Feb 14, 2022 · 1h 0m · capital-allocators
Joelle Kayden – Canvassing the Landscape at Accolade Partners, Venture is Eating the Investment World 7 (Capital Allocators, EP.235)
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Host Ted Seides interviews Joelle Kayden, founder and managing partner of Accolade Partners, examining her institutional career, multi-product fund-of-funds strategy, and manager selection frameworks. Kayden shares actionable insights on portfolio construction, venture fund economics, and navigating market cycles across venture capital and growth equity.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 24.9% of the talking time here. How this is scored →
Ted as informed peer 4.1 Guest teaching 1.6 Guest disagreement 0.8 Ted pushing back 0.3
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 39:40 Pushing back against lawyer-driven aggressive GP terms
Joelle expresses blunt annoyance at early-stage managers claiming aggressive LP terms are 'industry standard,' sharply noting that the lawyers asserting this aren't the ones writing capital checks.
Hardest push from Ted ▶ 26:56 Ted challenging VC brand sustainability amidst disruptionTed directly pushes back on the role of brand incumbency in VC, questioning how legacy firms sustain themselves in an asset class entirely predicated on disruption.
Biggest teaching moment ▶ 42:35 Joelle dissecting the trap of false domain expertise with EmergenceJoelle gives a masterclass on cognitive bias in manager selection, admitting how Accolade's own deep familiarity with software caused them to foolishly pass on Emergence Capital Fund II.
Ted holds their own ▶ 22:49 Ted framing crossover hedge fund strategies as public-private arbitrageTed displays sharp technical understanding by framing high-velocity crossover firms like Tiger Global as arbitraging private valuations against liquid public markets.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Joelle Kayden's Early Career at Alex. Brown & Sons | 3 | 1 | 1 | 0 | Ted opens the interview with standard biographical prompts about Joelle's early career at Alex. Brown & Sons. Joelle provides candid reflections on early tech boom-bust cycles and transitioning out of investing due to early VC culture. | |
| Founding Accolade Partners and Weathering the Dot-Com Crash | 3 | 2 | 1 | 1 | Ted probes into Joelle's decision to launch Accolade right at the peak of the dot-com bubble in 2000. Joelle self-deprecatingly admits inexperience in portfolio construction and details the brutal downturn following 2000 and 9/11. | |
| Accolade's Growth Equity Expansion and Multi-Product Evolution | 4 | 1 | 0 | 0 | Ted asks about Accolade's multi-product evolution. Joelle explains the early pivot toward growth equity alongside early stage, backing early pioneers like Thoma Bravo and Excel-KKR. | |
| Accolade's Investment Philosophy and Manager Selection Framework | 4 | 1 | 0 | 0 | Ted asks about investment philosophy, leading Joelle to outline Accolade's strict discipline around fund sizing, portfolio concentration, research hustle, and anchoring first-time managers. | |
| The Four Modern Strategies to Win in Venture Capital | 5 | 2 | 1 | 0 | Ted asks Joelle who wins in the modern VC landscape. Joelle breaks down four distinct winning archetypes: high velocity/check writers, brand names, sector specialists, and diversity champions. | |
| High-Velocity Capital vs. Early-Stage and Growth Equity Investing | 6 | 2 | 1 | 1 | Ted specifically analyzes the high-velocity capital deployment model represented by crossover hedge funds. Joelle explains why Accolade avoids late-stage VC arbitrage in favor of cash-flow-positive growth equity. | |
| Brand Equity, Partner Reputation, and Return Sustainability in VC | 5 | 2 | 2 | 2 | Ted pushes on the paradox of an industry predicated on disruption relying on incumbent brands. Joelle clarifies that founders pick individual partners rather than generic firm brands. | |
| Sector Specialization and Structural Macroeconomic Tailwinds | 4 | 2 | 1 | 0 | Ted asks about domain expertise and diversity strategies. Joelle explains how specialist sectors quickly get crowded by generalists and discusses the market inefficiency in backing underrepresented GPs. | |
| Sponsor Message: Ridgeline Front-to-Back Investment Technology | 0 | 0 | 0 | 0 | Sponsor advertisement break for Ridgeline technology platform and continuing discussion on diversity allocation data. | |
| Assessing Venture Firm Culture and Delivering LP Value | 4 | 1 | 0 | 0 | Ted inquires about assessing venture firm cultures and how LPs can add value. Joelle highlights the importance of junior-level relationship building and providing thoughtful introductions without micromanaging. | |
| Evaluation Criteria for Backing and Anchoring First-Time Funds | 5 | 2 | 1 | 0 | Ted asks how Accolade evaluates first-time fund managers. Joelle details their focus on apprenticeship, deal partner sourcing ability, small fund sizing, and disciplined reserve management. | |
| Venture Fund Economics, LP Leverage, and Re-Up Decision Frameworks | 5 | 2 | 2 | 0 | Ted asks about shifting terms and why Accolade chooses not to re-up with certain managers. Joelle criticizes aggressive lawyer-driven terms and explains that fund size bloat is the primary reason for dropping a GP. | |
| Target Return Hurdles and the Lesson of Missing Emergence Capital | 4 | 2 | 1 | 0 | Ted asks about return hurdles and past misses. Joelle openly shares the painful decision of passing on Emergence Capital Fund II because she incorrectly assumed SaaS was already commoditized. | |
| Navigating Market Froth, Rapid Deployment, and Time Diversification | 6 | 2 | 1 | 1 | Ted compares recent market froth and rapid fundraising pace to prior cycles. Joelle warns against rapid deployment destroying vintage time diversification and compares it to 1999. | |
| Accolade's Dedicated Blockchain and Crypto Fund Strategy | 4 | 1 | 0 | 0 | Ted inquires about Accolade's expansion into dedicated crypto and blockchain funds. Joelle credits her team's early research and explains both offensive upside and defensive necessity. | |
| Future Outlook for Accolade Partners and the Venture Industry Shakeout | 4 | 2 | 1 | 0 | Ted asks about the future outlook for Accolade and the broader VC landscape. Joelle predicts a major shakeout among overfunded portfolio companies rather than venture management firms. |
Statements from this episode (33)
Kayden: ABS Ventures managed $23M when she joined as CFO in 1982
“I joined the firm in 1982 as the chief financial officer of what was then called ABS Ventures. We had a whopping twenty three million dollars under management.”
Kayden: Accolade closed $114M debut fund in March 2000
“Started raising the fund in the end of 99 and closed on one hundred and fourteen million dollars in March of 2000. Right when the NASDAQ hit the peak of 5000.”
Kayden: Accolade shifted to cash-flow-positive firms after the dot-com crash
“And then when the internet bubble burst, and it became clear that continuing to fund early stage venture capital in the face of a nuclear winter was probably not a great idea, we slowly migrated to funding some firms like Golden Gate that were investing in cas…”
Kayden: Accolade backed Thoma Bravo and Accel-KKR's first software funds
“In that fund, we articulated that 50% of what we did was going to be early stage venture And 50% was going to be growth equity, which is not what we hear about in the growth stage today, but more firms which we backed, like Toma Bravo in their first software-f…”
Kayden: Accolade Has Backed Accel Since 2000 and Andreessen Since Fund II
“We've backed some terrific firms that we've stayed with, Excel since 2000, Andreessen since fund two.”
Kayden: Venture Capital Funds Allegedly Last 10 Years but Really Last 15
“You know, we invest in funds. They last 10 years, allegedly, but really they last 15 years, and they're not liquid, so we better make the right decision a priori.”
Kayden: Tiger Global and Coatue win via fast checks without board seats
“One, we've seen the emergence of firms that write checks really quickly and are extremely aggressive, whether it's Tiger Global, D-One, CO-Two, name your favorite firm. That's just a very different strategy. They don't take board seats, but they're extremely k…”
Kayden: Early sector specialists win in fintech and healthcare via regulatory expertise
“Then we believe sector specialists, particularly early on in the lives of companies, have a reason to win, whether that's in fintech firms like Ribbit, QED, firm like Transformation Capital and Healthcare. These are Each huge industries, fintech, healthcare, w…”
Kayden: Cap table diversity and diverse recruiting increasingly win startup founders
“And then maybe this is somewhat self-serving, but we are hearing this a lot, particularly from young founders that diversity on the cap table really matters. And so I think firms that offer that lens either by having available individuals who can serve as boar…”
Kayden: Public market companies are much cheaper than private venture valuations
“Obviously right now we're experiencing a pretty dramatic correction in the public market where I think the public market companies are much cheaper than what we're seeing done in the private market”
Kayden: Successful venture investing requires securing ownership early at Series A
“We don't like investing in later stage venture. We believe in venture, you need to be early, or you need to be a series A brand name manager and early, whereby you secure your ownership and knowledge of the businesses very early.”
Kayden: Growth equity offers superior risk-reward and liquidity over late-stage venture
“We think on a risk reward basis, and our data shows this in our funds over the past five funds, that investing in growth equity on a risk return basis is a far more compelling Opportunity and attractive opportunity, particularly given its liquidity profile tha…”
Kayden: Founders favor individual VC partners like Jeff Jordan over firm brands
“And I think founders will tell you that while they do pick firms, they really pick the individual partner. So if you're a marketplace consumer facing company, your number one draft pick is Jeff Jordan at Andreessen Horwitz, and you get a lot of ancillary servi…”
Kayden: Telemedicine consumer behavior shifts will not reverse
“That's also true of healthcare where telemedicine had been something been talked about forever. And all of a sudden overnight, It catalyzed a massive change in consumer behavior, and it's not going to go back the other way going forward.”
Kayden: Diverse VC managers face fundraising inefficiencies that create investment opportunity
“We saw people who were extraordinarily talented who were struggling to raise institutional capital and still struggle today to raise sizable funds, and so recognize that that's really an inefficiency in the market, and we all know that that's where one should …”
Accolade: Raised diverse-manager strategy as SMA after struggling with fundraising
“We struggled mightily to raise capital to address that opportunity, and we're fortunate to have a separately managed account with a handful of large institutions, but it wasn't easy.”
Kayden: Allocations to diverse managers remain experimental, not core for institutions
“There's been no data on that, and so it is very much of an early days in terms of trying to prove that out, and so I think people are separating out a small pool of capital to sort of run an experiment and see what happens with it, but it's not core to their p…”
Kayden: Meeting only top VC leadership misses internal firm dynamics
“Just meeting with the top people doesn't really necessarily tell you what's going on underneath at the firm, and so we really encourage broad participation by our team with those people who, you know, associates should know associates, and the VPs should know …”
Kayden: Accolade does not require an attributable track record to back managers
“For us, we don't need a referenceable track record and attributable track record, which I know is very important to certain institutions, but We can sort of gauge how good is this person in terms of being a deal partner, in terms of sourcing, in terms of reall…”
Kayden: Large VC firms raise seed funds to preempt Series A rounds
“Increasingly you're seeing every large firm raise a seed fund because they want to get in sooner to get that ownership and be able to write that big check and preempt the series A.”
Kayden: Missing venture upside harms fund returns more than downside losses
“Because in venture, it's missing the upside, not protecting the downside that's going to lead to not have a successful fund. The most important thing is being in those right companies and owning enough of them.”
Kayden: Venture carry is rising while management fees remain flat
“Carry is going up.
Fees are staying the same regardless of fund size.”
Kayden: Lawyers are responsible for pushing aggressive terms onto early VC funds
“I think the lawyers are at fault for pushing some very aggressive terms for first or early funds.”
Kayden: Fund size outgrowing opportunity is top reason Accolade passes on re-ups
“It's usually that the fund size over time evolves to be
Too large relative to what we think the opportunity is or what we think the team's capability are.
So sometimes a team that's going to have a great fund at five hundred million is not going to have a grea…”
Kayden: Accolade targets over 5x for seed funds, 3-4x for established VC
“When we invest in an early stage seed focused venture fund, we would like them to do better than five X. For an established venture fund, occasionally you'll get an outlier, but three to four X is still on a consistent basis, not easy to do.”
Kayden: Accolade passed on Emergence Capital Fund II despite early Salesforce win
“We had the opportunity to invest in Emergence too, and I think because we knew so much about software when they said that they were a SaaS-focused fund and they had put two million dollars into Salesforce, we were like, well, that's not that unique, partially …”
Accolade divides manager allocations over three years to counter rapid fundraising
“We think of it over three years instead of over one fund cycle, and we sort of divide by three knowing they're going to be back sooner. So you create your own time diversification that way.”
Kayden predicts painful lessons ahead for young founders and VCs
“There are a lot of young people within those venture firms that have never experienced a down market, and certainly young founders that have never experienced inflation, rising interest rates, inability to raise capital, etc. So I think there's some painful le…”
Kayden: Blockchain is a fundamental technology disruptive to venture capital
“One, we thought about it offensively in the sense that we thought this was a sector where our limited partners could make a lot of money, but we also thought about it defensively, that if this was in fact a fundamental technology, which we think it is, that it…”
Kayden: Mid-stage VC firms competing with massive fast capital face severe pressure
“I think the firms that are at risk or those are sort of in no man's land that are still continue to want to do diligence and feel their value add, but yet They're not investing at the early stage and they're competing against massive pools of capital with a ve…”
Kayden: Market Correction Will Kill Many Startups But Few VC Funds
“Attrition happens very slowly in our business. So I'm not sure it's that much different from what it is today. I mean, obviously we're going through a very significant correction here. And I think there will be a lot more companies that disappear than farms or…”
Kayden: Mental Health and Telehealth Startups Face Major Industry Shakeout
“How many mental health, telehealth firms does the world need? I don't know the answer to that, but I can tell you, There'll probably be a couple that survive, but we have dozens of those and each one serves a different niche market. So I think there's going to…”