The Exchanges

Q as well as the people behind it. Now, with Summit Peak, you had this very lovely opportunity to have a blank canvas and create what you wanted. When it came to portfolio construction, I'm just really interested from a funder fund's perspective of purpose. How do you approach portfolio construction? And bluntly, in terms of diversification, is it the same levels of diversification, and how do you think about that?

A So, look, our portfolio today mirrors how we've been investing for the last decade or eight years in venture, which is, even with a blank canvas, we have had this approach of having a more concentrated approach, which means that we think 12 to 15 GPs is sort of the optimal number of GPs or funds to back, as well as Anywhere from 20 to 30 underlying direct or co-investment, so direct investments into companies or co-investments. If you dig in a little bit further on portfolio construction, we allocate 60% of our capital to early stage GPs, and these are people that we've now been backing since 2012, and they are now on their second, third, fourth, or fifth vintage, you know, of their own life cycle. So 60% of the portfolio is for that. 10% is reserved for new GPs. So in our fund one, we backed four new GPs. In our fund two, we have backed one new GP, and new GP just, it means either they're new to us, they could be on their fund one, or they could be on their fund five, but they're just new to us. So we reserve that portion of our capital for those new GPs, and then 30% of our capital is reserved for co-investments. As a lot of these micro VCs and early stage funds, they ultimately will run out of pro rata capital For later stage rounds. So we like coming into a company at that inflection point of growth, and that could be as early as a series A, as late as a series C. So we res…

AI assessment note: “we think 12 to 15 GPs is sort of the optimal number”

Q Totally. Tell me, what's the most recent publicly announced investment And why did you say yes and get so excited?

A Most recent would have been in March of this year. We co-invested in a company called Sourcegraph, which was led by Craft Ventures on participation by Goldcrest Capital and Redpoint Ventures. We've known the founder since the business started. It was an early investment of Goldcrest Capital. Had met the founder over the last four to five years, and were thoroughly impressed with the team and product they've built. The opportunity came to us for the Series B Literally at the start of shelter in place in many places, and were excited about what their vision was, and how they were executing on enterprise sales. It's an enterprise sales business. We had gotten to know the business really well, and we were able to step in, you know, at a time where people froze up on capital.

AI assessment note: “We co-invested in a company called Sourcegraph”

Q do have one more question before you probably dive into the schedule, and I'm sorry for going off schedule so soon. You mentioned kind of referencing there, and I'm constantly umming and ahhing between how important it should be to a process. So I guess my question is, how do you place the importance of references, and how do you determine between kind of accepting versus rejecting that data point?

A You take it with a grain of salt, especially when A GP is providing references. We do the same in our business. We provide references to people. In addition to that, we use every other means possible within our network to reference beyond what somebody is giving us on a piece of paper. And so after you've taken that with a grain of salt, we put a lot of weight into it. I care a little bit less about when somebody's leaving a firm and what that firm is going to say. In early stage venture, the most important piece is references from founders. And, you know, I would say in any new fund, we are doing anywhere between 30 to 50 reference calls with portfolio company founders. In some cases, we will do that with cold outreach. We know a portfolio, we might know what legacy investments look like, and we use this little used tool called LinkedIn and connect to founders, and I don't know, people seem to be openly willing to chat about their experience, and we hold a lot of weight on that. And in venture, Again, it means less about what former colleagues and things like that say to us, but it really means a lot when a founder gives a reference of why a GP, why a VC is value-add, and why they would take their capital over and over again, and so it is one of the key areas for us in doing work on a GP.

AI assessment note: “we put a lot of weight into it. I care a little bit less about”

Q GP commit side, how do you feel about GP commits? Because when I was raising, there was a lot of people who were like, oh, we like managers to have three percent, and I'm like, that would be three million pounds, and I'm 22. Where do you think I came from? How do you feel about GP commits, making them proportional, and what you would like and expect to see?

A Yeah, this is another interesting question, having just flipped the switch from LP to GP. So, as an LP, we did the same. I mean, we said, wow, you have to have two percent at a minimum. And I just went and said to you that management fees are keeping the lights on, and GPs aren't getting rich off of them, and they generally haven't made a ton of money yet. One of our GPs, anecdotally, he had spun out of a family office. He was raising his first fund. It was a twenty-five million dollar fund. And we were the anchor investor, and we pounded the table as an LP. You gotta have two percent. You have to contribute a certain amount in cash as opposed to management fee waiver, and we didn't realize what that hardship necessarily entailed. I mean, he had to sell an apartment to generate the cash to make his GP commit as high, and he didn't have the liquid net worth to do it. He did it, and I have a lot of respect for him for doing so. And fast forward, and when we created our business, it was the same conversation. You have to have a two percent GP commit on a hundred million dollar fund. That's two million dollars. I'm not 22, but Patrick and I spent our careers in the endowment foundation space, which frankly is different and does not pay millions of dollars a year, and so putting two million dollars as a GP commit is a lot of money. It is, when we say we have skin in the game, every …

AI assessment note: “I have empathy for GPs on that GP commit. We do love seeing a higher number.”

Q do have one more question before you probably dive into the schedule, and I'm sorry for going off schedule so soon. You mentioned kind of referencing there, and I'm constantly umming and ahhing between how important it should be to a process. So I guess my question is, how do you place the importance of references, and how do you determine between kind of accepting versus rejecting that data point?

A You take it with a grain of salt, especially when A GP is providing references. We do the same in our business. We provide references to people. In addition to that, we use every other means possible within our network to reference beyond what somebody is giving us on a piece of paper. And so after you've taken that with a grain of salt, we put a lot of weight into it. I care a little bit less about when somebody's leaving a firm and what that firm is going to say. In early stage venture, the most important piece is references from founders. And, you know, I would say in any new fund, we are doing anywhere between 30 to 50 reference calls with portfolio company founders. In some cases, we will do that with cold outreach. We know a portfolio, we might know what legacy investments look like, and we use this little used tool called LinkedIn and connect to founders, and I don't know, people seem to be openly willing to chat about their experience, and we hold a lot of weight on that. And in venture, Again, it means less about what former colleagues and things like that say to us, but it really means a lot when a founder gives a reference of why a GP, why a VC is value-add, and why they would take their capital over and over again, and so it is one of the key areas for us in doing work on a GP.

AI assessment note: “we are doing anywhere between 30 to 50 reference calls with portfolio company founders”

Q to touch on Summit Peak as well, though, because it's a very interesting fund structure in terms of, it's a fund of funds, and it's obviously, there's a direct And I'm really interested because I speak to a lot of managers, obviously, on the VC side directly. And so when we think about, you know, raising Summit Peak as a fund of funds, how was the fundraising process for you?

A In three words, an emotional rollercoaster. Look, we are fortunate to have an amazing group of LPs. We raised Fund One from 2018 to 2019, and we raised eighty four million dollars. It was nothing that we had expected, meaning I don't know if we had expectations. Our expectations were probably, you know, we've been doing this for a decade. We have a track record. We have a portfolio of GPs that you can see. This should be easy, and we quickly realized how difficult it is to raise capital. That being said, for a first-time fund and putting up an eighty-four million dollar fund, we're extremely proud of the amount of capital we raised. We sort of slogged it through, and we also had GPs that were just great partners along the way and supportive through that process.

AI assessment note: “In three words, an emotional rollercoaster. Look, we are fortunate to have an amazing group”

Q pissed at me? Can I jack up the fees fully to two and a half, or can I jack up carry with kickers To 30% post three or four X or whatever we decide that hurdle to be. How do you feel about sensitivities around the two? I found that actually there's more sensitivity around carry than there is fees from the LP side. How do you feel about it?

A At the end of the day, because we're a fund of funds, we have to be sensitive to fees. But that being said, when it comes to running a business, we generally are not sensitive to the management fee. I mean, so you're right on that. We're not sensitive to it because we understand that Whether you're a new fifty million GP or a new twenty-five million, the management fees are going to run the business, and a lot of these GPs, whether it's a first-time fund or not, they haven't necessarily made a ton of money, and unless you're independently wealthy, the two and a half percent is literally just going to pay for the office and pay for a nominal salary in what's most likely an expensive city. So we rarely push back on management fee. I mean, ultimately, that two and a half percent, it tears down so that you do get to an average of two percent. And I agree with you. I think LPs generally are okay with that. On the carry side, I would also agree, LPs do push back on carry hurdles. My view is, is, look, if we're making that return over where that hurdle is, I'm okay giving up that further upside. We're a believer in if a GP performs, and if they're hitting that, then they should get compensated, and everybody is going to walk away being happy if they're earning those net returns. So generally speaking, we're not pushing back on an overall fund on the carry terms. Again, the management …

AI assessment note: “So we rarely push back on management fee... On the carry side, I would also agree”

Q of those ambassadors where I will follow him blindly into any deal, and I think he's, you know, truly special. That's quite obvious, though, today when you look at his portfolio, and I'm, I'm not alone in thinking that. When you backed him in, he didn't have the portfolio that he has today, and the brand that he has today. Can I ask, what did you see in him then?

A We were new to venture then, and as we were new to the space, we were trying to understand the early stage part, segment of venture capital. Ray came to Fort Worth, and maybe as a sort of the quintessential venture GP, he was in jeans, and a t-shirt, and sneakers, and It was different. It was different than every other asset class that we were investing in. We had a meeting, we went through his angel portfolio, which was called Orange Wall, and he was putting together his first fund. The benefit of when we were coming into his first fund was, 50% of it was invested, and at the time it was, let's take a chance. It was a small allocation for us as part of a big portfolio, and what we saw in him was hustle. He had the hustle to want to help us build our name. He had the hustle to get himself into deals. And when we did reference checking, that's what proved a lot of that out, which was his hustle was going to get him into deals. And he had a phenomenal network. And at the time it was, let's take a shot on this. If we're wrong, it is not meaningful to the portfolio. If we're right, we get to go build a venture portfolio. Look, it was not obvious then for sure, but it was the same way people took a chance on us a couple of years ago. We were taking a chance on Ray, and it's paid off in spades.

AI assessment note: “what we saw in him was hustle. He had the hustle to get himself into deals.”

Q centrality of founder references. I do want to touch on kind of, you mentioned the early stage space there with Ray, and we touched on Josh and Lockie. You've got a lot of your career, bluntly, on the early stage, For a long time. So I guess, really, how has it changed and evolved over the last eight years, and why have you been so bullish on it since then?

A So look, when we started this eight years ago, institutional allocators were generally down on venture as an asset class. If you look back to 2012, there was an overhang of illiquidity in venture post the global financial crisis. And add to that, the legacy brand name firms in Silicon Valley were hard to access. Generically, most allocators would say, If you can't access the brand name firms, don't bother building a venture portfolio. And so call it contrarian or call it stubborn, my partner Patrick and I, we decided to challenge that view and decided to, you know, to try and build a venture portfolio in this new way, focusing on early stage investing. We felt that it was the most inefficient segment of the market, and we decided, look, let's back micro VCs and early stage funds centered around startup ecosystems. As far as the evolution, the simplest way to put it is the space has exploded. If you look back to 2012, I think by all accounts, there were probably a hundred micro VCs in the market. And you fast forward to today, and that number is over a thousand. And so, look, we're still bullish on the space. I think the fact that there are even more GPs today makes it even more inefficient. Even though there's tons of capital, it's still, I think, the most inefficient segment of venture capital. But we believe it is the best way to play into tech innovation. You are at the earl…

AI assessment note: “As far as the evolution, the simplest way to put it is the space has exploded.”

Q GP commit side, how do you feel about GP commits? Because when I was raising, there was a lot of people who were like, oh, we like managers to have three percent, and I'm like, that would be three million pounds, and I'm 22. Where do you think I came from? How do you feel about GP commits, making them proportional, and what you would like and expect to see?

A Yeah, this is another interesting question, having just flipped the switch from LP to GP. So, as an LP, we did the same. I mean, we said, wow, you have to have two percent at a minimum. And I just went and said to you that management fees are keeping the lights on, and GPs aren't getting rich off of them, and they generally haven't made a ton of money yet. One of our GPs, anecdotally, he had spun out of a family office. He was raising his first fund. It was a twenty-five million dollar fund. And we were the anchor investor, and we pounded the table as an LP. You gotta have two percent. You have to contribute a certain amount in cash as opposed to management fee waiver, and we didn't realize what that hardship necessarily entailed. I mean, he had to sell an apartment to generate the cash to make his GP commit as high, and he didn't have the liquid net worth to do it. He did it, and I have a lot of respect for him for doing so. And fast forward, and when we created our business, it was the same conversation. You have to have a two percent GP commit on a hundred million dollar fund. That's two million dollars. I'm not 22, but Patrick and I spent our careers in the endowment foundation space, which frankly is different and does not pay millions of dollars a year, and so putting two million dollars as a GP commit is a lot of money. It is, when we say we have skin in the game, every …

AI assessment note: “So I have empathy for GPs on that GP commit. We do love seeing”

Q Last question that I'm really interested by is, you're based in Texas, and you have this incredible tight network in the valley. Bluntly, how do you build the tight relationships of trust from that distance? And then two, how do you think the world of, like, LP investing changes in the COVID world?

A Yeah, so pre-COVID, location didn't matter. Meaning, we started this in 2012. We dedicated just the resources. Myself and Patrick, We spent all of our bandwidth in Silicon Valley. We became members of the battery. We did all of our meetings there, and we built our network in Silicon Valley to the point where now location doesn't matter. You being in the UK, I'm sure you can attest to this, it's about who you know, not where you're located, and what kind of relationship you have with those folks. So we spent the time, I would say, required then to build our network in the Valley, which means that today, Everybody is a phone call, text, or WhatsApp away, and pre-COVID, what we did was we would be in Silicon Valley at least two weeks of every month, and we built a community around what we do. So, you know, in addition to just being an LP, we would organize community events, and we would have founder dinners and GP dinners where we would collaborate and have all of our GPs around the table and ask them to bring a founder, and this was pre-having a fund, We were building our name and our brand as, look, let's bring the venture community together. Now, I know funds do this all the time and bring founders together, but we were doing it as an LP and saying, let's bring funds together and they can share ideas. And so fast forward, post-COVID, we still do that. We do GP Zoom happy hours,…

AI assessment note: “we would be in Silicon Valley at least two weeks of every month”

Q of those ambassadors where I will follow him blindly into any deal, and I think he's, you know, truly special. That's quite obvious, though, today when you look at his portfolio, and I'm, I'm not alone in thinking that. When you backed him in, he didn't have the portfolio that he has today, and the brand that he has today. Can I ask, what did you see in him then?

A We were new to venture then, and as we were new to the space, we were trying to understand the early stage part, segment of venture capital. Ray came to Fort Worth, and maybe as a sort of the quintessential venture GP, he was in jeans, and a t-shirt, and sneakers, and It was different. It was different than every other asset class that we were investing in. We had a meeting, we went through his angel portfolio, which was called Orange Wall, and he was putting together his first fund. The benefit of when we were coming into his first fund was, 50% of it was invested, and at the time it was, let's take a chance. It was a small allocation for us as part of a big portfolio, and what we saw in him was hustle. He had the hustle to want to help us build our name. He had the hustle to get himself into deals. And when we did reference checking, that's what proved a lot of that out, which was his hustle was going to get him into deals. And he had a phenomenal network. And at the time it was, let's take a shot on this. If we're wrong, it is not meaningful to the portfolio. If we're right, we get to go build a venture portfolio. Look, it was not obvious then for sure, but it was the same way people took a chance on us a couple of years ago. We were taking a chance on Ray, and it's paid off in spades.

AI assessment note: “what we saw in him was hustle. He had the hustle to get himself into deals.”

Q wrote about the rise of solo capital. I'm really interested to hear your thoughts. I'm actually very bullish on this as a movement and kind of a sustainable ongoing theme of the ecosystem. How do you feel and think about the rise of the solo capitalist? And is this the tip of the iceberg or is this kind of the movement in itself and they are just the one percent?

A Look, we've been a believer in the space for quite some time, and we're not just believers in the solo capitalist per se, or the, you know, as Nicole put it, the rise of the solo capitalist. We think in the micro VC space, there are platforms that make sense as well. I think entrepreneurs, at least from our understanding, and when, as I mentioned earlier on reference calls, entrepreneurs care less and less at the seed stage about brand. The legacy firms, they've been around for a long time, and their capital is certainly valuable, but there is a stage where that matters. But at the seed stage, you want to know that you're sitting across the table from the decision maker, the person that is going to Roll up their sleeves and help this business out in a pandemic or whatever the next crisis that we hit. And if we haven't already, we're moving more and more towards this idea that at the seed state, pre-seed, seed, and even up to the series A, you have these GPs, solo capitalists that are that. They are entrepreneurs turned investors that they know what you've been through. They are sitting across the table and saying, Look, I can help you build this, and it's not to say that brand name firms can't do that, but there's more bureaucracy, and there's more red tape for a multi-stage firm, for instance, to be able to make a decision as quick as a solo GP.

AI assessment note: “we've been a believer in the space for quite some time”

Q pissed at me? Can I jack up the fees fully to two and a half, or can I jack up carry with kickers To 30% post three or four X or whatever we decide that hurdle to be. How do you feel about sensitivities around the two? I found that actually there's more sensitivity around carry than there is fees from the LP side. How do you feel about it?

A At the end of the day, because we're a fund of funds, we have to be sensitive to fees. But that being said, when it comes to running a business, we generally are not sensitive to the management fee. I mean, so you're right on that. We're not sensitive to it because we understand that Whether you're a new fifty million GP or a new twenty-five million, the management fees are going to run the business, and a lot of these GPs, whether it's a first-time fund or not, they haven't necessarily made a ton of money, and unless you're independently wealthy, the two and a half percent is literally just going to pay for the office and pay for a nominal salary in what's most likely an expensive city. So we rarely push back on management fee. I mean, ultimately, that two and a half percent, it tears down so that you do get to an average of two percent. And I agree with you. I think LPs generally are okay with that. On the carry side, I would also agree, LPs do push back on carry hurdles. My view is, is, look, if we're making that return over where that hurdle is, I'm okay giving up that further upside. We're a believer in if a GP performs, and if they're hitting that, then they should get compensated, and everybody is going to walk away being happy if they're earning those net returns. So generally speaking, we're not pushing back on an overall fund on the carry terms. Again, the management …

AI assessment note: “we're not pushing back on an overall fund on the carry terms.”

Q centrality of founder references. I do want to touch on kind of, you mentioned the early stage space there with Ray, and we touched on Josh and Lockie. You've got a lot of your career, bluntly, on the early stage, For a long time. So I guess, really, how has it changed and evolved over the last eight years, and why have you been so bullish on it since then?

A So look, when we started this eight years ago, institutional allocators were generally down on venture as an asset class. If you look back to 2012, there was an overhang of illiquidity in venture post the global financial crisis. And add to that, the legacy brand name firms in Silicon Valley were hard to access. Generically, most allocators would say, If you can't access the brand name firms, don't bother building a venture portfolio. And so call it contrarian or call it stubborn, my partner Patrick and I, we decided to challenge that view and decided to, you know, to try and build a venture portfolio in this new way, focusing on early stage investing. We felt that it was the most inefficient segment of the market, and we decided, look, let's back micro VCs and early stage funds centered around startup ecosystems. As far as the evolution, the simplest way to put it is the space has exploded. If you look back to 2012, I think by all accounts, there were probably a hundred micro VCs in the market. And you fast forward to today, and that number is over a thousand. And so, look, we're still bullish on the space. I think the fact that there are even more GPs today makes it even more inefficient. Even though there's tons of capital, it's still, I think, the most inefficient segment of venture capital. But we believe it is the best way to play into tech innovation. You are at the earl…

AI assessment note: “As far as the evolution, the simplest way to put it is the space has exploded.”

Q fund managers in the fundraising process, and they say, hey, this LP, you know, wants to put in twenty million and be a big anchor, but they want to buy part of the management company, and they really want a piece of flesh for it. How do you advise managers on selling part of the management company and that hurdle, which a lot of first-time fund managers especially do face?

A I wouldn't do it. It's, uh, I think you slog it out. It's expensive capital. Ultimately, as a GP, now we're in that seat. It's okay to give an anchor investor a break on fees. That's one thing. But giving up a piece of your management company, it makes that LP very expensive. And ultimately, I think, as a GP, you come to resent that. You're already working so hard. Everything you're doing are for the back-ended economics, and then to give a portion of that up would be difficult. So whether you're a solo GP, we know it's tough having gone through fundraising and going through it again. It's that emotional rollercoaster. There are LPs out there. There's family offices, there's fund of funds. It's just giving up a piece of the management company is just, it's hard to reverse decision.

AI assessment note: “I wouldn't do it. It's, uh, I think you slog it out. It's expensive capital.”

Q to touch on Summit Peak as well, though, because it's a very interesting fund structure in terms of, it's a fund of funds, and it's obviously, there's a direct And I'm really interested because I speak to a lot of managers, obviously, on the VC side directly. And so when we think about, you know, raising Summit Peak as a fund of funds, how was the fundraising process for you?

A In three words, an emotional rollercoaster. Look, we are fortunate to have an amazing group of LPs. We raised Fund One from 2018 to 2019, and we raised eighty four million dollars. It was nothing that we had expected, meaning I don't know if we had expectations. Our expectations were probably, you know, we've been doing this for a decade. We have a track record. We have a portfolio of GPs that you can see. This should be easy, and we quickly realized how difficult it is to raise capital. That being said, for a first-time fund and putting up an eighty-four million dollar fund, we're extremely proud of the amount of capital we raised. We sort of slogged it through, and we also had GPs that were just great partners along the way and supportive through that process.

AI assessment note: “In three words, an emotional rollercoaster.”

Q wrote about the rise of solo capital. I'm really interested to hear your thoughts. I'm actually very bullish on this as a movement and kind of a sustainable ongoing theme of the ecosystem. How do you feel and think about the rise of the solo capitalist? And is this the tip of the iceberg or is this kind of the movement in itself and they are just the one percent?

A Look, we've been a believer in the space for quite some time, and we're not just believers in the solo capitalist per se, or the, you know, as Nicole put it, the rise of the solo capitalist. We think in the micro VC space, there are platforms that make sense as well. I think entrepreneurs, at least from our understanding, and when, as I mentioned earlier on reference calls, entrepreneurs care less and less at the seed stage about brand. The legacy firms, they've been around for a long time, and their capital is certainly valuable, but there is a stage where that matters. But at the seed stage, you want to know that you're sitting across the table from the decision maker, the person that is going to Roll up their sleeves and help this business out in a pandemic or whatever the next crisis that we hit. And if we haven't already, we're moving more and more towards this idea that at the seed state, pre-seed, seed, and even up to the series A, you have these GPs, solo capitalists that are that. They are entrepreneurs turned investors that they know what you've been through. They are sitting across the table and saying, Look, I can help you build this, and it's not to say that brand name firms can't do that, but there's more bureaucracy, and there's more red tape for a multi-stage firm, for instance, to be able to make a decision as quick as a solo GP.

AI assessment note: “we've been a believer in the space for quite some time”

Q fund managers in the fundraising process, and they say, hey, this LP, you know, wants to put in twenty million and be a big anchor, but they want to buy part of the management company, and they really want a piece of flesh for it. How do you advise managers on selling part of the management company and that hurdle, which a lot of first-time fund managers especially do face?

A I wouldn't do it. It's, uh, I think you slog it out. It's expensive capital. Ultimately, as a GP, now we're in that seat. It's okay to give an anchor investor a break on fees. That's one thing. But giving up a piece of your management company, it makes that LP very expensive. And ultimately, I think, as a GP, you come to resent that. You're already working so hard. Everything you're doing are for the back-ended economics, and then to give a portion of that up would be difficult. So whether you're a solo GP, we know it's tough having gone through fundraising and going through it again. It's that emotional rollercoaster. There are LPs out there. There's family offices, there's fund of funds. It's just giving up a piece of the management company is just, it's hard to reverse decision.

AI assessment note: “I wouldn't do it. It's, uh, I think you slog it out.”

Q speed of fund deployments to be massively, massively kind of curtailed with some big brands spending their funds in 12 months even so, but the majority are kind of 18 to 24, but still much smaller kind of timeframe than the 36 months than was normally expected. How do you feel about the reduced timeline of deployment, and how do you advise your managers today in terms of deployment timelines?

A We are in the business of backing GPs, and the pace of their deployment should not be something I should be giving them advice on. When we back them, we understand how quickly they're going to deploy capital, and there's a rough schedule of what that pacing should look like. I think where it gets tricky is when GPs keep coming back, and you haven't necessarily proven anything out. You spend a fund one, and you come back with fund two within 18 months, and that's okay. I think the decision to invest in a GP Is generally a two or three fund decision, and there are certain metrics that you can track that we think of internally when there's very little distributions because it's venture and it's early. So it's not just purely reliant on distributions. You obviously should see some marks in the portfolio. So I think when you go in, you have to go in with eyes wide open, knowing how quickly a GP is going to deploy. We're cycle agnostic. So we want to be investing in venture, irrespective of what's going on in the market, and our GPs are generally that way too. They are investing year in, year out, and they always want to have capital to be backing the very best entrepreneurs, and we want to make sure they have that capital. So I think you can mitigate it by understanding that pacing and sizing accordingly. So in our own fund, we know that some managers are going to come back every ye…

AI assessment note: “the pace of their deployment should not be something I should be giving them advice on.”

Q ask, if you're, like, reflective on the process, like, there are a lot of things that when I look back on our fundraisers, I would do differently and do again. When you think about what you did well that you'd do again, and what you don't think you did well, and you'd change, what are those things that you'd do differently, and those things that you keep doing the same?

A So on what we would do differently, a lot of our LPs know this story, but little known to other people. We committed the entire fund before we had even lined up An anchor investor. So we had nearly eighty million of company investments as well as fund investments by summer of 2018, right when we launched, and the reason for that was all of the GPs we wanted in this portfolio were raising capital, and we wanted to make sure that we could secure our LP advisory board seat and secure our allocation to what I would call now hard to access funds. And so we had an eighty million dollar overhang of capital commitments and yet to raise any money And, you know, a few months later.

AI assessment note: “So on what we would do differently... We committed the entire fund before we had even lined up”

Q Last question that I'm really interested by is, you're based in Texas, and you have this incredible tight network in the valley. Bluntly, how do you build the tight relationships of trust from that distance? And then two, how do you think the world of, like, LP investing changes in the COVID world?

A Yeah, so pre-COVID, location didn't matter. Meaning, we started this in 2012. We dedicated just the resources. Myself and Patrick, We spent all of our bandwidth in Silicon Valley. We became members of the battery. We did all of our meetings there, and we built our network in Silicon Valley to the point where now location doesn't matter. You being in the UK, I'm sure you can attest to this, it's about who you know, not where you're located, and what kind of relationship you have with those folks. So we spent the time, I would say, required then to build our network in the Valley, which means that today, Everybody is a phone call, text, or WhatsApp away, and pre-COVID, what we did was we would be in Silicon Valley at least two weeks of every month, and we built a community around what we do. So, you know, in addition to just being an LP, we would organize community events, and we would have founder dinners and GP dinners where we would collaborate and have all of our GPs around the table and ask them to bring a founder, and this was pre-having a fund, We were building our name and our brand as, look, let's bring the venture community together. Now, I know funds do this all the time and bring founders together, but we were doing it as an LP and saying, let's bring funds together and they can share ideas. And so fast forward, post-COVID, we still do that. We do GP Zoom happy hours,…

AI assessment note: “we would be in Silicon Valley at least two weeks of every month”

Q have this opportunity with LP on the show, so I'm just going to pap you with questions that I'm too intrigued by. And it's, the first one is, a lot of GPs come to me and say, hey, this LP wants to invest, and it's actually 35% of, like, The total fund size. How do you advise managers on LP concentration and the LP concentration limits that you'd advise on?

A I don't have a strong feeling. I, look, it is, especially in this environment, it's tough because you have seen a lot of endowment and foundation groups which could represent significant concentration of a portfolio or of a fund. Right now, they're retrenching, and they're retrenching because This environment, they don't know if schools are going to open up in the fall, or if you're a healthcare institution, you've been hit by COVID in various ways, and endowments and foundations, similar to maybe the global financial crisis, are focused on liquidity in tough times, and so if they're going to represent, either as a whole, a large part of your capital base, or individually a large part of your capital base, I would agree that it's tough to While it's attractive to have that much capital from one LP, when it comes time to fundraise again, the fact that that could create a hole would be, I think, difficult. On our end, this is our business, and this is all we're doing. We don't mind being severely concentrated, and so long as our funds continue to say what they're going to do, we're going to continue to be there. I think the very best way one of our GPs put it, an LP was doing a reference on us for our fund one, and they asked one of our GPs, Why would you take Summit Peak Capital over an endowment foundation? What makes them different? And the GP answered, he said, look, they sta…

AI assessment note: “when it comes time to fundraise again, the fact that that could create a hole”

Q ask, if you're, like, reflective on the process, like, there are a lot of things that when I look back on our fundraisers, I would do differently and do again. When you think about what you did well that you'd do again, and what you don't think you did well, and you'd change, what are those things that you'd do differently, and those things that you keep doing the same?

A So on what we would do differently, a lot of our LPs know this story, but little known to other people. We committed the entire fund before we had even lined up An anchor investor. So we had nearly eighty million of company investments as well as fund investments by summer of 2018, right when we launched, and the reason for that was all of the GPs we wanted in this portfolio were raising capital, and we wanted to make sure that we could secure our LP advisory board seat and secure our allocation to what I would call now hard to access funds. And so we had an eighty million dollar overhang of capital commitments and yet to raise any money And, you know, a few months later.

AI assessment note: “So on what we would do differently, a lot of our LPs know this story”

Q to proactively allocate capital into those companies, do internal rounds, and build ownership. Now, it doesn't get the LP approval on the metric side, because Sequoia haven't done it, but they've just gained ownership, and now are sitting at 22% in a really high-performing company. So I think it's kind of a bit of a bullshit metric. How do you think about that? And am I wrong on being flippant?

A I don't know. I don't know because when you look at the GP presentations, they say our companies are backed by the very best funds at later rounds. I mean, we see that in GP presentations all the time. Ultimately, as long as the company is doing well, it's well funded, and they have the right people at the table, that's all that matters. And if you were to ask some of our GPs, they could care less What the name of the firm is at the next round, it's, again, the value add of that fund. Are they going to help this company grow from a fifty million dollar revenue business to a hundred million dollar revenue business? And that's what's most important. And we would agree there. Again, we want to see the companies do as well as possible. And so whatever that warrants in terms of the investor and who that investor is, that's the most meaningful piece. Look, I would be bullshitting you to say that it's not important to us. Those brand names do matter, whether that's Benchmark Capital, Andreessen Horowitz, Sequoia Capital. They are great funds, and they're great investors at various stages, and you want to see companies being well-funded by some of them, and so we think about those as metrics. Again, maybe less at the earlier stages, but when you get into mid to later stages, absolutely. I think it is something LPs like to see. It is something that we certainly Are keen to understand, a…

AI assessment note: “Those brand names do matter, whether that's Benchmark Capital, Andreessen Horowitz, Sequoia Capital.”