though it's just me reading them. Um, so every single one of those investment memos is in a data room that LPs can pour over and see my thought process at the time of investment. Every LP update I've sent out over the last I started samples and now it's beyond samples. It's really like every LP update I've ever sent out. I write a very lengthy letter every eight weeks. That's very transparent on every company in the portfolio to LPs. So potential LPs can see how I communicate transparently and regularly with, with my investors. And then obviously, of course, deck and an appendix to that deck and statement of investments and all the necessary legal, legal docs.

AI assessment note: “deck and an appendix to that deck and statement of investments and all the necessary legal”

Q I want to go back to the LP process before we leave that. How did you get the majority of your LP introductions? Was it warm intros? Was it direct outreach? How did you approach that?

A Before I started the process, I spoke to our mutual friend, Semel Shah. And Semel said, the only people that are going to invest in your first fund are people that know you. And I was like, well, why won't, you know, I invest in founders all the time that I don't know. He goes, this is different. And he was almost a hundred percent correct. Like every single LP in fund one is someone that I knew personally over my prior You know, years and years in and around the early stage tech ecosystem. And if they weren't an LP I knew before the fund one process, they came from an intro from an LP who said yes to fund one and then introduced me to somebody else. Yeah. And so that has continued to be the case for fund two as well.

AI assessment note: “every single LP in fund one is someone that I knew personally”

Q Wow. Ok. And, and you don't find your check size uncomfortable in terms of, like, unfriendly. The thing I worry about with the three to 500 range is, like, it's a lot of angel checks in that one bulk, and you're not really big enough to also take more than 60, 70% of the round. Do you see what I mean?

A I haven't found it to be a challenging check size. So I said in fund one ranges were seven, 50 K to three and a half million dollar is four million dollar round sizes. Um, I got what I was looking for in virtually every single investment. Um, out of fund two, the round sizes have been one and a half to two and a half, and I've gotten the allocation that I wanted in every single one. And I don't think it's that unfriendly. Like I've been, I've come into rounds with a 300 to 400 K check after there was already a lead who set terms in a couple instances. So it didn't prevent me from getting what I was looking for. I think A quintessential round for me would be one and a half to two million dollars at a six to 10 post. That's like down the middle of the fairway, you know, structure for me. And if I want to write a 500 K check. If there's a 1.75 million dollar round and they already have a quote unquote traditional lead who's taken a million, I can still get 300 to 500 K and it's on me to compel that founder to give me that allocation. It's on me to sell them on why I should have that much of the remaining 750 K. If the investor who's leading the round introduced me to the company, then I have a leg up and I'm not bashful about preemptively having founders give references to other founders. It's a key part of my strategy. It's a key part of why I'm investing in a thematic way is tha…

AI assessment note: “I haven't found it to be a challenging check size.”

Q get you. Now, you mentioned a little bit on touching on the benefits of, like, thematic investing at pre-seed. Honestly, I disagree. I just think that you have no idea what's gonna happen. It's like, Adam is amazing. We just have to get behind him. Everything pivots. It's so early. How do you think about the benefits of pre-seed thematic investing, given everything is in such transient state of flux?

A I mean, I'm a single GP. I'm also a single employee. I don't work with anybody else at looking glass. So my bandwidth is constrained. I can't be a generalist. I can't see every deal. I can't chase every hot company. There's nothing that gives me more satisfaction than when someone says you need to download this test flight app and play around with it. This company is, you know, taking off. They're quietly raising around and I'm like, Cool. I'm gonna play around with it, but it doesn't align with my themes, and I can be very happy not having to chase that entrepreneur and convince him or her to take a meeting with me. The thematic investing that I do is the fundamental driver of all of my sourcing. It allows me to be top of mind for other investors when they share deal flow because they know what I invest in, they know the constraints that I invest around, and they know that I could be a good fit because I invest in Healthcare or climate or education or small business sass. They know that I should be top of mind for them compared to a generalist firm who they might not necessarily immediately think of when they're building a syndicate. It allows founders to come to me directly. Like I invest in cold inbound. All right. I respond to every single email that I get, even if it's simply to tell a founder, this isn't a fit for me again, reputational, you know, reputation matters. And …

AI assessment note: “The thematic investing that I do is the fundamental driver of all of my sourcing.”

Q Ophelia Brown said on the show from Blossom, one of Europe's leading venture investors, multi-stage firms have destroyed seed. In many ways, I agree. Do you agree?

A It's hard to disagree. But that's why, I don't know what, I don't know how you define seed. Like, I don't know how you define seed these days, right? So, like, I see companies, I saw an announcement in Dan Premack's newsletter yesterday that a company raised a 7.3 million dollar seed round. Well, that's not, that's not a seed round. In fact, it's probably, you know, as a investor who started doing this a decade ago, to me, that's someone who combined an A, a seed and an A into one round. And maybe they're combining, you know, two pre-seeds and a seed and calling it a 7.3 million dollar seed, right? Like the announcements are, the announcements don't give you any signal into the dynamics of these raises.

AI assessment note: “It's hard to disagree. But that's why, I don't know how you define seed”

Q people's pushback to me is, yeah, but like if we think about bluntly, the core goal is to get to product market fit, and you need often multiple iterations to get there, a larger runway gives you that. So raise five and operate and spend like you have one and a half, and give yourself four years and V six to get to PMF. How do you feel about that?

A You were describing a founder that has an uncanny level of discipline. It's easier said than done to say raise five and operate like you have one and a half. You and I both know that most people don't have the willpower or self-control to do that. I would much rather invest in a founder that says I'm going to raise two and a half and operate like I raised one. And so my general rule of thumb is you need to have at least 24 months of cash gross burn, not net burn. When you raise your around that I'm involved in initially, I assume the fact that they're probably going to overspend a little bit. So it's probably more like 21 months, but let's call it 24 months of gross burn. If you can't find product market fit by being that disciplined over a two year period, then you probably shouldn't have raised, you probably didn't deserve to raise more than two and a half or two or whatever the number was in the first place. Like, Giving someone five million dollars and four years to figure it out to me is a luxury of a billion dollar venture fund. That's a luxury of the, of the multi-stage fund that knows that a five million dollar check doesn't matter or doesn't move the needle for them. And it's an option for writing a very large check into the series A to level up their ownership. For me, with my fund size, my fund size dictates my strategy, right? And so I need to find founders that are…

AI assessment note: “It's easier said than done to say raise five and operate like you have one and a half.”

Q Sorry, I'm confused. How does, how did I miss them, Adam? I saw five on 25 for the last three years. Where were you fishing?

A That's part of the strategy. I, um, I don't operate amongst the regular way seed investors, or at least the, put this way, the multi-stage seed investors that have driven up the price of seed valuations significantly and are still doing so. So my, my strategy is to make sure that I'm part of the first money into rounds. Ideally first. Yes. I literally own the domain first. Yes. Dot. BC. It redirects to the looking glass website. And so The deals that I've done over the course of fund two have been six million cap, eight million cap, eight million cap. Um, and I'm stretching on one now, which is an eleven million cap, but this is, this is all first money into companies over the last eight months.

AI assessment note: “I don't operate amongst the regular way seed investors”

Q you with a certain deal, and that's where thematic investing has its benefits. I want to discuss the strategy. You said that, and it kind of touches on that, but you said it's very like inside a baseball, inside VC. What makes you say that? Because we heard earlier, 24 to 30 companies between funds, you know, three to 400 K, Four percent average ownership. What's the insider baseball element?

A I think that the strategy that I'm pursuing of being a pre-seed investor that takes a much more institutional approach to investing in discipline is definitely uncommon. I think most sub Forty million dollar funds, really, especially most sub twenty five million dollar funds have way more investments. They write way smaller checks. It's not necessarily spray and pray, but it definitely is more of a scattershot approach to use the term you used earlier in the conversation. And I just don't deviate from the strategy that I'm pursuing at all. I don't make any compromises around it. I'm never gonna be like, oh, I got a 75 allocation here. Yeah, I'll do that one. Like I, I stick to my target check size range. I stick to my target ownership, which is an average ownership across the portfolio. It's not like every single deal has to be in there. Cause I know that some are going to be higher. Some are going to be lower. And it's really comes down to a lot of what I learned investing at Anchorage prior to starting looking glass. So Anchorage is mostly a public faith, a public investing, long short hedge fund. I was surrounded by credit investors who took a very conservative approach to investing. And like I always said, like credit investors think everything is going to go wrong and these think VCs underwrite everything going right. And so It required me to be incredibly buttoned up when…

AI assessment note: “takes a much more institutional approach to investing in discipline is definitely uncommon”

Q been preemptively, aggressively done where anything working has been aggressively taken out of market. Anything that's in market, bluntly, has not got the support of existings. B and C and D is Fucking dead, and it's a death zone, but I, I think seed is actually relatively immune, um, which is interesting. Uh, tell me, what would you most like to change about the world of venture, Adam? Penultimate one.

A I have to say, I wish that things were a little bit more transparent and I wish that things were more consistent for processes for entrepreneurs. I just, I think the, the process for raising capital as a founder is incredibly opaque. It's a game. And it probably shouldn't be the amount of times that I've had to advise and coach founders on how to have certain conversations when they're out raising what certain signals mean from investors, how to position the company. And they're blown away by what my advice is, is an indication to me that companies aren't being evaluated and founders aren't being evaluated in the most transparent sort of systematic way. And if I could change anything, I wish that that, that dog and pony show, as I said before, wasn't as much of a dog and pony show, but ultimately I think it's really hard to change an industry that It's still in the grand scheme of things quite, quite niche, and has, you know, 10 to 15 year feedback loops before someone realizes that things need to be different.

AI assessment note: “I wish that things were a little bit more transparent and I wish that things”

Q What are the single biggest mistakes founders make when it comes to round composition?

A They're not broad enough. They're too narrow with who they go out to and they don't actually realize that there's lots of other investors that are not the household name, pre-seed and seed funds. That would be phenomenal investors on the cap table. And I'm not talking about like looking glass. I'm talking about the really niche healthcare investor that only does healthcare. That's based in Nashville that nobody knows about unless they're a healthcare investor. And this founder just thinks like, well, I should just go to Up and down, you know, the Midas list. And that's, that's my lead list. And it's like, well, no, you need to have a much broader funnel. And you also need to recognize that there's a lot of strategic value that an investor can bring to the table that you might not have ever known that investor before this process started, but I'm going to put you in front of them. I'd say the second point that they don't think about is they don't appreciate that the partner at the fund matters. They just think about the fund as a giant entity and don't realize that there are Personalities and motivations and bureaucracy and all sorts of things that You know, internal dynamics of any large organization and venture funds are no different. And the individual partner that you get introduced to really matters because he or she might specifically be looking for a company like yours. T…

AI assessment note: “They're not broad enough. They're too narrow with who they go out to”

Q On the fun raise, before we kind of go to actually like being on the battlefield, so to speak, what docs do you have ready? How do you think about the materials that you need to get in place to go out and raise?

A That's a big lesson learned from fun one. I started having conversations and people were like, send me sub docs. I was like, oh no, I don't have sub docs ready. I was just like in a unbridled enthusiasm phase of having conversations. And I thought processes were going to take a lot longer than they did on fund one, um, when I was out in market. And so now I've given my sort of background operating at Anchorage capital before starting looking glass, sort of the most institutional of institutional places. I err on the side of formality in terms of data room and materials and I write an investment memo for every single investment I make, even though it's just me reading them. Um, so every single one of those investment memos is in a data room that LPs can pour over and see my thought process at the time of investment. Every LP update I've sent out over the last I started samples and now it's beyond samples. It's really like every LP update I've ever sent out. I write a very lengthy letter every eight weeks. That's very transparent on every company in the portfolio to LPs. So potential LPs can see how I communicate transparently and regularly with, with my investors. And then obviously, of course, deck and an appendix to that deck and statement of investments and all the necessary legal, legal docs.

AI assessment note: “deck and an appendix to that deck and statement of investments and all the necessary legal”

Q I, I, I absolutely love that. Before we can go any further, I just have to ask, Chris is such a good dude. What did you learn from working with Chris at such a young and formative stage of your career?

A I think the number one thing that I learned from Chris was His deference for founders, just the absolute respect that he has for entrepreneurs and how that translates to your reputation as an investor. And the thing that I think is so critical as a young VC and really hopefully that's compounds over time is that reputation is the number one currency as an investor that you have control over. The other one obviously is your track record, but you and I both know that To a certain extent that's out of the investor's control. You know, we can hopefully select great founders and hopefully they build amazing companies, but ultimately we're not the ones building them. But reputation is the one thing that you have a hundred percent control over as an investor. And from working with Chris, I sort of developed this hypothesis that if you have a great reputation that should compound over time, should yield higher and higher quality deal flow. Should yield higher and higher quality references from other founders and ultimately give you the best possible chance of picking the best founders.

AI assessment note: “the number one thing that I learned from Chris was His deference for founders”

Q Okay, interesting one. You said revenue charts there. I know where you invest. I fucking hate it when it's like investors like, hey, financial models, I want to see year three projections. We have no idea where this is going to go. It probably won't even be the same idea. Do you expect founders to have financial models that precede?

A No, of course not. My general view is that a financial model, if a founder so chooses to have one, It's a great level of insight into what they think the drivers of their business are and the levers that they can pull over time. But ultimately I am fully aware that what I'm underwriting is a hundred percent going to change and not occur. Um, as it was, I mean, I was an investment banker in a previous life. I know I can make a model say whatever I want. So it doesn't matter what the model says. I just want to understand that the founder knows what the drivers of their business may end up being over time.

AI assessment note: “No, of course not. My general view is that a financial model”

Q it'll come with 20 LP intros, but my check will be, I don't know, 25 or 50 K. Um, but, hopefully there's more strategic value there. Ok, so we have that in the minimum. How do you enforce a sense of urgency? We both know LPs, they can be a little bit slower. How do you kind of get them over the line when you feel they're around the hoop?

A I think that's, The absolute hardest part of fundraising as a fund manager compared to a founder of a company where there's typically a lead and that lead. Sets the terms and everyone kind of falls in line. And as soon as you and I both know, as soon as there's a lead investor in a round, it's an all out sprint from people to secure an allocation. That's just not the way things operate in this world, unless you have like a very substantial anchor investor, who's going to take like 50% of your fund and probably take a piece of your carry and maybe even a piece of your management company. But for a regular way, venture fundraise, I think creating that sense of urgency is really challenging. LPs, just like VCs can Smell a bluff a mile away. And so I have really frankly struggled to sort of set deadlines and hold people accountable because I know naturally LPs are going to come, you know, that deadline is going to come and go and I say, oh, well, what happened to that date? And so the way that I've tried to demonstrate a sense of urgency is really by demonstrating compelling momentum. So it's consistent updates and conversations with LPs to share progress and markups from fund one. It's sharing new investments on fund two. Who has co-invested with me in certain instances on fund two that they might find compelling that they might be LPs in that fund already using those investors as…

AI assessment note: “the way that I've tried to demonstrate a sense of urgency is really by demonstrating compelling momentum”

Q I want to start on, ah, Looking Glass. What is the fun size, and why did you decide that as the optimal size?

A Sure. So the, the fund that I'm currently investing out of now is a twenty million dollar target. And really the, really I chose that size because I felt like it was incremental from fund one. So fund one was a little over eight and a half million dollars, generally investing 300 to 400 K into pre-seed and very early seed rounds. So really 750 K to three million dollar rounds. And so I felt like the step up from eight and a half to 20 Was iterative enough for me to essentially go from 300 to 500 K really 400 to 500 K sort of incremental step up in check size. Allow me to invest in 30 companies versus 24, but still maintain the exact same entry point.

AI assessment note: “the fund that I'm currently investing out of now is a twenty million dollar target”

Q What do you mean by that? Just unpack that because that's important if founders are getting hurt.

A I think the number of companies that are having a hard time raising seed in a rounds right now, like real seed, like, Hey, we've got, you know, half a million of ARR and we want to raise like three million dollars. Like the level of companies that are raising seed in a, I think are unjustifiably being punished because VCs deployed way too quickly in 2021. And now they're like, well, we deployed You know, hundreds and hundreds of millions of dollars in 12 months. Now we need to make sure this fund lasts for three and a half to four years because our LPs have told us that. And so you have investors doing way fewer deals than before. They're now actually doing diligence, which slows down processes as well. And they've reserved an increasing amount of their dry powder for reserves for existing portfolio companies to keep them alive in terms versus net new deals, because they know that they're going to have They're going to have existing companies that are doing well. They're going to struggle to raise for no fault of their own. And so they need to have dry powder to keep those companies afloat. And so when you add up all three of those things, that just means there's a lot less capital available for new deals. And a lot of companies are going to struggle to raise, not because their businesses aren't doing well, but because there are so few people that are actually investing right n…

AI assessment note: “unjustifiably being punished because VCs deployed way too quickly in 2021”

Q When you look at those ones that keep you up at night, is there something that now you would have seen? And so like, when I look at mine, there are certain things where like, had I known what I know now, I wouldn't have made that investment. Do you see what I mean? It would have changed my mindset. When you look back, did you miss something?

A No, when I look back, I acknowledge something and I thought it could be mitigated over time and it was not. So with every investment memo that I write, the last slide of it is a risks and mitigants section. And so I've usually put three to four risks and three to four sort of like counter mitigants that could mitigate that risk over time based on what I'm currently seeing at the time of investment. And so it's a good check for when a company inevitably fails or isn't doing well for me to go back and look at, was this a risk that I was aware of, but I underwrote it and was comfortable with it anyway. Um, in the case of a couple, this might change over time, but right now at this moment in 20, 23 with these particular companies, the things that are keeping me up at night are things that I was aware of at the time of investment that I was just comfortable with and thought would Get mitigated over the life of that company, and in a couple instances, they have not.

AI assessment note: “No, when I look back, I acknowledge something and I thought it could be mitigated”

Q Do you feel that many VCs today still hold reputation as the number one currency? I find the transactional nature, the short term deal oriented. I'm going to win this deal and fuck our relationship to be very prominent.

A Well, I think there's a difference between reputation with founders and reputation with other investors. And so your reputation with founders needs to be sterling. Your reputation with other investors, ultimately, I think some people take different tacks as to how they appreciate that one way or another. I personally have always felt that if you have a great reputation with other investors, that should hopefully allow you to be brought into other deals, allow that there would be respect that you're going to punch above your weight on the cap table and other investors want you on board. To your point, maybe not every investor operates that way, but I think reputation with founders is something that you can absolutely not compromise on.

AI assessment note: “I think there's a difference between reputation with founders and reputation with other investors.”

Q What are the single biggest mistakes founders make when it comes to round composition?

A They're not broad enough. They're too narrow with who they go out to and they don't actually realize that there's lots of other investors that are not the household name, pre-seed and seed funds. That would be phenomenal investors on the cap table. And I'm not talking about like looking glass. I'm talking about the really niche healthcare investor that only does healthcare. That's based in Nashville that nobody knows about unless they're a healthcare investor. And this founder just thinks like, well, I should just go to Up and down, you know, the Midas list. And that's, that's my lead list. And it's like, well, no, you need to have a much broader funnel. And you also need to recognize that there's a lot of strategic value that an investor can bring to the table that you might not have ever known that investor before this process started, but I'm going to put you in front of them. I'd say the second point that they don't think about is they don't appreciate that the partner at the fund matters. They just think about the fund as a giant entity and don't realize that there are Personalities and motivations and bureaucracy and all sorts of things that You know, internal dynamics of any large organization and venture funds are no different. And the individual partner that you get introduced to really matters because he or she might specifically be looking for a company like yours. T…

AI assessment note: “They're not broad enough. They're too narrow with who they go out to”

Q Just help me out. If you're moving from 50 to eight deals, the impact on that on founders, it's unfair. How do we think about that?

A Yeah, I think unfair is probably the wrong The wrong word in my mind. I probably misspoke there, but I think it's, it's less that it's unfair, it's more that it's very challenging to advise founders right now as to what to expect in this market. Like what benchmarks matter, what milestones matter, what gets around done versus not done. I think the whiplash that's been experienced from 20 21 to 20 23 is just, it's challenging. And founders shouldn't necessarily rely on venture dollars to keep them afloat. Founders should figure out, alright, how do we extend runway? How do we grow revenue faster than expenses? How do we get to profitability? How do we make, even if we're not profitable, how do we reduce our burn to such an extent that we're able to get through 2023 and 20 24? So that we have runway well into 25, and we can fundraise in 25. Um, that's an exercise I've done with at least half a dozen founders in the portfolio, where it's how much cash do you have at the end of this year, how much cash at the end of 24. If you don't generate, if you don't raise any dollars at all until January first of 25, make sure you have at least seven months of cash at that point. Um, but I do think that It's a healthy shakeout for the ecosystem. It's the way things used to be. And when I say used to, I mean like a decade ago used to be, but I think the fervor of 2021 is doing more harm than g…

AI assessment note: “I think unfair is probably the wrong The wrong word in my mind.”