Yesterday marked five months since I got the phone call from my mother. We lost my brother on Sunday, September 22nd, 2019. 40 years and 5 days after he came into this world.

We buried Jonny’s ashes on October 5th with great love and support from a community of friends and family. It was really wonderful to see so many attend his service and to honor the relationships that Jon built over his life. We saw friends of his from grade school through college. And friends that he made later in life, including a great group of his Masonic brothers from Colbert that came to provide services and honor him. I’m grateful for all that participated and I’m happy that we laid him to rest in that way, on that day.

Weddings and funerals are such a blur of emotion and relationships. I loved seeing so many of my mother’s friends at Jon’s services. Even some relationships that carry back to my father. Those are friends that hold old memories and bring big smiles from our youth. It’s striking that we had so many of our extended family together, some that probably hadn’t been in the same room in far too many years. I also loved seeing so many of my friends, spanning from grade school to business school. It’s comforting to feel that support from this community and yet painful that we don’t have more time to share. I suppose it takes a wedding or a funeral but I certainly wish that we all had more cause to be surrounded by our loved ones more frequently. And to spend time in a deeper way that allows us to share those memories and those feelings that brought us all together for Jon. Thank you all for being a part of our larger family and supporting us as we began to process and grieve for Jonny.

Five months later and it’s only begun to sink in and feel very real. I think of him often even though he wasn’t a fixture in my daily life for the last many years. We lived apart and were on different life trajectories but had the history of youth together. His passing has prompted me to talk more about Jonny with my own family and to tell funny stories (there are plenty of them) from when we were young. It’s nice to be able to smile at those memories.

I certainly missed him this week when our mom pulled a very humorous stunt. We both would have worried about her together while also laughing at her misadventure. It was the first time that I’ve missed him in a happy way, able to acknowledge that he’s gone but still very much with us as we go through life. I hope that his extended community feels the same way.

Today wraps up the final stage of this year’s Tour de France or “Le Tour”. This is my admission of love for this event. I’m certainly not a bike rider (wrong shape for that) but I simply love to follow this one cycling event each year. It’s not just the amazing bikes, incredible physical feats, or even the drama of the crowds on mountain top finishes. It’s the story of strategy, team strength, differing goals, good days and bad days, psychological warfare, and glorious solo rides off the front. There is so much drama, even during a flat stage, with the ever changing winds, intermediate sprints, and threat of crashes. Each competitor looking for weakness from their rivals, a constant reappraisal of standing, and a reward each day for glory by capturing just one stage. Yep, I love it. All of it.

Yes, Lance Armstrong was the Texan that got me into Le Tour nearly 20 years ago and I have at best mixed emotions on him, but the sport itself has kept me interested all these years. It’s right up there with the college football playoffs as one of my favorite sporting events of any given year.

So, while I may not be the obvious bike nut in our partnership (Moody and Seth holding that role), I want to publicly congratulate Egan Bernal for an incredible race, not just for the yellow jersey, but also winning at such a young age. I hope we see lots more of Egan in the coming years. It’s also worth congratulating Julian Alaphilippe on an incredible run in this year’s tour. He should be proud. I’m sorta sad to see this year’s tour end. It was a great one. Until next year, see you on the Peloton….

Go ahead and click this link and hit play. It definitely changes the read (warning: explicit).

I was recently asked to talk to a room full of founders and one of the questions was sorta taboo.  Not something that we talk about often but a real-life issue that everyone in that room hoped to face. What happens if you do have a big win? How do you think about the life-changing money? How do you invest it?

Maybe it’s all the news of the upcoming IPO bonanza that prompted this question but if you’re in a spot where you have that upside, then you ought to at least have a plan. Now, I’m not a retail investment expert so don’t take this as any specific guidance. However, I did have the benefit of seeing how you successfully manage one of the largest endowments in my time at UTIMCO. I would argue that a large amount of money for a family starts to look like an endowment, planning for intra-generational wealth over long periods.

The quantum of money definitely matters. There is an entire spectrum of risk that lies between managing money to create wealth and managing money to stay wealthy, perhaps while living off the proceeds. One size does not fit all but I think the process does transfer: Understanding the goal of your investments, Understanding what risks you want to take, and Working with the right partner to help you execute.

I talked a little bit about this with that room full of founders and have continued thinking about it. I wanted to write a blog post so I reached out to my friend who comes from the endowment and foundation world and now manages HNW clients for a living to see what I was missing. I jokingly said that my best advice was to “Stop, Collaborate, and Listen”.  His response was perfect. I’ve included it below in italics and inserted my own commentary below:

So it sounds like you are going with a hip hop themed post (Vanilla Ice lyrics)?

I would include:

1) I got to say it was a good day (It was a good day – Ice Cube)

Enjoy the win. Run a victory lap. Recognize the success for what it was – a combination of hard work, skill, and luck. Celebrate. But that’s in the past, what are you doing tomorrow?

That’s right, you had a big win and you likely still have some work to do closing that out. Take a little money and buy yourself (and your partner/spouse) a few nice things. Maybe you take X% and buy that boat, car, house, ranch (let’s dream big). I hope you also had the foresight to think about Pledge 1% before that Good Day.   

2)  We used to fuss when the landlord dissed us, no heat, wonder why Christmas missed us. Birthdays was the worst days, now we sip champagne when we thirst-ay.                                         (Juicy – Notorious BIG)

Don’t forget where you came from.

This is good advice, even before you have that big win. Wealth can do more than change zip codes, it can also change relationships. Be prepared for some challenges and stay humble, that’s how you got the win.

3) I’m not a businessman, I’m a business man   (Jay Z – We’ll go with “all the way up” even though it’s just a quote)

Post exit, you have now proven expertise in a specific area. Leverage that into a brand.

He brings up a good point, is there more that you can do with the attention your exit got you?  Is there something else you want to work on in that sector? However, I come at this one a little differently.

Many entrepreneurs possess a lot of self-confidence (some call them crazy to start in the first place), don’t let that risk-taking approach automatically bleed into your investing. Have a business plan and make sure you understand what your risk tolerance is before you start scatter blasting angel investments across the universe.

4) Check Yo Self before you wreck yo self  (Check Yo Self – Ice Cube)

Being successful at one thing, doesn’t mean you will be successful at everything. Know what you are good at, and recognize other people are better than you at other things. Get them on your team.

I’ve seen too many people assume that they are going to have continued success or another big win, and that usually leads to some very poor decision making. One challenge is thinking that you have more money than you’ll ever need. Too many people adopt a lifestyle and burn rate that eats up their capital. Or decide to pile money into their next start-up. Or worse, their friend’s start-up. Don’t be the pro athlete or the pop star that finds themselves in the bankruptcy court.

Now, let’s talk about how to get the right team in place and not make that mistake. I’m one of those people that have always been guilty of being cheap, too cheap in fact and it has come back to bite me many times. The more capital that you are investing, the more important it is that you get someone that has the right experience and is aligned with you. Paying for professional services is hard, just make sure you get the right team. More on that in a minute.    

5) As I leave my competition, respirator style

Climb the ladder to success, escalator style   (You’re Nobody (Til Somebody Kills You) – Notorious BIG)

Long term financial success is a methodical approach made up of repeatable wins managed in a risk controlled format. The only scorecard that matters is your own – define the game you are playing and stay focused on that game – don’t let the games of others cause you to lose focus on the outcome you determined matters for you.

Tushar brings up a good point. Successful investing isn’t about the big win, the most important thing is to execute your own plan and not take big losses. Erratic moves as an investor almost always come back to bite you, don’t let emotion drive your game. Instead, understand the risks you’re taking and keep your portfolio balanced.  

6) Ain’t no half steppin  (Ain’t No Half Steppin – Big Daddy Kane)

Exit was successful because you fully embraced the journey. Fully commit on the next thing if you want the same kind of success.

Many successful founders start to forget the grind and miss the commitment of the start-up world. Too often, they accidentally find themselves back in an operating role without the true passion for a project. We all know that start-ups aren’t a part-time job. Whatever you do with your time, make sure you’re committed to it.

7) Even the genius asks his questions    (Me Against The World – Tupac & Outlawz)

Seek out experts to help you achieve your goals.

So back to that idea of getting the right team. I’m going to bash most retail brokers right here but I don’t think you can ever know what excellent looks like until you’ve seen the world of investment opportunities at the global institution level. It’s difficult to grow up in a retail-oriented financial institution or trust company and understand what the manager opportunity set looks like.  No knock on that background or that specific person, they may be great, but the challenge is that they’ve never been exposed to the full menu. I have the same concern with affiliated bank platforms (Goldman, UBS, ML, etc). Plus, you have the underlying motivation to use that platform’s products (yuck). You also need to understand exactly what the rest of their practice looks like. Are you important? Do you resemble their other clients? And how, exactly, are they getting paid? Easy questions don’t always have simple answers, but the answers should at a minimum be transparent. This is where the relationship can take one of two turns – one that is a partnership or one that has more of a transactional type bent. Relationships that are partnership-based strive to deliver value to both parties over a long period of time; transactional based relationships often result in one party trying to extract value from the other party. Make sure you understand the incentives and motivations created by whatever arrangement or platform they might be using. Who owns their business?  What happens if they leave? They are essentially your key-person. You get the idea. How are you aligned at every turn?

8) So here I go it’s my shot, Feet fail me not, (just capitalizing Feet as a reference to my Peleton screenname), this may be the only opportunity I got  (Lose Yourself – Eminem)

Not sure what the lesson is here in this context, but can’t have a list like this without the G.O.A.T.

I think Tushar just wanted to include Eminem but I would use this to emphasize that you have some work to do when you hit the big win. The most important decision after your deal closes might be who you choose to be on your new team. Finding the right partner for your financial wealth is a big lift. These relationships are difficult to move with lots of friction from private investments, multiple accounts, and lots of shared historical knowledge between the parties. This is one hire that you want to get right (and not something that you wait on if you need to admit that you made a mistake). So get it right from the first shot!

Well, this turned out to be way more fun than I might have guessed. I hope you at least got a kick out of the quotes. Let’s hope that we have many of our founders and their teams that have these questions.

And if you’re looking for an advisor – I know one that I think is great. I’ll leave you with this quote from my pal – I love the intersection of hip hop and managing money…

I was thinking about our predilection for negative bias on the way into work today.  Mostly in the context of the broader community but then that led me to muse about partnerships and spouses.  

If I’m being honest, I was internally cursing the fools that run in the middle of the street in Boulder.  I’m right behind you with a very large automobile. I’m empathetic that it’s cold and snowing. And I know the sidewalks aren’t always even and may be harder to run on. I’m freaking impressed that you get out in the very cold weather and get your run on. However, it’s 8AM and much of the world is trying to go to work or school. Let’s all work together to not run you over. That means you need to actively get out of the “effing” way. There, that’s what really prompted me to muse about the negativity of human nature and the way we all affect each other. Moving on….

The negativity bias is strong, it’s part of what informs our survival and it’s clear that we are constantly looking for risks even in our closest relationships. And we see the challenges of that in our companies (often among founders) and in our partnerships (more than we’d like to admit). And yes, even in our closest relationships with our spouses and family.

It seems the human mind is built to evaluate risk and look for the negative in any relationship.  That’s why you have to work so hard to stay positive. My wife likes to say that you aren’t just “happy” but that you have to make an active decision to “be happy”.  It’s something you have to work at and, for me, that usually comes from a place of humility and gratitude. It turns out you have to work even harder to stay happy or positive in your relationships with other people. I came across this interesting article that claims we have to maintain a 5:1 ratio of positive to negative experiences in a relationship just to maintain neutral bias.  

Your physical condition definitely influences your ability to bias positive. That’s why some form of consistent exercise is important. Also, the temporary setbacks of physical sickness affect your mental health. I’ve been trying to shake a cold for the last 3 weeks. Every time I get to feeling better, I try to rally or push through some travel and end up sick again. It has definitely impacted my psychological state. I’ve been “fussy” to put it kindly.  Thus, the rant against street runners above.

As investors, we have to guard against our physical and emotional state creating a too negative or too positive bias.  We are experienced (meaning we wear scars from our mistakes) and it would be easy to become cynical given all the daily challenges of investing in early-stage companies.  However, as an equity investor you must be an optimist at your core. The game is controlling that peaks and valleys.

As partners, we have to work hard to keep our partnership in a good place. It’s entertaining but we also have put emphasis against having fun together to keep that magic ratio in place. We all work hard and it’s easy to miss having those positive experiences if you don’t prioritize them.  

And most importantly as spouses, we all have to make sure that we maintain a positive relationship with our most important partners in life. I think the secret to our group may be that we all have strong, amazing partners at home that keep us in a good place.  

So, go work on the positive and make a decision to be happy.  

The idea of an “anti-portfolio” reflects some of the great investments where you had the opportunity to participate but missed for one reason or another. There are many excuses, as you’ll see below, but the truth is that you completely screwed it up. This idea was first shown to me in the Bessemer Anti-Portfolio and I think many other VCs have since copied it. I don’t know that any LPs have publicly owned their own fund investing mistakes but some may be out there and I hope readers will point them out to me.  

This notion of the LP Anti-Portfolio came up twice in the last few weeks in conversations with managers and prompted me to go ahead and write this post. It’s an interesting, albeit painful, mental exercise to look back at decisions you made that turned out to be wrong. If you invest for a living, you’re going to have made A LOT of bad decisions. You can only hope to learn from them.  

Venture investing is a little different than other asset classes. I always say that you have to be BOTH lucky and good in venture and I think that I’ve been very lucky. Early stage venture, whether in directs or funds, is about picking the right people to partner with as founders or GPs. There is often less data available than buyouts, or growth, or credit, and the like when you make your decision. When you invest as a venture LP, it’s very similar to investing in early-stage companies. You are buying off on a team and idea with little proof. However, the passage of time provides more information and, now that I’ve been doing this a long time, there is hard data on how fund investment decisions turned out from earlier in my career. And with the benefit of more data, I think you can learn from your mistakes. So, I’ll lay out the most obvious ones here and try to throw in a few learnings too.

True Ventures II –  It’s only fitting that I start with True Ventures as they recently announced their new fund. We are happy to be investors in the two latest funds. And I was lucky to be an investor in every fund since True II while at UTIMCO and now here at Foundry. However, I can remember the chair I was sitting in when we decided not to invest in True II. It was late in the fundraise for them when we got in front of Jon and Phil at the little office on Pier 38. And there wasn’t as much capacity as we needed for a minimum investment (these should sound like excuses) which was a common problem and part of the reason I needed to move platforms. All that said, we knew that True would be a good investment but we didn’t make the exception for size, nor drop everything and pursue it. It turns out True II was a REALLY GOOD investment.  I’m glad we have the whole True gang as friends and partners, we’ve had a lot of good direct investments with them and hope to have a lot more in the future.

First Round Capital – I remember a walk from the St. Julien hotel in Boulder, Colorado with Rob Hayes. We were walking up Pine Street to my partner Jason’s house for a social hour post dinner. I remember the walk specifically but I can’t place the exact year. It had to be the 2008-2009 time frame. FRC was raising a new fund and it was already clear that they were building something special yet it wasn’t well-known to LPs. Rob and I had a very direct conversation about sizing being a challenge but it was perhaps the very first time that I internalized the challenge of scale for me as a venture LP. I remember how that felt, saying it aloud to Rob, and knowing that scale was the enemy of returns in this case. Rob and I have had a chance to stay in touch as friends and now fishing buddies (thanks @Ken) which makes missing those funds all that much worse!  Even so, we are happy to cheer for our friends at FRC to continue knocking it out of the park.  And congrats to Rob on his new role as Board Partner. I hope that means more fishing time too.

Lux Capital –  Peter and Josh came to see us when they were raising what had to be fund two or three? We were still in the old UTIMCO offices so I know it had to be 2003-4-5? They were doing something really interesting with their thought leadership via research and writing. However, they were super young (my age at the time) and we had a really hard time wrapping our heads around their success. The thing that made us pay attention was that Bill Conway had been involved and begun to personally mentor them. That, and they were doing some completely amazing technology investing. Mind-blowing, “can that actually work?” type of investments. They had recently done 3-4 deals with Arch at the time they came to see us and Arch gave them a strong endorsement. We decided not to make the investment from a top-down portfolio perspective. That is almost always a dangerous way of thinking. It should be an input but the bottoms-up view on the specific deal should be the heaviest weighting. At that point, Arch was doing a lot of physical sciences investing and we felt like we were getting some of the exposure already. That may have been true but we shouldn’t have passed. Peter and Josh were a special pairing of minds (and good humans). We should have backed them early and it’s proven out that they’ve built a special firm that continues to back really cool technology (that can actually work!). We are cheering for them and I hope we find a couple more direct deals to do together.    

Spark Capital Fund III – We were lucky enough to find Spark Capital as they raised their second fund. Mark Shoberg gets much of the credit for this one as he found and built the initial relationship. We invested in that second fund which turned out to be a great returner. It was also one of those funds where you could see early on that it had great potential. Interesting companies with early mark-ups and connection to our network of other funds that built conviction for us. Unfortunately, Spark came out to raise fund III just as the overall economy was dipping in 2008-9. UTIMCO had its own set of challenges in that period that kept us from making the investment. One of the challenges was that we had a lot of pressure on legal terms that caused us to push too hard as Fund III formed. We got sideways with Spark and they pulled the fund together without us. Ultimately, that was a very painful outcome. Fund III was a huge returning fund that we missed on. I’ll take some of the blame for that, as I’ve always struggled with the balance of terms in LPAs versus what we see in term sheets for company investments. That said, it was a learning moment. I think you should always focus on the cash flow terms in an investment (timing, order, splits) but the governance terms of LPAs are not where you should focus attention nor burn a relationship. There is certainly data in the negotiation of terms but it should not end up solely driving the outcome. I’m glad to say that the Spark team remains one of our favorite relationships and a big co-investor of ours at Foundry Group.   

The Column Group – The Column Group is one of those where we engaged, recognized there was something there but found a way to be too busy to get it done. This was a team that had the confidence to preach a concentrated strategy and the experience to back it up, even in a first time fund.  Mark Shoberg should get credit for raising this one to the top and I’ll take the blame for not focusing on it. I haven’t seen the actual returns but I’ve heard that they are pretty darn impressive. I had a hard time listing this one, or the next one, as I’ve never been a great selector of life science funds. I feel like we were very lucky with Arch, Sofinnova, and Sante in our life sciences portfolio at UTIMCO. Add in Terry at Polaris and you had some pretty good drug development investors there, even if it was all likely luck. Those funds all were accretive from a return perspective and were done based on special partnership dynamics, not our ability to really vet drug development or life science projects. That said, the next fund to mention is a life sciences fund as well.  

Flagship Ventures – Simply put, Noubar is a force of personality. We should have invested with him. There was a clear change of culture happening at Flagship when we looked at it and the partnership dynamics didn’t feel quite right. We felt that life sciences was going to be driving the firm but it wasn’t apparent in the partnership at that point. We also were really keen on Samir and weren’t surprised to see him leave. However, those are excuses. Sometimes you see a money-maker type of investor and you should invest with them. I’m happy to have seen Noubar prove the success of Flagship and glad that he and Bob at Arch have been co-investors on a few of the good ones.  

There are A LOT more funds where we should have invested and I’m sure that I will get more than a few notes that remind me of other mistakes. That is part of investing. You can’t do them all, nor will you get all of them right. Note that I’m only listing a few of those funds that were deeply considered and/or where real conversations existed. There is a long list of funds where we didn’t engage, usually because of size or bandwidth.

We were lucky to have such good access and opportunity sets. I’m always grateful to have the opportunities to partner with emerging managers (something all these had in common) and I’m sure there are many GPs that are thinking they should be on the list. I always cheer for other portfolios, even when we’re not invested.

Hoping this gives some more insight as to how/why LPs behave and it was actually fun to revisit some of these mistakes, a few that were corrected, and a few on-going relationships despite missing on some good funds!  

At the highest level, venture investors are looking for talent and to invest behind that talent. Obviously, it must be a talent that is lined up against an interesting opportunity. Hopefully, it’s a fully complete and talented team of people with specific domain expertise but it may just be a single founder with a burning desire to fix a given problem. No matter how much an investor may identify with the problem, you still have to believe that the single founder can be a magnet for the additional talent he/she needs to pursue the opportunity. Building companies requires a group of talented individuals to decide to work together in common cause.

We think about the world in networks. If venture investors are pursuing talent, what is it about their network that allows them to see and attract talent? How do they identify talent? And how do they convince the talent to work with them? How additive is the venture investors network to the founders? Will it help them succeed in acquiring talent? Is there shared domain expertise in their networks?

As a Limited Partner, we also consider venture funds as networks. A single GP fund is easier to discern than most. In the same way as founders, is that GP proven as a high-quality talent? In what domains? Is he/she positioning themselves in a way that maximizes their network effect?  Then, you start adding in partners. What are they good at? How do their networks overlap? How do they mesh together to create a stronger, wider network? What is the dynamic between the partners (this one is important)?

What is the network coverage of the venture firm? Where is it aimed? Will it attract the talented founders they are looking for? Where they are best suited to help? How have they tuned that network to attract the right founders? Just as importantly, do they know what they are and are NOT looking for? How defined is their filter? Can they get time back by quickly saying no?

There are many ways of tuning a network. It may be sector, themes, business model, geography, founder genotypes or any other specific view on talent. Our view is that the strategy of the firm must match the strengths of the team’s network. Defining your network and maximizing competitive advantage of attracting talent is critical to your success as an investor.

I started investing in venture funds with a very lucky first investment back in 2004. I’m now at LaGuardia airport headed home after attending the 14th annual edition of the firm’s limited partner meeting. Yes, that first fund is still active 14 years later!  

It is such a privilege to have a long-standing business relationship with good people. Sure, it helps that the returns have been great but I’ve also had the opportunity to see them grow and mature, to know them beyond the investments and to watch their team develop. To see brand new EAs grow to help run the firm, to see former analysts go on to become incredible GPs themselves. To see kids move from elementary to college and into the working world. This firm has been consistent in their fund size, limiting their growth to a few new partners of the same ilk, and carefully selecting any new LPs so that the overall size of the meeting has remained manageable.  

I look forward to this trip every year.  It anchors an opportunity for me to check-in with the manager but also to see the group of limited partners around the fund. Many of us have become friends and co-conspirators investing across several funds so that we see each other several times a year. LPs often form these informal alliances and this is one of the best.

What happens with all of this history together? You’re able to build real relationships and inspire a deeper connection to the companies and the partners. There is no need for salesmanship or portfolio cheerleading. Good returns give you the space but relationships give you the comfort to acknowledge the constant challenges of venture investing and share the inevitable issues that arise. A real partnership can absorb so much when you have good people around the table.

I hope that we have the privilege to develop this sort of relationship with many of our partner funds. To see these firms grow and have the success in not only investments but in building a real partnership of people and capital that form a community.

A final note – we were all very young in 2004!