Jul 5, 2024 · 56m · neon-show
2024 VC Updates, IPO Trends, And Fundraising Advice with Churchill’s Raja Doddala I Neon Show
0:00 / 0:00
▶ Watch on YouTube →
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The Neon Show, Siddharth Ahluwalia interviews Raja Doddala, Head of Venture Capital and Growth Equity at Churchill Asset Management, examining institutional LP underwriting, seed fund economics, and tactical fundraising strategies for emerging managers. Doddala shares critical insights on portfolio construction, exit math, and the emerging venture and IPO landscapes across Silicon Valley and India.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
Siddhartha as informed peer 3.9 Guest teaching 3.6 Guest disagreement 0.8 Siddhartha pushing back 0.4
speaking balance: gold is Siddhartha, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 47:04 Raja dismisses gross metrics as meaningless
Raja passionately vents about poor data room practices, explicitly calling gross returns meaningless to institutional LPs and expressing frustration when managers obscure net metrics.
Hardest push from Siddhartha ▶ 23:23 Host challenges fund size constraints on successful managersSiddharth directly challenges Churchill's $25M-$125M fund size cap, pointing out that successful emerging managers naturally scale to $200M+ by fund three or four.
Biggest teaching moment ▶ 32:20 Raja breaks down realistic DPI vs paper markupsRaja systematically breaks down institutional LP return metrics, explaining why 2021 unicorn paper markups are largely phantom and how 2.8x-3.0x net DPI is the true benchmark.
Siddhartha holds their own ▶ 36:09 Host calculates exit math for oversized seed fundsSiddharth demonstrates sharp domain expertise by doing the mathematical breakdown of ownership dilution and required billions in exits needed for large seed funds to return 3x net.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Siddhartha as informed peer | Guest teaching | Guest disagreement | Siddhartha pushing back | Why |
|---|---|---|---|---|---|---|
| Raja Doddala's Career Trajectory and Churchill Asset Management Overview | 3 | 3 | 0 | 0 | Siddharth opens with broad introductory questions about Raja's personal journey and Churchill Asset Management's structure. Raja provides a detailed summary of Churchill's private equity, private credit, and venture arms. | |
| The Evolution and Mechanics of the Fund of Funds Model | 4 | 4 | 0 | 0 | Siddharth demonstrates familiarity with the 40-year history of university endowments investing in VC, while Raja explains the distinct role and evolution of the fund of funds model. | |
| Defining Emerging Managers and Churchill's Venture Strategy | 3 | 4 | 1 | 0 | Raja provides Churchill's definition of emerging managers based on lifecycle years and fund count (funds 1 to 4) rather than strict fund numbers, detailing their allocation across 35 venture managers. | |
| Churchill's Capital Source, Co-Investments, and LP Selection Criteria | 3 | 4 | 1 | 1 | Raja clarifies that their venture capital currently comes from parent organization TIAA rather than third parties, explaining the necessity of access to top-decile funds and co-investments to shorten the J-curve. | |
| What VCs Look for in LPs: Providing Value Beyond Capital | 4 | 3 | 0 | 0 | Siddharth asks how LPs compete to get into top-tier venture funds. Raja details sticky patient capital, cycle understanding, and commercial value-add such as enterprise contract intros. | |
| Check Sizes and Churchill's Rigorous Underwriting Process | 3 | 4 | 1 | 0 | Raja details their 5-15% check size target in seed funds and explains their rigorous, highly personal 2-3 month underwriting process where they underwrite long-term human behavior. | |
| Target Vintages and Why Seed Funds Should Not Over-Scale | 5 | 4 | 2 | 2 | Siddharth raises a sharp question about successful fund managers naturally scaling beyond $125M into $200M+ vehicles. Raja confirms Churchill explicitly opts out when seed funds over-scale, viewing seed as a boutique craft. | |
| Generalist vs. Sector-Focused Strategies in Early-Stage VC | 4 | 3 | 1 | 1 | Siddharth synthesizes Raja's points to confirm Churchill's preference for sector-agnostic funds. Raja agrees but clarifies that they avoid rigid dogmatism if a specialist has a distinct edge. | |
| Underwriting Performance: Track Records, Graduation Rates, and Return Metrics | 3 | 6 | 2 | 0 | Raja breaks down the evaluation of managers across vintages, analyzing graduation rates to Series A, IRR risk premiums, DPI targets (2.8x-3.0x), and discounting ZIRP-era unrealized paper markups. | |
| Exit Dynamics and the Mathematical Reality of Fund Sizes | 6 | 3 | 0 | 0 | Siddharth works out the math on fund sizing, illustrating how a $500M seed fund holding 10% ownership requires $20B-$30B in total portfolio exits to return 3x net, validating Raja's thesis on boutique fund sizes. | |
| Portfolio Construction and Key Superpowers of Top Seed Managers | 4 | 3 | 0 | 0 | Raja explains typical seed portfolio construction (25-40 companies with 30-40% follow-on reserves) and identifies manager 'superpowers' such as technical community standing and graduation support. | |
| Macroeconomic Shifts and the Normalization of VC Fundraising | 3 | 4 | 1 | 0 | Raja frames the tight 2024 VC fundraising landscape as a welcome normalization following the 2020-2022 anomaly, citing falling manager graduation rates as a healthy correction. | |
| Tactical Fundraising Advice and First-Close Strategy for Emerging Managers | 3 | 4 | 0 | 0 | Raja provides tactical advice for emerging managers: define minimum viable fund sizes and execute early first closes on $10M of a $30M target to build portfolio momentum rather than waiting. | |
| Optimizing LP Data Rooms: Best Practices and Common Mistakes | 4 | 4 | 2 | 0 | Raja lists primary data room pet peeves, highlighting obscure top-line returns, confusing gross vs. net IRR, and hiding the underlying company value drivers. | |
| Evaluating India's Venture Ecosystem and International Expansion | 5 | 3 | 2 | 2 | Siddharth jokingly pushes that Churchill might not write its first check in India until 2030 and suggests copying their Israel playbook. Raja pushes back, noting they will enter much sooner and will tailor strategy rather than applying a blanket copy-paste approach. | |
| Tech IPO Landscapes: Comparing Public Markets in India and the US | 5 | 2 | 0 | 0 | Siddharth immediately identifies Gokul Rajaram's viral tweet on Indian vs US software IPOs as Raja starts referencing it. The conversation concludes on a friendly note discussing Raja's cycling hobby. |
Statements from this episode (25)
Churchill Asset Management manages $50B across credit and private equity
“Churchill Asset Management is a Fifty billion dollar AUM private capital asset manager, and Churchill's businesses are private equity. We're an LP in three hundred-odd private equity firms, and largest private credit provider in the US for middle market compan…”
Doddala: Top venture fund of funds include VenCap, StepStone, and Sapphire
“In terms of size probably vent cap. They, they've been around a long time. There's one called vintage investment partners out of Tel Aviv and, or from forgetting the large us one step stone is a large, has a large fund of funds. Sapphire Ventures has a sizable…”
Doddala: VC managers need 8 to 10 years to outgrow emerging manager status
“In our opinion, it's less about how many funds you've had, but we think it takes about, you know, eight to 10 years for your portfolio strategy to sort of settle into one that really designed to take advantage of whatever your strengths are as a manager. And t…”
Doddala: Pre-seed and seed funds perform best sized between $25M and $125M
“For seed and pre-seed, we've taken the approach of, we think smaller managers are better suited to invest in seed and pre-seed. We, you know, we have a long tail of 25, you know, ish firms in, in that and most of those we've added in the last sort of three yea…”
Doddala: Churchill invests proprietary capital from parent TIAA rather than LP funds
“We have yet to take third party capital. We're currently investing our own capital source of work for this strategy, the source of our capital is our nonprofit parent. Called TIAA.”
Doddala: Venture performance has far wider quartile dispersion than private equity
“There's a lot of dispersion between the performance of top quartile and bottom quartile. Not so much dispersion in private equity, but in venture.”
Doddala: LP co-investments shorten the J-curve and boost net returns
“And the co-investments is a great way, sort of de-risked companies later on in the life cycle is a great way to not only shorten the J curve a little bit, But also maybe a higher return because some, you know, a lot of the times co-investments tend to be lower…”
Churchill AM targets 5% to 15% of total fund size for seed checks
“For seed and pre-seed, the way we think about it is anywhere from five to 15% of the fund size is sort of what we look for in terms of the check size, depending on our familiarity with the manager or experience with the manager and their track record.”
Churchill AM commits to 8% to 10% of 300 venture funds evaluated annually
“We see two to 300 firms a year and we're very selective so call it, you know, eight to 10% of the funds that we see we commit to.”
Doddala: LP underwriting requires forecasting a GP's behavior over 20+ years
“Especially seed and pre-seed managers. You're underwriting as much as the track record, but also you as people. We're forecasting how you'll behave for the next 10 to, you know, a lot of cases, 20 plus years. And we're forecasting how you know, what kind of de…”
Doddala: Churchill predominantly backs Fund III, IV, and V early-stage managers
“We do do fun ones, not many. We do a handful of fun ones. We think it's important to discover new managers and sort of bet on them when they're before they scale. But in, you know, typically, you know, a fun ones and fun twos are rare, but they do happen, but …”
Churchill drops seed GPs who scale fund sizes past $125M to $150M
“And if you quote, scale beyond that size, you likely won't be part of our portfolio anymore. We think, you know, especially seed and pre-seed is sort of a boutique business, and we don't think it should scale to hundreds of millions of dollars. So if you end u…”
Churchill's venture portfolio is 90% US and 10% Israel
“In our portfolio, we're in the U.S., so we're about 90% U.S., 10% Israel. And in the US predominantly, probably 70% California, even in California out of the 70% that we have in California, probably 70% in the Bay Area and maybe 30% in LA, an increasingly grow…”
Churchill will not back first-time fund managers without prior track records
“What we don't do is we don't invest in managers in fund one if they had no investing experience whatsoever. If this is the first time they're writing a check, that would never even pass the first email through us. So in that case, what we'd look for is typical…”
Doddala: 2.8x to 3.0x DPI typically marks top-quartile venture fund performance
“Typically 2.8 to three puts you in the top quartile on depending on the vintage and some vintages, it may not, some vintages, it may put you in the top decile.”
Doddala: 60% of 2021-2022 unicorns will probably never realize their valuations
“I think, 60% of the unicorns that were marked up in, you know, in our 20, 21, 20, 22, Are probably not going to ever realize their markups.”
Doddala: The median venture exit outcome over 30 years is $90 million
“I looked at some data, the exit data for the last 25 or 30 years. Median outcome is about ninety million, believe it or not.”
Doddala: Only about 300 US public companies are currently worth over $1B
“If you look at all the public companies in the US today companies that are worth more than a billion is about 300 companies.”
Doddala: $50M seed funds only need $220M in total outcomes for 3x net
“If you're a fifty million dollar seed fund, to do a three X, you have to produce a total of maybe two hundred and twenty million in total outcomes. There's a number of ways to do that, and they have a lot more optionality. In their outcomes than a large fund.”
Doddala: Common seed portfolio size is 20-40 companies with 30-40% reserves
“The most common we see is sort of 20 to 30 companies, maybe 40 and 30 to 40% reserves follow ons for pro rata.”
Doddala: Unique domain superpower is the biggest predictor of seed VC success
“Are you, do you, what is your unique, you know, I don't want to be corny, but what is your superpower? Are you are you someone who's well-respected in a narrow field of data and open source? I'm just going to pick, you know, just picking that as an example. Yo…”
Doddala: VC fundraising has normalized after an anomalous 2018-2022 boom
“There's no doubt that the fundraising environment has become tighter. But I would say we're sort of back to normal. We think sort of the 2020 to 20 22 maybe even 2018, 2019 to 20 22, sort of three or four year period sort of an anomaly”
Doddala: Gross returns are meaningless to LPs; you must present net returns
“Gross is meaningless to LPs. You have to have net net of fees.”
Doddala: Churchill will make its first India venture investment before 2030
“No, no, no. It'll be sooner than that. You know, usually takes about a year for us to get to know an ecosystem. So we hope to do that work soon.”
Doddala: US private companies have faced their longest liquidity drought
“Public markets in the US have been I mean, some people say they're closed, they're not it's just the criteria for, you know, what a successful IPO candidate has been changing and moving around. So you know, we've sort of had probably the longest period of you …”