The Exchanges

Q It's a total setup, Peter, but go with it all the same. So I want to start on the meta then, and the macro. You stated there about your entry 30 years or so ago. So many cycles and booms and busts in between. I'd love then to start on, fundamentally, how have you seen the venture ecosystem itself really evolve and develop over the last 30 years?

A Yeah, great question. I mean, you know, when I got into the business, so a few of us co-founded a firm called Ampersand Ventures back in the late eighties. There were probably, we thought, maybe 200 venture firms in the world, and in those days, the U.S. was the predominant player in venture capital. Now, this is early stage venture capital. A lot of these were efforts that spun out of investment banks or other even, like, high net worth individuals just doing it as a There were maybe 2000 professionals in the industry, but really only about 500 partners. You could almost know everyone in the industry. So, you know, you fast forward to today, I mean, there's just so much money, so many more firms. And what I think has changed a lot is specialization. So back in the late eighties, there were very few specialized firms at all. None that I knew of that would call themselves, for instance, life sciences firms. We We became specialized in the sense that we formed a firm around my background in specialty materials and chemicals, and our early investors, meaning LPs, included some corporate investors who wanted to learn more about that field. So in some ways, that was a very groundbreaking fund, and I think it just was part of an early wave of specialization that's now taken over.

AI assessment note: “what I think has changed a lot is specialization.”

Q Can I ask, what makes a great pitch meeting, so to speak? Is it kind of incredible communication in terms of conversation? Is it your partners and you being very in line with each other and cohesive? What makes you leave going, yeah, that was a great pitch meeting?

A It's always more than one of us, I've noticed. So there are meetings you have to sometimes take alone. They're never the best meetings. Generally, if you could Bring two or three partners to a meeting, and everyone is playing their role, meaning speaking, so that no one person is doing most of the talking. From our side, those tend to be the best meetings. From the other side, we've got to get them engaged, so if they sit there, take notes, we ask maybe one question, and then meeting's over, and we'll get back to you. Bad meeting, but again, our platform is so interesting, and they've never heard of it before quite often, that they'll start to dig in and ask us, You know, really key questions. Hey, you guys run labs. Doesn't that take away from your investing time? And then we explained that, no, we live in the labs with the companies, and that's like diligence right at your front door. You don't have to travel to see them. And it goes on and on. The more we can get into that Q&A, the better it is. And I'll tell you one final comment, which is I have a luxury that probably very few others have. So we have these laboratories. They're beautiful. If you're in Cambridge sometime, come see the one we have there. It's called Lab Central. It's become a role model for Startup company shared workspaces in life sciences. When we can get an LP there, meaning this may say the second meetin…

AI assessment note: “The more we can get into that Q&A, the better it is.”

Q world, Peter, but I do want to touch first on the element of strategic set, because I often, as you know, 1300 interviews in speak to VCs, and they always cite the fear with bio that It's such a hard venture investment, because with such strategic input, it's really just a game of early aqua hires, which really doesn't move the needle for funds. How would you respond to that?

A No, it's not aqua hires, but it is early acquisition of technology. So big pharma has a pipeline, and they need to get more drugs into their pipeline so they can have commercial products when their current ones go off patent. They used to have a reliance on their own research If you look at the last 10 years, the research headcount in pharma has gone down by five or six percentage points per annum, so they're half as big internal research, but now what they've done is created external R&D groups, so they're out shopping, and we have really created our fund around that concept. In the last three or four years, there have been really eye-popping exits of pharma companies out of Series A rounds. I mean, there's a company called Costum Pharmaceuticals, which was sold to Novartis in 2014. They immediately let the whole team go and just kept the asset. It was a big return for the venture backers. And the teams went out and created two new companies, which ended up in our lab, one called Potenza, one called Surface Oncology. And now those two companies have very large pharma investors and are likely to be sold quite early out of A or B rounds. So that's, I think, what's happening. This is all very new, Harry. I mean, I couldn't have told you this story in 2006. This is all within the last 10 years.

AI assessment note: “No, it's not aqua hires, but it is early acquisition of technology.”

Q world, Peter, but I do want to touch first on the element of strategic set, because I often, as you know, 1300 interviews in speak to VCs, and they always cite the fear with bio that It's such a hard venture investment, because with such strategic input, it's really just a game of early aqua hires, which really doesn't move the needle for funds. How would you respond to that?

A No, it's not aqua hires, but it is early acquisition of technology. So big pharma has a pipeline, and they need to get more drugs into their pipeline so they can have commercial products when their current ones go off patent. They used to have a reliance on their own research If you look at the last 10 years, the research headcount in pharma has gone down by five or six percentage points per annum, so they're half as big internal research, but now what they've done is created external R&D groups, so they're out shopping, and we have really created our fund around that concept. In the last three or four years, there have been really eye-popping exits of pharma companies out of Series A rounds. I mean, there's a company called Costum Pharmaceuticals, which was sold to Novartis in 2014. They immediately let the whole team go and just kept the asset. It was a big return for the venture backers. And the teams went out and created two new companies, which ended up in our lab, one called Potenza, one called Surface Oncology. And now those two companies have very large pharma investors and are likely to be sold quite early out of A or B rounds. So that's, I think, what's happening. This is all very new, Harry. I mean, I couldn't have told you this story in 2006. This is all within the last 10 years.

AI assessment note: “No, it's not aqua hires, but it is early acquisition of technology.”

Q in companies and sit on boards. And you've sat on countless boards, and from my memory of our past conversation, you've even chaired over 25, I think I'm right in saying. So with that incredible experience in mind, how do you compare yourself in the early days as a board member to your much wiser 25 chairs down, so to speak, board member status now, and how have you developed?

A Well, I would say the biggest thing I can point to is a realization that my partners and I came to in the mid-nineties, And that is how to ask companies what their goals are, and then how to sort of follow up on that. And I'll really give you an example. So when I started into the business, you know, a company would produce a plan at the end of every year for the following year. Generally, they would come to the board meeting and say, all right, here's our goals in marketing. Here are our goals in technology. Here are our goals in fundraising. Here are our goals in partnering. And they'd have some sort of a set, which would look like a McKinsey project. Two by two set of boxes, and a lot of strategic plans look this way. We actually decided we couldn't judge a company based on that at the end of the year, and we finally moved to a metric where we say, just tell us the five things you're going to do for this this year. Put them in prioritized order. Make them quantifiable, so you're going to do X by, you know, that date, and these people are in charge. Just tell us five things. Don't tell us about the market. Don't tell us about the Competition. We, we kind of know a lot of that already, but that actually changed a lot of the board dynamic because the board meeting is now very simple. Objective number one, what have we done in the last couple of months? Objective number two and …

AI assessment note: “the biggest thing I can point to is a realization that my partners and I came to”

Q So your favorite book and why, what must I be reading, Peter?

A Well, here's one you probably haven't heard of, but it's called Barbarian Days. It's subtitled A Surfing Life. It's by a New Yorker staff writer named William Finnegan. You know, he was kicking around Hawaii in the seventies and took up surfing as a kid, and it just captured his imagination in such a way as that he did it for his whole life. He became a war correspondent and then a very, very accomplished writer for the New Yorker, and he never really gave up his first love, which is surfing. So it's an autobiography, but it's really a, a coming of age story and a road trip. He actually travels around the entire world Surfing in every possible location that you could imagine, and I just couldn't put the book down when I read it.

AI assessment note: “it's called Barbarian Days. It's subtitled A Surfing Life.”

Q It's a total setup, Peter, but go with it all the same. So I want to start on the meta then, and the macro. You stated there about your entry 30 years or so ago. So many cycles and booms and busts in between. I'd love then to start on, fundamentally, how have you seen the venture ecosystem itself really evolve and develop over the last 30 years?

A Yeah, great question. I mean, you know, when I got into the business, so a few of us co-founded a firm called Ampersand Ventures back in the late eighties. There were probably, we thought, maybe 200 venture firms in the world, and in those days, the U.S. was the predominant player in venture capital. Now, this is early stage venture capital. A lot of these were efforts that spun out of investment banks or other even, like, high net worth individuals just doing it as a There were maybe 2000 professionals in the industry, but really only about 500 partners. You could almost know everyone in the industry. So, you know, you fast forward to today, I mean, there's just so much money, so many more firms. And what I think has changed a lot is specialization. So back in the late eighties, there were very few specialized firms at all. None that I knew of that would call themselves, for instance, life sciences firms. We We became specialized in the sense that we formed a firm around my background in specialty materials and chemicals, and our early investors, meaning LPs, included some corporate investors who wanted to learn more about that field. So in some ways, that was a very groundbreaking fund, and I think it just was part of an early wave of specialization that's now taken over.

AI assessment note: “what I think has changed a lot is specialization.”

Q So the other criticism, though, that I hear is, say they don't get acquired early, though, There's little life cycle funding to really allow them to continue through the stages of fundraising, meaning that you, the initial investor, have to carry them, so to speak, for much longer with little discernible benchmarks. How do you think about that and the kind of concern about having to carry companies for longer?

A Yeah, so that is absolutely true, and it is a big problem with life sciences companies that can't get to a demonstrable place on Reasonable millions of dollars of venture investment. So we like to say the companies have to be able to exit by the time fifty million dollars of venture money has gone in. So you sort of work backwards and you say, okay, so where do you have to get to on your A round? Where do you have to get to on your B round and so forth? If you're in a company that's taken down a lot of money, they're in the clinic, there's no real good signal from the clinical trial that this is working. I'm afraid your prospects are difficult. I think you can sell those assets Generally always, if you have a clinical stage asset, there's often a buyer for that, but you'll lose money in that transaction. So we try to go into things that have, you know, very, very early signals, and we're not unwilling to sell a company for a very nice return, but way before its potential is reached. And I think that is a difference between us and tech investors. I'd like to see a portfolio with two thirds of my companies being gains for us. And so not relying on the 50 to one winner to Drive the whole portfolio. I think that's just too hard to do.

AI assessment note: “that is absolutely true, and it is a big problem with life sciences companies”

Q Absolutely. In terms of process, I'm always intrigued by decision-making processes. What's your thoughts on kind of optimizing decision-making processes? And I'm sure you've had many different Partnership dynamics across the decision making. How do you think about optimizing that today?

A I had the good fortune of coming into the business with a fabulous managing partner, a guy named Rick Sharpie at Ampersand Capital. He'd come out of Payne Weber and really just wanted to leave the whole investment banking legacy behind. And he was very much a believer in unanimous decisions. So it's hard. You've got five partners and And they have very different points of view often on investments. It's a lot easier down the road because it's not a question of whether these companies are going to get into trouble. It's just a question of when. And when they get into trouble, you have to be all pulling in the same direction and not having somebody say, hey, you know, I told you that was a pretty dumb idea. So, you know, we passed on deals where one partner had just serious reservations and four would have voted for it. And that was true at Ampersand. It's true at Bioinnovation Capital as well.

AI assessment note: “he was very much a believer in unanimous decisions.”

Q Well, I mean, it's a first for the show, so congratulations on that. Then, your most memorable LP meeting, and why, Peter?

A Well, this one won't sound too good, but I did go to meet a pretty famous guy who will remain nameless in the most recent fundraising effort we had underway, and I arrived at the meeting. It's a lunch meeting in a pretty nice restaurant right near where he normally works. He was About four glasses of Chardonnay into the meeting, and I sat down with my fundraising agent, and he said, yeah, welcome, and where's Peter Parker? And so we kind of looked at each other, and my agent said, he's sitting right here. Oh, ok, ok, and he had my deck out, and he was fumbling with it, had a couple of more Chardonnays, and about two-thirds of the way into it. Is Peter Parker gonna come? I thought, ok, this meeting probably hasn't gone too well.

AI assessment note: “I did go to meet a pretty famous guy who will remain nameless”

Q Not at all. I want to start today, though, because you haven't been in the industry for long, so tell me, Peter, how did you make your way into the wonderful world of venture capital?

A Well, you're right. It hasn't been long. I was working in a big corporate R&D unit in the seventies, right out of graduate school. And in those days, there was no cult of the entrepreneur. In fact, we didn't even know what one was. And I ended up running laboratories in several locations around the United States, all heavy duty chemistry. And I realized that all the research had been done on innovation by teams. Teams would produce the latest computer or teams would Produce the latest great catalyst chemicals, but it was people. And that just struck me so hard when I realized that in the early eighties. And then there was a lot of research that came out about intrapreneuring and people within corporations who suddenly were renegades and making a difference. And three M is a great example of this, where the post-it note was famously invented by someone who just needed a way to communicate with the CEO on a piece of sticky paper. That really energized me, and ever since then, I've been very, very focused on entrepreneurs in any way I could be. So in my research job, I actually created a bunch of internal ventures, about 20 ventures in this very large firm. I became somewhat notorious for this and ended up joining a venture capital firm that was just getting started out of MIT.

AI assessment note: “ended up joining a venture capital firm that was just getting started out of MIT.”

Q No, Peter, and that's exactly why I love chatting to you so much, but you said there about your new experience. You recently raised a one hundred and thirty million seed fund at the ripe age of Tell me, how was that experience for you in the latest fundraise?

A You know, it was good. We love the platform that we're working off of, so we, we show that to people. They get it right away. You know, I think my age was probably a bit of a concern to some of the people we pitched, but actually a very small minority of people mentioned it. You know, they had the good taste not to mention it to my partners or my fundraising agent, but I would, I would hear certain comments. The thing is, I've been able to Keep my enthusiasm for this business. I think that comes across. And when they see that I've had a great track record over 30 investments, they understand that's not just five people trying out a new fund idea. And so I think this fundraising went pretty smoothly, largely because they believed that I could build a team and then impart some of that background to this new team.

AI assessment note: “You know, it was good. [...] this fundraising went pretty smoothly”

Q Unbelievable. Tell me, I love that story. What motto or saying do you most frequently revert to, and why?

A I don't know about frequently, but, you know, one that's kicking around in my head recently is, you know, back in September, Fred Wilson, in his blog, he quoted Brad Feld, who said that, you make money in winners, but you make friends in losers. And, you know, it's absolutely so true, and it's been very true in my career. And, It gives you a perspective on every experience you have in venture investing. I mean, not all companies go well, and you're working with a team, you're working with boards. What do you take away from that? And actually, all the people I'm working with now, we coalesce around a couple of things that probably didn't go well, but it really caused us to bond to each other.

AI assessment note: “you make money in winners, but you make friends in losers”

Q that you're investing with the new fund, and the slightly switch tax to that, dominating the world of bio. You've said to me before that tech and bio have many things in common, but there are some major differences. So you're teeing me up for this one now, but also leaving me with a cliffhanger here, Peter. So what are the fundamental differences between tech and bio, do you think?

A Well, the overarching one is almost trivial. Basically trying to take a technology to market and see if you have a market for it. In biotech, there's a market. There are people with disease, and so if you have a technology that can make an impact on any disease, you will have a pretty ready path to either an exit or a much larger company. So that's a very different proposition. It means we're in the business of enabling entrepreneurs to create breakthrough science, and I think in tech, VCs are in the business of enabling entrepreneurs to get really interesting market uptake. If you think about it in those terms, there are very different elements that come into the picture. I mean, we have a lot of strategic investors in our companies. Why? Because they're the folks who will eventually market these drugs to the world. There are very few, there won't be any new major pharmaceutical companies created out of biotech VC money anymore. Really all about creating companies that can exit to these people. The good news is there are 25 of them or more that are readily buying up assets, and in the tech world, I don't know the numbers. We hear about the scary five, but maybe there are many more. So we're lucky. We have a ready market of buyers, but it means you have to have a lot of dialogue with these strategic investors all the time. They all have VC funds. They all invest with us. They a…

AI assessment note: “In biotech, there's a market. There are people with disease”

Q So the other criticism, though, that I hear is, say they don't get acquired early, though, There's little life cycle funding to really allow them to continue through the stages of fundraising, meaning that you, the initial investor, have to carry them, so to speak, for much longer with little discernible benchmarks. How do you think about that and the kind of concern about having to carry companies for longer?

A Yeah, so that is absolutely true, and it is a big problem with life sciences companies that can't get to a demonstrable place on Reasonable millions of dollars of venture investment. So we like to say the companies have to be able to exit by the time fifty million dollars of venture money has gone in. So you sort of work backwards and you say, okay, so where do you have to get to on your A round? Where do you have to get to on your B round and so forth? If you're in a company that's taken down a lot of money, they're in the clinic, there's no real good signal from the clinical trial that this is working. I'm afraid your prospects are difficult. I think you can sell those assets Generally always, if you have a clinical stage asset, there's often a buyer for that, but you'll lose money in that transaction. So we try to go into things that have, you know, very, very early signals, and we're not unwilling to sell a company for a very nice return, but way before its potential is reached. And I think that is a difference between us and tech investors. I'd like to see a portfolio with two thirds of my companies being gains for us. And so not relying on the 50 to one winner to Drive the whole portfolio. I think that's just too hard to do.

AI assessment note: “that is absolutely true, and it is a big problem with life sciences companies”

Q But still in your youth, I do want to kind of touch on the partnership dynamic elements. Were there elements learned from fund one that you took to kind of the formation of the team with fund two?

A Not so much. It's actually interesting. We have exactly the same number of partners, five that we had at the time we formed fund one. For me, this is now fund six, really, and it's a whole new group of partners, so the first time fund is in moniker that we sometimes get labeled with. I remind people that it's really my sixth fund, but that's okay. I think, you know, I'm just calmer now. I think the idea of both mentoring these younger partners as well as providing some structure for them and some process is a lot easier for me now, and it's, it's something I did learn from the first time around, by the way. I think process is almost everything in good venture firms. If you get under the hood of any firm that you really respect, I think you'll find a very, very detailed process. Even though it looks chaotic, they have a pretty set system. They have a set of values. They're investing based on common shared vision of what the firm should be. And that was a lot easier to bring to this firm really the second time around.

AI assessment note: “providing some structure for them and some process... something I did learn from the first time”

Q in companies and sit on boards. And you've sat on countless boards, and from my memory of our past conversation, you've even chaired over 25, I think I'm right in saying. So with that incredible experience in mind, how do you compare yourself in the early days as a board member to your much wiser 25 chairs down, so to speak, board member status now, and how have you developed?

A Well, I would say the biggest thing I can point to is a realization that my partners and I came to in the mid-nineties, And that is how to ask companies what their goals are, and then how to sort of follow up on that. And I'll really give you an example. So when I started into the business, you know, a company would produce a plan at the end of every year for the following year. Generally, they would come to the board meeting and say, all right, here's our goals in marketing. Here are our goals in technology. Here are our goals in fundraising. Here are our goals in partnering. And they'd have some sort of a set, which would look like a McKinsey project. Two by two set of boxes, and a lot of strategic plans look this way. We actually decided we couldn't judge a company based on that at the end of the year, and we finally moved to a metric where we say, just tell us the five things you're going to do for this this year. Put them in prioritized order. Make them quantifiable, so you're going to do X by, you know, that date, and these people are in charge. Just tell us five things. Don't tell us about the market. Don't tell us about the Competition. We, we kind of know a lot of that already, but that actually changed a lot of the board dynamic because the board meeting is now very simple. Objective number one, what have we done in the last couple of months? Objective number two and …

AI assessment note: “the biggest thing I can point to is a realization that my partners and I came to”

Q This is a case where I wanted to switch away from the interview into the advice element. So when you have a situation like that, What's the right way to approach it? How do you construct your kind of thesis and line of argument and really try and convey the point that you're trying to get across without kind of ousting them, so to speak?

A Yeah, I mean, you have to do it in person. It's all, it's empathy, right? I mean, we all don't want to be in that situation. I think the more clear-cut data you're bringing to the table, the easier it can be. That's why these very objective measures that you set out For the company, those are the CEO's goals, right? There's no difference between the CEO's goals and the company goals, and if they really are just lagging behind dramatically, then it's just not something you can sustain. I don't ever have a CEO say to me, wow, that's really unfair. I should get another year, sort of no room for that kind of argument. I have not had the situation where CEOs are just killing it, really hitting their goals, and we just think they're the wrong person. That could be, but then it's my fault. We didn't set the goals high enough.

AI assessment note: “the more clear-cut data you're bringing to the table, the easier it can be.”

Q Not at all. I want to start today, though, because you haven't been in the industry for long, so tell me, Peter, how did you make your way into the wonderful world of venture capital?

A Well, you're right. It hasn't been long. I was working in a big corporate R&D unit in the seventies, right out of graduate school. And in those days, there was no cult of the entrepreneur. In fact, we didn't even know what one was. And I ended up running laboratories in several locations around the United States, all heavy duty chemistry. And I realized that all the research had been done on innovation by teams. Teams would produce the latest computer or teams would Produce the latest great catalyst chemicals, but it was people. And that just struck me so hard when I realized that in the early eighties. And then there was a lot of research that came out about intrapreneuring and people within corporations who suddenly were renegades and making a difference. And three M is a great example of this, where the post-it note was famously invented by someone who just needed a way to communicate with the CEO on a piece of sticky paper. That really energized me, and ever since then, I've been very, very focused on entrepreneurs in any way I could be. So in my research job, I actually created a bunch of internal ventures, about 20 ventures in this very large firm. I became somewhat notorious for this and ended up joining a venture capital firm that was just getting started out of MIT.

AI assessment note: “ended up joining a venture capital firm that was just getting started out of MIT.”

Q No, Peter, and that's exactly why I love chatting to you so much, but you said there about your new experience. You recently raised a one hundred and thirty million seed fund at the ripe age of Tell me, how was that experience for you in the latest fundraise?

A You know, it was good. We love the platform that we're working off of, so we, we show that to people. They get it right away. You know, I think my age was probably a bit of a concern to some of the people we pitched, but actually a very small minority of people mentioned it. You know, they had the good taste not to mention it to my partners or my fundraising agent, but I would, I would hear certain comments. The thing is, I've been able to Keep my enthusiasm for this business. I think that comes across. And when they see that I've had a great track record over 30 investments, they understand that's not just five people trying out a new fund idea. And so I think this fundraising went pretty smoothly, largely because they believed that I could build a team and then impart some of that background to this new team.

AI assessment note: “You know, it was good. We love the platform that we're working off”

Q Absolutely. In terms of process, I'm always intrigued by decision-making processes. What's your thoughts on kind of optimizing decision-making processes? And I'm sure you've had many different Partnership dynamics across the decision making. How do you think about optimizing that today?

A I had the good fortune of coming into the business with a fabulous managing partner, a guy named Rick Sharpie at Ampersand Capital. He'd come out of Payne Weber and really just wanted to leave the whole investment banking legacy behind. And he was very much a believer in unanimous decisions. So it's hard. You've got five partners and And they have very different points of view often on investments. It's a lot easier down the road because it's not a question of whether these companies are going to get into trouble. It's just a question of when. And when they get into trouble, you have to be all pulling in the same direction and not having somebody say, hey, you know, I told you that was a pretty dumb idea. So, you know, we passed on deals where one partner had just serious reservations and four would have voted for it. And that was true at Ampersand. It's true at Bioinnovation Capital as well.

AI assessment note: “he was very much a believer in unanimous decisions”

Q No, I love that kind of strategic alignment there. I'm intrigued when one doesn't hit the metrics that they set out in that Plan, so to speak. How do you think about that as a board member and creating that kind of accountability and responsibility of hitting them, but also not a culture of kind of fear amongst the CEO in terms of returning without the metrics?

A Yeah, they always get very focused on the goals when I introduce this for the first time and goals they've talked about and put forward previously are all of a sudden, wait, we really have to do that? Oh, okay. Let's really write that in a different way. And there's a bit of a negotiation over the goals at the beginning of the year, which is good. It's very healthy. So the board and the team get together and talk about the 20 possible goals, and then narrow that down to five. Yeah, if companies aren't hitting their top two or three objectives, and if they're reasonable objectives, yeah, something's wrong. And this is, you know, when you really then look at your whole card and decide what happens on subsequent funding rounds, what happens to that team. I haven't been shy. I mean, I've changed probably 15 CEOs in my life. It's never fun. Sometimes it has to happen. You know, often, you probably don't do it soon enough. I mean, I think the signs are there, and I've never had anyone feel like it was a draconian and unfair measure. I mean, everybody kind of looked at it and said, yeah, I didn't hit my goals for a couple years. That's pretty obvious.

AI assessment note: “I've never had anyone feel like it was a draconian and unfair measure.”

Q But still in your youth, I do want to kind of touch on the partnership dynamic elements. Were there elements learned from fund one that you took to kind of the formation of the team with fund two?

A Not so much. It's actually interesting. We have exactly the same number of partners, five that we had at the time we formed fund one. For me, this is now fund six, really, and it's a whole new group of partners, so the first time fund is in moniker that we sometimes get labeled with. I remind people that it's really my sixth fund, but that's okay. I think, you know, I'm just calmer now. I think the idea of both mentoring these younger partners as well as providing some structure for them and some process is a lot easier for me now, and it's, it's something I did learn from the first time around, by the way. I think process is almost everything in good venture firms. If you get under the hood of any firm that you really respect, I think you'll find a very, very detailed process. Even though it looks chaotic, they have a pretty set system. They have a set of values. They're investing based on common shared vision of what the firm should be. And that was a lot easier to bring to this firm really the second time around.

AI assessment note: “something I did learn from the first time around, by the way.”

Q No, I love that kind of strategic alignment there. I'm intrigued when one doesn't hit the metrics that they set out in that Plan, so to speak. How do you think about that as a board member and creating that kind of accountability and responsibility of hitting them, but also not a culture of kind of fear amongst the CEO in terms of returning without the metrics?

A Yeah, they always get very focused on the goals when I introduce this for the first time and goals they've talked about and put forward previously are all of a sudden, wait, we really have to do that? Oh, okay. Let's really write that in a different way. And there's a bit of a negotiation over the goals at the beginning of the year, which is good. It's very healthy. So the board and the team get together and talk about the 20 possible goals, and then narrow that down to five. Yeah, if companies aren't hitting their top two or three objectives, and if they're reasonable objectives, yeah, something's wrong. And this is, you know, when you really then look at your whole card and decide what happens on subsequent funding rounds, what happens to that team. I haven't been shy. I mean, I've changed probably 15 CEOs in my life. It's never fun. Sometimes it has to happen. You know, often, you probably don't do it soon enough. I mean, I think the signs are there, and I've never had anyone feel like it was a draconian and unfair measure. I mean, everybody kind of looked at it and said, yeah, I didn't hit my goals for a couple years. That's pretty obvious.

AI assessment note: “I've never had anyone feel like it was a draconian and unfair measure.”

Q Can I ask, does consensus like that not kill outliers?

A We're also tolerant. We're a new fund pioneering a new platform. We're very much a startup, too, and so we've kicked around lots of ideas for investment concepts. For instance, our cash flow model would suggest that over the life of a deal, we'll put roughly seven to eight million dollars in the company, but does that mean we shouldn't give an entrepreneur a chance to get started for six months on 250,000 dollars? Initially, I thought no, but A couple of cases where people have made that argument, and it's been very persuasive, and we've done it. So, no, I think as long as your partnership really likes working together, you can get through almost any decision like that, even an outlier's case.

AI assessment note: “So, no, I think as long as your partnership really likes working together”

Q This is a case where I wanted to switch away from the interview into the advice element. So when you have a situation like that, What's the right way to approach it? How do you construct your kind of thesis and line of argument and really try and convey the point that you're trying to get across without kind of ousting them, so to speak?

A Yeah, I mean, you have to do it in person. It's all, it's empathy, right? I mean, we all don't want to be in that situation. I think the more clear-cut data you're bringing to the table, the easier it can be. That's why these very objective measures that you set out For the company, those are the CEO's goals, right? There's no difference between the CEO's goals and the company goals, and if they really are just lagging behind dramatically, then it's just not something you can sustain. I don't ever have a CEO say to me, wow, that's really unfair. I should get another year, sort of no room for that kind of argument. I have not had the situation where CEOs are just killing it, really hitting their goals, and we just think they're the wrong person. That could be, but then it's my fault. We didn't set the goals high enough.

AI assessment note: “the more clear-cut data you're bringing to the table, the easier it can be.”

Q Can I ask, does consensus like that not kill outliers?

A We're also tolerant. We're a new fund pioneering a new platform. We're very much a startup, too, and so we've kicked around lots of ideas for investment concepts. For instance, our cash flow model would suggest that over the life of a deal, we'll put roughly seven to eight million dollars in the company, but does that mean we shouldn't give an entrepreneur a chance to get started for six months on 250,000 dollars? Initially, I thought no, but A couple of cases where people have made that argument, and it's been very persuasive, and we've done it. So, no, I think as long as your partnership really likes working together, you can get through almost any decision like that, even an outlier's case.

AI assessment note: “So, no, I think as long as your partnership really likes working together”

Q No, absolutely. And speaking of partners there, we've spoken before, and going slightly more granular, we've spoken before about a different type of partner being limited partners, people that invest in funds. And you've stated your love or liking of LPs. So, I want to start with that. And other than the obvious capital, so to speak, What drives your passion and enthusiasm for really this segment of the market?

A Well, you're not passionate about them when you're fundraising, and they don't call you back. But, you know, I'm a fairly low-key person. I mean, I also try to be pretty low-profile, so if you think about it, my view of the world is we're middlemen. It's their capital, and we're finding great places to put it. That sounds pretty pedestrian. I really don't like the cult of Personality that sometimes accrues to very, very big names in the venture business. I'm not sure it's warranted. I think we're investors primarily. I mean, we certainly have all been operators as well, so we have a lot of empathy for the entrepreneur, but I think you need to have empathy for the LP. I mean, the LP has got a job to do. They've got to put money out into places where they can get better returns than they'll get in the stock market or a bond portfolio, and telling them exactly what Your strategy is and being really open and clear with them, making the decision pretty easy for them. Yes or no. And, and I'd much rather have a quick no than being stretched out for a long time. So, you know, we show them the warts right away. We say, Hey, we're new. We're trying something that's never been done before, but you know, we think it's incredibly exciting. Come see us. That generally is the way to do it. I find they respond really well. And once they've given you a commitment, think about it. They're giving…

AI assessment note: “my view of the world is we're middlemen. It's their capital”

Q No, absolutely. And speaking of partners there, we've spoken before, and going slightly more granular, we've spoken before about a different type of partner being limited partners, people that invest in funds. And you've stated your love or liking of LPs. So, I want to start with that. And other than the obvious capital, so to speak, What drives your passion and enthusiasm for really this segment of the market?

A Well, you're not passionate about them when you're fundraising, and they don't call you back. But, you know, I'm a fairly low-key person. I mean, I also try to be pretty low-profile, so if you think about it, my view of the world is we're middlemen. It's their capital, and we're finding great places to put it. That sounds pretty pedestrian. I really don't like the cult of Personality that sometimes accrues to very, very big names in the venture business. I'm not sure it's warranted. I think we're investors primarily. I mean, we certainly have all been operators as well, so we have a lot of empathy for the entrepreneur, but I think you need to have empathy for the LP. I mean, the LP has got a job to do. They've got to put money out into places where they can get better returns than they'll get in the stock market or a bond portfolio, and telling them exactly what Your strategy is and being really open and clear with them, making the decision pretty easy for them. Yes or no. And, and I'd much rather have a quick no than being stretched out for a long time. So, you know, we show them the warts right away. We say, Hey, we're new. We're trying something that's never been done before, but you know, we think it's incredibly exciting. Come see us. That generally is the way to do it. I find they respond really well. And once they've given you a commitment, think about it. They're giving…

AI assessment note: “I think you need to have empathy for the LP.”