The Exchanges

Q their business grow. If you want to put your brand in front of this highly dedicated audience that's difficult to reach, I'm currently looking for a few strategic partners for the channel. To learn more about sponsorship opportunities, click the link in the description. Let's grow together. If so many VCs out there have a poor record for returning investment, why does it continue to exist as a business model?

A Well, I think it's a great question, and I think it exists because there are the top performers, like anything else. I mean, it's sort of like looking at, if you look at the public markets, like mutual funds, why are there so many mutual fund managers out there when every piece of data basically suggests that every investor should just buy index funds, buy and hold, and forget about it. Yet there's thousands and thousands of people who make a great living managing other people's money for fees. In venture capital, the asset class really exists because historically it has outperformed other asset classes, traditional outlets asset classes, which is particularly true if you're a top quartile investor. So the top quartile VCs have done remarkably well compared to other asset classes, and that's why our model at Alumni Ventures is to co-invest alongside the best VCs to get our individual investors access to the same great deals That traditionally only institutional investors have had access to. We don't just invest with anybody. Um, part of our due diligence process is who is leading and who is, who else is part of the syndicate, uh, because that helps us validate, um, not only that, you know, we're making the correct decision on, on the founders, uh, but just knowing from their, these other investors and their track records, um, that there's some element of value that should be pl…

AI assessment note: “it exists because there are the top performers, like anything else.”

Q I hear many VCs say, I'm the first check into a startup. But the reality that I've seen is that most VCs want to know who else has invested before they're willing to write that check. Why is there this, this dissonance between what investors say and what they actually do?

A Yeah. Yeah, no, it's, it's very fair. And, um, there's a lot of FOMO in this business and, um, there is an element of, of herd mentality and, you know, we, we don't, you know, shy away from that. It's actually quite core to what we do. Um, you know, but, but we also don't try to make claims like we're the genius. We say, we explicitly say we're never the first check-in. We we're, we're not investing in a silo. Uh, you know, we're a generalist firm. We, it's hard for us to have a very strong conviction at the pace at which we invest in very specific industries. So we look for signs from the market, and so we look for other VCs. So, um, you know, knowing what other investors are doing is important, and that's why all the VCs show up to YC Demo Day, because it's like, you know, a lot of these companies have gotten an initial vetting already. Um, so I think that some of the claims on first check-in can, of course, there are, there's always someone who's the first check-in, and You know, God bless them if they're the ones that get it right and do well. And maybe those are why those are some of the outliers. Um, but I think for most of us, we are looking for clues. Uh, and the truth is that, you know, the, the, the first check in are usually the friends and family or the angel investors that are willing to take a bet because they know the founder personally. And, you know, those are …

AI assessment note: “there is maybe a little bit of smoke and mirrors around who's really the first check”

Q Why do VCs brag about the number of decks that they see a year?

A Well, I think they're trying to, in many ways, show their for one, show their LPs, uh, that they're being selective. Um, and secondly, I mean, it's also true. I know as an investor, I get loads of inbound and we get so many decks from linked over LinkedIn, over email. Like I don't have time to review everything that I see. Uh, and I might be missing opportunities because of that. Um, but you know, there's only so many hours in the day. Um, and so I think they're, they're one, they're, they're showing their LPs that they're adding value and that they're Um, getting through the, the best. And then two, I think they're also signaling to founders. Um, you know, don't waste my time. Uh, if you're going to come to me with a pitch, it better be a really good one. Uh, and you better have thought it through. So I think there is some, some, um, different, different things that they're trying to show by, by sort of bragging about that. I, you know, I, I don't, I think we, we particularly try to brag about it, but we're also, you know, not trying to hide the fact that we do get lots and lots of inbound. And I, I wrote a blog on my sub stack recently called the cold truth about cold outreach, um, that says, if you really want to get to an investor, find a way and use your resourcefulness, um, do everything you can to find a way to that investor. If you think they're really the right investo…

AI assessment note: “show their for one, show their LPs, uh, that they're being selective.”

Q how, like, if I were to be a scout for someone, and I were to get some of the carry, it could be 10 years for me to see anything, but I could get money the minute it arrives in the bank from that investor. So why would people choose to be a scout and potentially get something in seven to 10 years when they could get money right now?

A Yeah. Well, as, as an investor, certainly at the very early stages to me, it's, it's somewhat of a negative signal. If I see that they've hired and are actually paying, whether it's an investment bank or, um, you know, usually these are more boutique type of operations. Uh, you know, I, I, I want to see the hustle. I want to see the founder go out and do it themselves. Um, so if I know there's that kind of middleman, um, It's generally not a good sign. Now, if it's really an advisor, someone who's maybe compensated by equity, it might be a different story. Um, but I, I really encourage founders to at least go out and try to do this themselves. Um, you know, use your network, use your resources. I know it's time consuming. I know it can be a pain. There are a lot of founders who don't love the fundraising process. Um, but do it. It's good for you. And, and most of the great founders have done it. Uh, so, um, you know, if, if you're a later stage company and you're raising You know, a hundred million dollar series E or something. Sure. Okay. There's justification in hiring somebody to help in that process. You're talking to only larger institutional growth investors and so forth, but, um, but yeah, I, I, I'd like to see the founder do it themselves.

AI assessment note: “to me, it's, it's somewhat of a negative signal.”