Recast Capital Managing Partner Sara Zulkosky on Working With 65+ Managers | Seed to Harvest Ep49

Welcome back to Seed to Harvest, a podcast with founders, creators, and investors about their stories, frameworks, and tactics. Today I'm joined by Sarah Zulkusky.

That is perfect.

Managing partner at Recast Capital. Prior to co-founding Recast, Sarah served as a venture partner at Greenspring Associates, a venture capital platform with over $12 billion in assets under management. She also gives back to the young investing community as a coach for the Georgetown BCIC team, led by 5 young female investors this year, which I'm super excited to chat about, Sidecoach SCUs. So Sarah, welcome to the show. Thanks so much for joining us.

Yeah, thanks for having me. I appreciate it.

Yay, of course. Okay, so I wanna start things off with my first question is, what's something you wish others knew about you that you don't often get to share?

You know, obviously our, our business can be so metrics oriented and we don't really always get to know the, like the humans behind the businesses or the funds or the strategies. And so I always love to talk about just like family. And for me, I have 3 daughters and so it's a huge part of my life. Obviously they're what keep me grounded, what kind of refocus me to think about kind of why I do what I do and trying to support the innovation economy, right? And helping the future world, future generations.

I know, same thing.

For me, like it would certainly be, certainly be that. And just learning more about everyone else as individuals is always so wonderful.

I love that. What's like one interesting thing that you've learned from one of your daughters recently?

You know, you talk about, so my children are a little bit on the younger side and their personalities are developing. And you could say that many, all 3 of them frankly are fairly strong-willed and, um, can be immovable from time to time. But it's funny, it, it, you know, you look at that as like a, oh, come on, why aren't you listening to what I'm asking you to do? But the flip side of that is like, You know, I love the fact that you're happy and, and able and comfortable to say what it is you want. And I like hope that never changes, right? On some level.

Oh.

Because women need to do more. But you know, as a 6-year-old child, you should probably listen to your mom too. So good and bad of it.

I love that. I love that. Okay, so transitioning a bit more into venture, one of my favorite fun facts is that during your initial call with Recast co-founder Courtney, you two found out you have the same shoe size, which I think is just like hilarious and so convenient if you're like traveling together for things. But can you share more about how you two met and how your partnership has evolved since you founded Recast together?

Yeah, I know it's funny that, that shoe size comment comes up often. It's, it's, it's certainly funny. Fun fact about us. Yeah. So, you know, Courtney and I have been in one another's spheres for some time. We were both Kauffman Fellows, both involved in kind of women in private equity broadly. And But never really had the opportunity to work together. But it was a mutual friend of ours who was actually also an LP who at the time had heard us both talk about where we thought venture was headed, where we thought the opportunities were, and, and where we thought, you know, LPs could be more effective and impactful in venture. And it turns out we were saying the same things to her. And so she was saying, hey, why don't, why don't you guys have this conversation? And so saying the same things to me. And so, um, we were kind of reconnected through that conversation. through Yeah. this mutual friend, and the rest was history. It was great to kind of share the same perspective on what it is we thought was missing in the industry and, and frankly what we wanted to build. Yeah.

And I would love if you could talk a bit more about what Recast is and what you all do at Recast.

Sure. So Recast is a platform that both invests in and supports emerging managers in venture with a specific focus on more diverse partnerships. The platform was, was started by myself and Courtney, 2 institutionally trained LPs that had this perspective that it was kind of in the earlier fund iterations, smaller fund sizes, or said differently, more appropriately sized funds for their strategies, and more diverse partnerships that were generating the alpha that one would expect from their venture portfolio. And as a result, we felt that any kind of properly constructed venture portfolio should include diversified exposure to emerging managers, but properly selected. emerging managers, right? Because no one wants to be a median investor in emerging managers in venture. Certainly why you wanna focus on the top. And, but that, you know, that's also a part of the market that is very difficult for many LPs to access themselves. Maybe check size constraints, breadth of team, time to respond, bureaucracy, whatever the reason may be. Um, but also it's an underserved part of the market, right? There's a lot of room for emerging managers to be lifted up in more ways. And so As a result, we wanted to create a platform that could address all these issues. So today Recast has 2 parts of the business. The first is a fund investment strategy or fund of funds where we're investing in emerging managers in venture. And then the other is actually a tuition-free virtual educational program that we call our enablement program. And that's actually the part of the business that we launched first at the end of 2020. And to date, we've actually worked with 65 funds so far. Um, 82% of them, thank you, 82% of them have included at least one GP that identifies as a woman or non-binary, and 57% have included at least one GP of color.

That is awesome. I've been so inspired by your work in the ecosystem, and I just think that it's awesome that you and Courtney saw an opportunity to provide what wasn't being provided previously. And I, I think like a lot, like the emerging manager journey is scary. Like I talk to emerging managers all the time and like going through the process of getting to your first close on the first fund is like one of the scariest experiences. So I would, I would love to hear more on like your side of the table. Like how did it feel making your first LP check out of Recast?

Oh gosh. Um, you know, certainly, I mean, it was amazing, right? I mean, it's your, first of all, it's your own firm. So I, I, you know, I too, you know, building a firm, so I, I can understand how exciting it is to make those first few investments. But so our first was with an emerging manager that was raising their institutional fund 1. We had been tracking them for some time and I just felt absolutely amazing to be able to support their efforts, right? Mm-hmm. And kind of be their champion and market. It's honestly a feeling I probably won't forget.

I love that.

Well, speaking of feelings that you won't forget, one of my like favorite moments of the week is coaching the VCIC team at SDSU. Yeah. And you coach the Georgetown VCIC team, which national champions, right? What has kind of I'm just gonna toot your horn for you.

Thanks for sliding that in there for me.

Yeah, of course. Of course. What has coaching future investors taught you about yourself as an investor? I feel like it's a very like meta pursuit. You're, you're kind of like talking about things that you do every day in practice and people are asking you questions. They're super excited. And yeah, I feel like it's just like an interesting perspective to look at it from. So what have you learned from that experience?

Yeah, so I've been doing the coaching since 2015 and yeah, I think what I've found that the coaching kind of brings Reminds me of the fun of the business, right? We so often get caught up in like the minutia of it and building firms is difficult and the fundraise is difficult, but this is a fun job. This is a fun job. It's a meaningful job. You get to, you know, hopefully do some good with, with your efforts along the way of hopefully also generating outperformance. But it's so awesome. It's so great to see the students really leverage the competition to learn about venture broadly, you know, the innovation economy, how they can really help, you know, drive change in our industry. That seems to be such a common, a more common theme now with kind of this next generation of investors, which is awesome.

Yeah, definitely.

And kind of watch how that experience shapes them. You know, they go on to do amazing things, you know, some in venture, some in philanthropy, some working for big tech, some, you know, it, it on and on and on. And, you know, I have immense gratitude for, for Georgetown and, and the VC/IC competition. Like specifically because I, I participated when I was a student there as well.

And it really— Wait, so did I. That was like my like jumping off point into venture. That's like why I came back.

I love it.

Yeah.

It's like, you know, it's funny. I, it got me really excited about the industry up until that point. I had always been on the operating side of the business or of the house, I should say. And so, you know, it's just fun to watch that same excitement and that same kind of like introduction happen for, for other students after me. So I absolutely love it. And I think that love is also why I get so much joy out of our enablement program at Recast because, you know, You know, so glad I get to include that kind of educational perspective in my career as well.

What would you say, like, what coaching tactic has been most influential for that VCIC team in setting them up for success?

I mean, should I share that since you're—

Yeah, do it. Do it.

I mean, much like you, I'm sure you've seen it too, that this is an apprenticeship business, right? You learn by doing. And I think that's also true. For the competition, just getting the reps in. So as many companies as you can look at, analyze, trying to figure out what, what the risks are, why you should invest, why you shouldn't. I think that's, that's by far the best way to prepare. Mm-hmm.

Yeah. I, I feel like it's one of my favorite parts of BCIC is like there's been a couple students who you can just see like their eyes light up in like one class and it just like clicks for them. Yeah. And you're like, oh. You come into the dark side, there's no going back. But yeah, I, so let's go back to Recast. So now you've worked with 65fund and you focus on funds 1 to 3 for fund managers raising under $75 million. So how do you think about adapting your curriculum based on, I feel like as I've gone through my journey, there's very different, like as you're mentioning, hot button topics, whether you're a fund 1 or a fund 2 or a fund 3. So how do you think about adapting your curriculum based on where a fund manager is at in their journey?

So it's interesting. So for the, for enablement specifically, we try not to put any restrictions on fund iteration or size of fund. When it comes to our fund investment strategy, yes, that is where we're targeting funds 1, 2, and 3.

Oh.

Yeah, we talk about the ceiling of about $100 million, but that's largely because that's a part of the market that's so hard for many other institutional LPs to access.

Yeah.

But, you know, are there exceptions to that rule? There's exceptions to every rule, right? But like, that's typically what you're seeing. But on the enablement side, I don't wanna assume anyone at any stage in their journey is too far along to benefit from something if they opt in for it. If they truly believe that they could benefit from what it is we're providing, um, you know, we're not gonna tell 'em no. But as you can imagine, the vast majority of the folks that have applied and gotten in are those like in fund 1 or starting to think about fund 2, you know, that kind of $10 to $50 million in size, most $10 Typically many solo GPs. And so as we think about the curriculum itself, we try, I think the content is relevant regardless of where you are in your journey.

Yeah.

In many ways. Um, so, you know, we bring in our friends from the LP and GP community to help address issues around fundraising, and that means like everything in and around that space. So, yeah. You know, we certainly talk about the, the mechanics of your data room and, you know, how best to position yourself, like what, What legal levers do you have in building your firm, PR strategies, whatever. But I think a lot of it is around just how you tell your story, you know, the pitch itself. Are you being authentic to what it is like you are and what you can really offer and, and your differentiation in market? Mm-hmm. Um, you know, something that I know is so important to you all, just like the storytelling aspect of it. Like everyone can be better at telling their story regardless of how far along you are.

Yeah.

And so I think that's actually been where We receive the most positive feedback is, you know, that part has been just so helpful for so many.

I feel like storytelling is, is really challenging, especially as like a, as a solo GP, it's, it sometimes can be difficult to get like pure feedback. Like if you are, for example, if a fund manager's pitching an LP and they get feedback, it might be like just that LP's point of feedback.

Mm-hmm.

And there's like the transactional element. And so I feel like it's really helpful to be in a peer group where you're receiving feedback because then it's just There's no like transaction implied or anything like that. It's just like purely like, hey, here's like what I've seen work and here's where I think you could improve it. Or just like re— maybe reevaluate a part of your story so that it will work better. So I feel like that's, that, that like cohort-based learning is really cool. Yeah.

Yeah. And you're absolutely right. Like one, you know, everyone's opinion is just that, right? And then, and that's true for LPs too.

Yeah. I, I think that's like a, a challenging part as you are starting out your journey is to understand like where to apply like that feedback so Like what feedback to directly apply, especially if you're like in the fundraising process and, and talking to, you know, could be talking to like 1,000 different LPs and you're gonna get broadly different feedback from folks. So yeah. I, I wanna hear more about like some of your favorite memories when meeting new diverse fund emerging managers. Like, can you name some specific moments for you that have been really heartwarming?

Oh gosh. I mean, honestly, this sounds like a cop-out, but there's just, there's so many. It's like so hard to pick just one. You know, having worked with 65 of them now, like each one of them has had, you know, really heartwarming moments. I think, I think what I take away from it most is it's just, it's some of my favorite moments are when you see these managers that you've built a relationship with over 12 weeks or more, because we do try and engage with our folks like post-program as well, as much as possible.

Mm-hmm.

You know, when they hit, you know, work through the challenges that they've identified, when they, you know, really set themselves apart, launch their funds. And have these things to celebrate, right? Get that anchor investor, you know, fill in the blank. It's just been, been awesome to be able to kind of cheer them on along the way and help them celebrate. Super rewarding.

Yeah, I love that. Well, let's, let's dig into the nitty gritty. So when deciding success metrics for managers raising their second fund, in your experience, what specific qualities can managers have at this time in order to outcompete others in the market?

So, you know, I think this is true for whether or not you invested in as an LP, whether that LP invested in your fund 1, or if it's someone coming like net new to the relationship. I personally believe it really comes down to, did you do what you said you were gonna do? You know, did you pursue the strategy you set out to? You know, did you win access to the quality of the deals that you claimed to have access to? You know, did your differentiation really shine through in a way that, you know, we Thought it would when we underwrote your fund one. Did I get what I was betting on? Right? Like, does that story come about? So that's certainly a big part of it. I would say too, the difference between managers fund one and fund two sometimes is very large. There may be changes in fund size, drastic changes in fund size. There may be changes in team. And so how best to kind of articulate those changes can make or break how your LPs feel about it, right? So how do you justify doubling your fund? You know, is it because you can take larger bites? of each of the deals, or you're hiring more, more partners that can handle that board load, or, you know, fill in the blank, whatever it is. Is there a big strategy shift? Why does that make sense? Are you just being thoughtful about execution and thoughtful about building your firm? I think it, I kind of side note of that, or like a byproduct of that is just the discipline.

Mm-hmm.

That you have, right? And we hope, and I'm sure many LPs like me hope to be building or to be supporting industry-leading franchises in the future. And that starts at fund 1 and fund 2. And, so I think it's that transition point is so critical and being really thoughtful about what it is you're, the decisions you're making.

Yeah, I, I just chatted with, um, Monique Woodard at Cake who announced her fund today, which was super exciting for her. But she talked a lot about how, like, one of the hip-hop albums that really impacted her was Reasonable Doubt by Jay-Z. And she was talking about how fund 1 is really that, like, there's reasonable doubt on fund 1, but ultimately those fund 1s can become classics. And that's really been her goal with Fun Ones. So I'm curious, are there any music albums that have like impacted you in your formative years or ones that you might go back to?

Wow. In my formative years.

This can be like this, you can like, you know, out yourself a little bit if there's any like guilty pleasures that you enjoy going back to, maybe like a pump-up song for, you know, an important meeting or something like that.

So, I mean, I personally today, I love '80s music and by far my favorite, like I just, all of it, any of it, like I love it. So that is definitely my kind of feel-good music at the moment. But like back, you know, I, I'm not even gonna out myself with like the silly songs that I loved back in the day. I mean, it was kind of ridiculous. Yeah, I'll leave it at '80s. I love, I love that. I love the '80s.

No, that's awesome. My, I'm like borrowing in air quotes, my dad's record collection and speakers from his college So definitely have some Beck in there. So I love that answer. To go back to more venture stuff, sorry for that sidebar conversation. When, what do you, what do you wish that GPs knew coming from the LP perspective? And you can answer this either from the lens of Recast or from working at Greenspring. I would, I would love to hear more about that.

You know, I guess that from the LP perspective, it were, if it were someone pitching me, so something I would hope that most GPs understand or understood more is like, know your audience, right? Like when you go into a pitch, like understand the LP that you're speaking to, what they care about, the type of organization they represent. You know, pitching a, I'm making this up, but pitching a climate fund to a fund of funds that perhaps has already made bets in those areas where it's just difficult, right? If you're providing diversified exposure, like I, that's gonna be hard.

Right.

So, But, you know, always happy to be helpful. Similarly, if you're talking to, you know, a large endowment that is, you know, their allocations are largely spoken for, you know, still build that relationship for sure. But don't be surprised, you know, certainly like in markets today when they're not able to execute immediately. There are organizations on the flip side, just like talking about philosophically, there are foundations that are very focused on climate, on racial equity, on caregiving, on, you know, fill in the blank. And they can be great strategic fits for funds, but if they have a strategic focus that is not in line with what you're offering, that again is an uphill battle. May not be the most efficient use of your— the final example I'll give is just like check size constraints, right?

Yeah.

If you're raising a $15 million fund, there are, you know, many large organizations are not able to write a check of a size that's appropriate for your fund. So I think it's just doing your homework. It'll make your fundraise process so much more efficient, so much more effective.

I love that.

We've seen people fall down time and time again on it or just waste time.

Yeah.

Right.

What are kind of like some of the common mistakes that you see emerging managers making in the fundraising process?

I mean, honestly, it comes back a little bit to storytelling.

Yeah.

Um, you know what people want to understand why you are the right GP to be focusing on the strategy that you're pursuing, like why you're the right person or why you're the right team. And if, if it's hard for me to understand that, then it's very unlikely that I will commit, right? And so what we're looking for are those strategies that are certainly differentiated, but the individuals running those firms have the relevant experience and networks in order to execute. And we can just fall down. You may be the best team ever, but if I don't, if that doesn't come out in how you're telling me about your strategy, it's gonna be very difficult for us to commit.

Mm-hmm.

And I like that.

Well, it's also like that is a story that you have to stick to as well. Like you were saying, for a fun 2, it's like you're looking at the, the integrity of the word. Like, did you say what you were like? Did you do what you said you were gonna do? Yeah. Did you keep the promises that you made earlier on? So it sounds like setting yourself up for success means like telling the most authentic story to you and then executing on that is, is sort of what you look for in like the fun 1, fun 2 combo.

Yeah.

Absolutely. Cool. What advice would you have for emerging managers fundraising within the 2023 vintage? Do you think it's going to be as challenging as 2022 was? Are you seeing any like shifts and trends from the institutional LP perspective? Would love to hear your thoughts on that.

Yeah, I mean, I'm, you know, I feel like all many venture capitalists are, you know, an optimistic bunch. So I'm gonna put on my, you know, optimistic hat and I, I do believe that 2023 will be better. I think that a lot of folks that paused their programs are coming, LPs that paused their programs are coming back to market, are, are gonna be making, or will be actively making allocations in 2023. You know, I think there are, there are many folks that didn't stop, right? You know, they see it, venture is a long-term game and they're not gonna try and time the market. And so they're continuing to play. And on the flip side, there are plenty of folks that perhaps had smaller pools of capital that really, you know, took a hit from the public market. So But I do believe folks are coming back, which is exciting to see. But that being said, it's not what it was.

Right.

Right. And not that it should be the environment where it was, where everyone was kind of just kind of—

FOMOing into things.

Yes. And so I think differentiation, how you stand out is gonna matter more than anything if folks are, you know, tightening their purse strings a bit, making allocations, but perhaps not as much as they have previously. It's just standing out. Yeah. And you stand out in any number of ways, but that's what matters.

Cool.

Um, well, I wanna, as we wrap up this conversation, I would love to hear what are you most proud of coming out of 2022?

Oh boy. You know, I think I'm really proud of the work that we're doing at Recast. I'm really proud of kind of continuing to build this platform with an awesome team. Despite this very crazy market, you know, we're working really hard and it's paying off. And so it's, it's awesome to see that come together. It's also awesome to be able to celebrate the folks that we've been able to work with. And so just feeling really lucky to be able to continue doing that.

Love that. And then what are you looking forward to in 2023?

I definitely just doing what we're doing and this is like, I can't imagine a better job. So feel like so happy to be doing that and Not to like leave a cliffhanger, but we do have like really exciting new things that we're looking to launch in 2023. So, you know, keep an eye out for us. I think there's gonna be some really great ways that we'll be able to further support this community and invest in the community.

So, yeah. Amazing.

Really excited.

Well, yeah. Where should we follow you on the internet? LinkedIn, Twitter?

Give us some details. Yeah. LinkedIn is, yeah, LinkedIn is great for both myself and the firm and my team members. Twitter as well. @SarahZolkowski. Easy to find. Yeah, it's, it's exciting times. So please do reach out. Please do connect. We'd love to hear from folks that are, you know, like-minded and we can stand shoulder to shoulder with that wanna do this work.

I love that. Well, Sarah, thanks so much for joining us today. I had such a great conversation with you and really looking forward to sharing this with other folks.

Thank you. Really appreciate it.

Special thank you to producer Riley Jennings and podcast editor Tate Doherty for your help on this episode. If you're listening and you'd like to connect with me, follow me on Twitter or LinkedIn, Paige Finn with 3 N's. Thanks again for listening. I really appreciate it. You can look out for new episodes every Monday at 5 PM PST. And if you'd like to learn more about the strategies and tactics of seasoned institutional investors and rising venture stars, check out our YouTube channel at Seed to Harvest. Also my TikTok channel Seed to Harvest where I post a lot of behind the scenes. Um, and if you like this episode, please rate and review this podcast wherever you get your podcasts, if that's on Apple or Spotify. Anyways, thank you so much for listening. I hope you have an awesome rest of your day.