Investing in Emerging Managers and Markets : A Fireside Chat with Paul Bragiel

All right, and we're live. Hello everybody, welcome, welcome, welcome to this VC Lab webinar. We're super excited to host you. My name is Mike Supravici. I am the head of acceleration here at VC Lab, and I'd also next like to introduce Adeo Aresi, who's the CEO of VC Lab, to say a few words, and then we can go ahead and get started with the topic of today.

Hey everybody, my name is Adeo. Very excited to be here today. We're going to be talking about launching a new venture capital firm, which obviously includes also launching a new venture capital fund. And there's really no one better than to have this conversation with than our guest today, Paul Braguil. We'll introduce him in one second as people continue to stream in. Let me tell you one second about VC Lab first, uh, before we jump into the conversation with Paul. So VC Lab is a program that lasts approximately 5 months, and it is designed for new managers. These are individuals launching a new venture capital fund or firm to go through a structured process and really create that firm in the most efficient way possible. And so if you look at starting a venture capital firm and closing on your first venture capital fund, it's a difficult and confusing process that can take anywhere from 9, 12, 18, and sometimes 24 months. People that successfully complete the VC Lab Accelerator for their venture capital firm are closing on average in 6 months. So we're— I would say the average close without VC Lab is between 12 and 18 months. So maybe 14, 15 months. And so we're easily more than half time savings or twice as fast as going on your own to start a fund. Let me tell you why and how. It's not some magic fairy dust. So there's a lot of complicated things in starting a fund. We'll be talking about these with Paul in a moment. And a lot of times if you don't know what you're doing, you do things out of order. So you work on a very big deck and you use that deck to pitch LPs, but then you realize you got everything wrong and you spent a lot of time on the deck. So you have to go back to the drawing board. You may hire a lawyer too early. So what we try to do is we say, look, Mike and I together have done 14 funds and I've done a few more. That doesn't make us— Paul is certainly more prolific than we are, but we're up there in terms of the number of funds that we've done. And there's sort of a sequence of doing things and it's not necessarily the right way, but it's the most efficient way. And we're constantly tweaking the curriculum of VC Lab so that you're not doing things that don't matter and you are doing the most efficient and most effective thing at your time. And as a result of that, dedicating, you know, 20 or so hours a week, you know, and up, you can close a venture capital fund and launch your venture capital firm in about 6 months. And so I'm not sure if you can do it much faster than that. We'll certainly always be trying, but that's our goal is to, right now we've got it about twice as fast as going it on your own. And we're always looking for new ways to speed it up. So if you're interested in learning more, you can go to fi.co/vc. Mike, if you could paste that into the chat. Let me give you some housekeeping rules. We're already at 83 people, which is great, and I'm sure more will come in. Welcome, everyone. So I'm gonna be talking with Paul about launching a venture capital firm, being a new manager, being a new manager in new markets. And if you have questions you'd like me to ask, there's a Q&A button at the bottom of your screen. Click on the Q&A button and type in your question. You have the ability to vote up questions from other people that you like. You can vote those questions up and then the top voted questions we'll try to get to first. Now, I am going to weave in questions that are somewhat relevant to what we're discussing. We may go out of order, But please do vote up questions that you want to see answered because we will definitely get to all of the top voted questions in the talk. Will there be a recording available for this session? First question. The answer is yes, and we will send it out. See, ask questions and they get responded to. So you got the hang of it. Q&A button, type in your question, upvote it. We'll try and work it in. Mike, before we get started with Paul, any other quick announcements or—

Yeah, so we— the applications for the next VC Lab cohort are open. We have an early admissions deadline here on the 27th of this month, and the folks that do apply early, they get, you know, priority access. It helps us also kind of sift through their applications. So make sure that if you are considering applying for VC Lab that you go ahead and, and, uh, submit an application. If this is your first time learning about VC Lab, if you can go ahead and look in the chat, I posted a link where you can learn a little bit more about the program and what it's about. Go ahead and go to fi.co/vc.

Yeah, you may want to post a blog about applying. So we had almost 2,000 general partners apply last time, and we have around 500 so far. With a few weeks to the early deadline, so we might even have more than 2,000 people apply this time. Mike can post in the chat a link about how to apply because it's not hard, it won't take very long, but if you do it better and take it a little more seriously, your chances of getting in the program will be much higher. Okay, let's, let's get started with the meat of the program. Today we have a lovely guest, someone who's amazing in the world of venture capital, Paul Bragiel. Paul has been involved in funds pretty much on every continent in, uh, in the world, uh, and in one way or another as an LP, as a GP, as part of the management company. So he knows more about new managers, more about new markets, and more about starting a venture capital fund than almost anyone I know. And it's a real honor to have you here, Paul. Please add anything to your bio or introduction that you think people should know before we get started, and I'll then jump in with some questions.

I mean, I think you covered it pretty well. I mean, in general, I'm excited about, uh, yeah, working with new and up-and-coming managers. I believe, um, that they, you know, one, are the hungriest, two, they produce the best returns, uh, and three, yeah, you get to go out there and explore completely brand new markets or new verticals as a result. So I've kind of made it my life's work to kind of pass on some of the knowledge I've done, I've learned in kind of building all these funds and get involved with some great new folks. So thanks for having me. Yeah.

So I know you have a number of funds all around the world. You know, maybe if you want to just tell some anecdotal stories of funds that you're involved with as an inspiration to the people listening, you know, the positive side, we'll cover the negative side a little later. I know you've had some big exits and things recently, but any positive anecdotal stories from funds you're involved in?

Yeah, I mean, this all started out by accident, kind of, right? So, I mean, my history goes back— I'm a former entrepreneur. I built 3 companies. So I'm guessing a lot of people in the audience are entrepreneurs that either exited or are looking to kind of transition to the next step in their life. So I've been in a lot of your shoes. And yeah, so I, you know, exited my most recent company in 2010. So it's been 11 years. And, but after I sold the company, I was determined what to do next. I started doing some angel checks, kind of build my portfolio. And that's when I stumbled upon the world of venture capital. I mean, I knew what VCs were and I raised money from them, but I didn't necessarily think of it as a path. But then, yeah, as I started working with my friends and putting my mind to work, I'm like, hey, I should formalize this. And that's kind of was the beginning of it. We launched the first accelerator in San Francisco called IO Ventures. This was in 2010 timeframe. And that's, yeah, the whole journey began from there. And one thing I noticed at that time, and this is about 11 years ago, is like You know, talent is global. There's smart people everywhere. It's just they weren't being serviced by most of the VCs in Silicon Valley. And so people like Adeo, myself, a few other misfits, we made it kind of our personal journey to go out there and try to, yeah, one, you know, bring more resources to entrepreneurs around the world. And then after that, how do we bring more money to those entrepreneurs around the world? That's kind of where I started launching our funds. The first one I raised outside the United States was One in Southeast Asia called Golden Gate Ventures. That's the oldest fund. It hits our 10-year anniversary this year. And we're now on fund 3 with a growth fund on top of it. So yeah, things have been progressing really well. And we're still seeking to launch funds in Africa, Eastern Europe, Nordics. We're looking to do stuff in Latin America. And then we also have a bunch of other funds in specific verticals as well too. So yeah, I get to touch a lot of cool stuff and work with some amazing people around the world.

[Speaker:BRIAN_BRADLEY] So you have— let's dive into that for a moment. There's already an interesting question sort of related to this, but And it will be a good lead into the question, which is, you know, you have these geographic-based funds like Golden Gate Ventures in Singapore and the Savannah Fund that's in Africa, etc. But then you also have the vertical funds, as you brought up. And, you know, for new managers coming into the field, what are your thoughts today? I mean, there's still tons of places around the world that don't have venture capital or don't have enough venture capital. Would you say think of it based on where you are, or we need more vertical funds? What's your view these days?

It's a little bit of both, right? So there are certain regions that are not spoken for. So yeah, if you are in one of those regions where there's less than a handful of funds, then that's an opportunity for you to be a regional fund or country-specific fund, but generalist in its, I guess, scope of what you're investing in. But let's say you are in Silicon Valley, or let's say you are in Singapore nowadays, or you're in China, there's a lot of funds there, you know, hundreds of funds in some of these places. So if you're in a place like that, uh, where you can't necessarily differentiate yourself by being, uh, I guess, you know, regional in a country that's not as defined, or a region, um, then you should go look at a specific vertical, right? So, hey, I want to get into climate tech, or I want to get into video games, or hey, I want to go out there and do, I don't know, self-driving cars in this, you know, only startups, right? So like, you should go out there and Find something where you could go out there and be an early player. And the reason this is important is a lot of the best funds in the world are funds that started early with an ecosystem. So be it a regional ecosystem or a vertical ecosystem. So let me give examples. If you look at the best funds in Silicon Valley, a lot of these funds are 20, 30, sometimes even 40 years old. You look at Sequoia, they're not new people on the block. All the best funds are usually pretty old, with a few notable exceptions, right? I would say Andreessen Horowitz is an exception, but Marc Andreessen invented the web. So he deserves an exception, right? You know, funds like Founders Fund. I mean, that's the whole PayPal mafia, right? So for you to go out there and start a general Series A fund in the Valley, it's near impossible nowadays, right? But if you were to go out there and start a general fund in, I don't know, Central Asia, you have a chance of cracking that. And so you should go out there and try to do that. So yeah, you want to go out there and be early in the ecosystem, be it the vertical ecosystem or the regional ecosystem, and then grow with the ecosystem. And that's usually where the best funds come out of, in my my kind of opinion. And I'd say also with a lot of data backing it as well too.

No, that's great. And so I heard my speaker was echoing a little, hopefully this is better. So let's dive into that just a little bit deeper, okay? Because I think thesis is super important for a new fund. And I'm gonna ask specific questions about thesis and Michael has a question in the Q&A, but So if, if I'm in a market, let's say Central Asia, and there aren't any funds right now, would it make sense to do a vertical fund? Or would you say in that case, hey, do a generalist fund because there aren't generalist funds?

I mean, okay, so there's two answers to this question. Like, if you want to focus on the region of Central Asia, uh, no, you should do a very broadly themed fund because there aren't enough deals to go out there and do that. But let's say you just happen to live in Central Asia, but you are the number one expert on artificial intelligence. And you know everybody in the world on artificial intelligence. Well, you could launch an AI fund that's global nature out of, I don't know, Almaty or something like that. But you wouldn't be doing Central— if you want to do an AI fund only in Central Asia, just because you're an AI expert living in Central Asia, you've limited your options and you won't find enough deals to kind of make a fund justified. So you kind of have to look at what your prospects are. You have to see kind of what a potential pipeline could be. You have to see what the region you're good at or what the vertical is kind of offering and what the options are, right? Like you could be too early to a place too, right? You could be too early to a region or you'd be too early to a vertical. Let's say quantum computing. That might be too early for a VC fund, right? I have heard of one VC fund that came out recently, but like it's like there's certain things that you might be too early where you just won't have enough deals and you'll be just kind of sitting there twiddling your thumbs for 3, 4 years and your LPs will be saying, what the hell are you doing with my fucking money? Right? So yeah. So that's kind of—

Yeah, you need, right, deal flow and demand from LPs are super important. So, which is I think a great way to think about your thesis and your focus. Will you have enough deal flow and will there be interest from LPs? Which is a good segue in the question to Michael, from Michael. I know that the vast majority of VCs are focused around technology. However, I'm trying to start a film or TV development fund Is there appetite among LPs for something like that? Would found— you know, would we support a fund focused on the Hollywood entertainment industry? So I can answer the second part of the question, 'cause he's asking if we would. So we're not opposed to any type of fund, I think. And this is a great question because I'd love to hear your thoughts on this as well, Paul. But our view is like, you really test your thesis, sort of like what Paul just said, like make sure there's enough deal flow out there, but also make sure there's enough demand from LPs out there. And you may find that you have lots of deal flow and no demand, or lots of demand, as Paul brought up with the chip company, and not enough companies. Right? So you sort of have to market test, but I'd love to hear your views on that in the holidays.

I mean, let's say Hollywood, perfect example, right? I mean, so, you know, you could go out there and yeah, be a film financier company. Um, this exists already, right? They're maybe not called VC funds, but there's like, you know, film angel investors, there's film financiers, there's film, I guess, you know, pockets of money out there, right? And if you structure it in a kind of VC format, it might work. I don't know the actual terms of some of these, you know, film financing companies and what kind of, you know, LP/GP structure they have or what kind of carry structures they have. But that's something you could test the market. But no, for sure, I mean, that's intriguing, right? I mean, Hollywood is being, you know, re-innovated, right? You know, companies like Netflix and, you know, you see Amazon coming in and you see HBO Max and Disney have to reinvent themselves. So there probably is gonna be some disruption. And also there's a lot of tech entering into Hollywood too. So you're seeing everything from all the VFX studios to you know, players like Unity coming in and, you know, reforming what it takes to kind of do stuff in real time. So I think Hollywood is constantly being renovated and is being disrupted from many different angles. So there's absolutely no reason why there couldn't be a fund that focuses, uh, and some kind of intersection that whether it's tech-focused or not even, it's just more like traditional film financing.

Keep your questions flowing, guys. We have already a few questions. You click the Q&A and you type it in there. Don't put questions in the chat. Okay, um, and, and I want to talk a little bit a bit about this, how important thesis is to a fund, right? Uh, and because it's sort of like Michael's questions, there are other questions coming in similar. So the thesis of a fund, basically, in my experience— I'd love to hear your, your, your comments as well— defines, um, the stage. Well, there are lots of things. So the size of the fund, so how much money are you raising, The stage that you're gonna invest in, and there, those are pretty, you know, it's early stage would be pre-seed, seed, Series A, then you might have growth, which could be Series B, or just you call it growth. Then you're gonna have a geography, right? Which is an area of the world, and you will often and/or have an industry. Now, your last piece of the thesis, if you can fit it in, is your secret sauce. Why you? What are you doing or what's special about you that will make this fund succeed? I love to hear, is there anything else you would add and how important is thesis, Paul?

[Speaker:PAUL_VANDERHEYDEN] I think it's important to reverse engineer the thesis from who you and your team is. Let's say my background, I'm a tech guy. I did a lot of stuff in consumer internet. I did a lot of stuff in gaming. If somebody said, hey, Paul, you can go out there and start a fund doing farming, you know what? Maybe I'm not the best GP to do that. Maybe I could go out there and team up with 2 other farming experts and say, I'm bringing my gaming social media experience to farming. And then maybe it makes it more viable. So what I'm trying to say is a thesis is super important. And you could go out there, you know, some really cool stuff and, you know, some really interesting companies. But if you and your core kind of founding team have no relevant experience in that core thesis, it's dead upon arrival, right? So you have to make sure that you come with a very compelling story, you're going after a very cool market or a very cool region or a combination of both, that, you know, you're targeting the right size amount of the fund, right? If you want to go out there and raise like a, you know, $10 billion fund, focusing on just small consumer internet companies, that makes no sense either, right? Just to make sure, yeah, good topics, good, right size for that market in that region. And then does it fit with who you are? Because if you do not fit that part, it doesn't matter how amazing a beautiful story it is, they're not going to have confidence to invest in you, right? So you can weave the best story, but if there's no meat behind it, it's done. So make sure that you are Building something that plays to your strengths and plays to your connections and plays to your life's work, that's going to help you succeed in raising your first fund a lot more easier. And it's still going to be really hard. It's going to be still like a pain in the ass. You're going to be begging people you never thought you'd be begging. But if you don't have that part, you are done. Don't even try. Right? So yeah.

So were you digging the SoftBank Vision Fund with the $10 billion?

No, not at all. Was I referring? Maybe subliminally I saw that deck probably like months ago. But no, I don't know what I was referring to. Yeah.

So I have, I, you know, I had to just make, because, you know, they have this $100 billion consumer internet fund, and, you know, but it seems like he could actually justify that.

He has made money on like Alibaba. So like, it wasn't insane for me. It's insane, but it wasn't insane. He pulled it off, right? He got, you know, $45 billion from Saudis and these guys. Like, um, but like, if you are, let's say, an entrepreneur and exit your company for, you know, $50 million, which is fucking amazing, right? And you're like, hey, I'm raising a $10 billion fund. It doesn't fit. It's like—

Right. Well, so, you know, I had an example and I didn't know how to break it to the guy, but it's actually a friend of mine and he's like, I'm starting a $40 million, you know, pre-seed, possibly seed stage fund in New Zealand. And I'm like, I don't, you know, that's enough money to fund like every company. So, I mean, I don't know, when you hear something like that, Do you feel that's too big? Give me your sort of gut reaction. And then for a lot of people who are listening, people assume a first-time fund size that is too big, in my experience.

Yeah. So I am of the belief that for your first-time fund, smaller is not necessarily bad, right? Like, it helps you kind of ramp up, it helps you close faster, it helps you learn on less money so you could fuck up on less people's money if you do fuck up. Um, and so I think it's really important, right? Let's say $40 million New Zealand. I could see a world where that might happen, but it'd be a very specific strategy. It'd be like, hey, I'm putting in at the seed level, I'm putting into, you know, 20, 30 companies. I'm kind of blanketing the whole country. I'm taking small checks and I'm maybe deploying 25% of the money up front and then 75% for follow-on, right? Maybe something like that might work. But if it's like, no, yeah, we're gonna go out there and do all the deals and it's like, oh, maybe it doesn't work, right? I haven't necessarily dived deeply into the New Zealand scene. I haven't been there for 4 or 5 years, but like It doesn't sound like it kind of, you know, passes what is the sniff test they call it. So like, yeah, you have to kind of— it has like—

because the stage— and let's, let's explain why, Paul, if you don't mind. But yeah, there's stage, amount, and market.

Yeah.

And that's where misalignment can happen.

Exactly. Yeah. Yeah. It's like you have to, you have to know the market that you're targeting, right? You have to know how many startups are there, what kind of stage are they normally at, what kind of financing have they gotten historically, uh, what kind of interests are there, uh, let's say you're in a different emerging market, what kind of interest is there from, you know, parties from outside that region investing into that region. You have to kind of take all these things into calculation to see, does this even make sense? Right? Like, am I raising too much? Or like, hey, maybe I'm raising too little. There's all these kind of factors. And yeah, and once again, I want to really hammer this home, make sure you're playing to your strengths. Like, don't do things just because they sound cool on paper, but doesn't mean you're good at it.

Right?

It means you could probably learn how to do it over time, but investors won't give you money to learn on their dime, right? You have to learn it on your own, making— doing angel checks or, you know, starting a company at Space or whatever it is.

And starting small means that you probably have a really good chance of raising that fund, making the mistakes. I don't know if you know, 500 Startups started— it's a very big fund organization today with a $5 million fund.

Yeah, I mean, our Golden Gate Fund, um, it was $2 million in and then matching from the government $8 million, right? And we ended up using most of the matching, right? So it was effectively like, you know, a couple million dollar fund. And then we did like another one, and then it grew, and then we gave them $60 hundreds, and now it's hundreds and hundreds of millions, right? So like, starting small is not bad. Just the key thing is do it, close it quickly, put the money to work, build an amazing portfolio, work your ass off to make sure those companies have up rounds and showing momentum, and then you can move on to your second fund faster. There's nothing wrong with that.

All right. Now we got tons of questions coming in. Thank you, everybody. Upvote them, and I'm gonna work through them with Paul, okay? Okay, so remember, upvote the questions by clicking the little thumb if you like a question and we'll try and get through them all.

Yes, send us cool stuff. Okay, let's go.

All right, so great. Ben Bui, hopefully I got your name right, is asking, while all VCs claim they invest in the team, they still bound to make ROI for LPs and there are heavy corporate VCs. How can a VC effectively become founder-first VC and not financial first?

Well, I think that can be mutually complementary, right? Like, you know, a lot of great founders produce great returns. So you have to just be very strict with your thesis. That's what you're doing, right? I'll give you a perfect example. Like, I like to claim that, you know, our funds are pretty founder-friendly. We do have to return to our, you know, LPs. But like, you know, when we're pitching it, we tell our LPs like, hey, some of our companies might take a little bit longer to develop. Or we might do some kind of, you know, black kind of ugly duckling, kind of, you know, like kind of off-beaten companies because we believe in the founders. And you have to get your LPs used to that before you close the fund. Now, if you close the fund and all of a sudden say, yeah, our thesis has changed and now we're doing this, you're going to get a lot of LPs that are pissed off. So you have to just be very, I guess, deliberate in the way you're presenting it and making sure that everybody is along for that vision. And yeah, and then it comes up to you. You have to actually walk the walk, right? So some people talk a lot, but then if you're walking the walk, other founders will seek you out for being founder-friendly.

Let me just drill into that one second with something that I've seen funds do and get your thoughts on. So a lot of them are looking at the 10-year time horizon as the pressure point on the founders, right? Because they're like, I gotta get liquidity in 10 years. So I'm seeing more and more funds with longer time horizons and some funds even without any time horizon, like endless, right? I love— is time horizon a factor in that, in your opinion?

Yes, it can be. But you know what? In reality, if you have a company that's doing super amazingly well and you're hitting that 10-year mark, the LPs would be like, no, let's let it ride, most of them, right? Or some of them might say, yeah, we really need to leave because of some kind of, you know, institutional laws. You could buy them out or you could do secondaries. There's a way to kind of, you know, be founder-friendly, not screw over the entrepreneur while also, you know, placating and working toward your LP's needs. You have to just be, you know, you have to have an open conversation to be transparent with both parties and say, what do you need on this part? What do you need on this part? And hopefully you could go out there and, you know, do some nice resolutions for all ends. Wow.

There's lots of great questions coming in. All right. What are your thoughts on micro VCs working together for mutual benefit. Lots of solo GPs and micro VCs are forming. My thinking is they'll need a different approach than the classical secretive approach. This is from Fardan. Great question.

Yeah, I mean, 100%. This is already happening, uh, in many parts of the world. I think that, um, yeah, I mean, I would rather fight that— I mean, I'd rather be kind of clever than fighting people, right? So, um, yeah, I would say—

well, that's the thesis of VC Lab, right? Because you have a cohort base. No, I mean, VC Lab is great for that, right?

You're going to go out there This is what sucks about VC in general historically. A lot of them would be very kind of in their own silos. They weren't sharing information. You didn't even know like what standard terms were when you're raising a fund. And hell, if people ever shared an LP. I don't think I've had many VCs share LPs with me in the past. That is changing. And it's up to guys and girls like you to go out there and change that attitude. So if you want to be more collaborative, you have to be the one who extends your hand the first 50% of the way. If you're not doing that, then You're not talking, you're not walking the walk, you're just talking a lot of BS. So yeah.

Yeah. And I think VC Lab is a great example of that.

Okay.

So is it feasible to start a fund without being a GP? For example, would you advise against starting a fund if you have only reached a VP or associate level? So this is, I guess, you're already a vice president or associate.

Yeah. I mean, I've seen all crazy things happen. I mean, what was my path? I was an entrepreneur. I never made a VC check. Ever. I did angel investments, but like, I was not a VC. I didn't know about VC structure. I just made it up as I went, right? There was a lot less information back then too. So no, absolutely, if you're like a star associate or you're kicking ass as a principal, you're sourcing a lot of deals, and you feel that you kind of have a unique angle that maybe the firm you're working at is not doing, it's totally cool for you to leave and start your own thing. The key thing though is, one, if you leave amicably with the firm, they can be very helpful in kind of sponsoring you. So that's one way of doing it. Or two, If you already have a lot of LP connections and you feel you could do that as well, then yeah, I mean, by all means, go for it. There's nothing stopping. I mean, it's like being an entrepreneur. You don't have to work for somebody. You could always start your own thing.

Well, and I think right now is the time where we need more diversity in venture capital in terms of age, in terms of gender, race, geography, because for many, many years, venture capital was concentrated in Silicon Valley and run by, you know, older white men. Uh, so we—

and I'm becoming one of those guys though, right? No, but yeah, we should be as inclusive as possible. But yeah, you know, anybody should— if you believe you have a unique angle, you have unique deal flow, you have access to an LP base, and, um, you're— but you're junior, there's nothing stopping you. Absolutely not.

Well, and look, let's, let's be fair. To date, venture capital being run by older white men like Paul and I— if Paul and I don't help people who are not like us become VCs. No one's going to train you on how to do it. And unfortunately, I would say venture capital is pretty hard, which leads to the next question from Caselli. How do you go about implementing a VC fund in an environment where that ecosystem is very weak or nonexistent? What is the appetite of potential investors, for example, in Caribbean-focused initiatives?

Okay, cool. I like Caribbean. And I think that someone should start a fund there. And I'd be happy to help mentor that person. But let me take a—

That's an important point. You can email us vc@fi.co. And we will love to see your thesis and introduce you to Paul. Sorry to interrupt. But I'm going to facilitate that introduction.

But yeah, I mean, to kind of answer the question. So yeah, how do you go out there and help an underserved market? This is what I've been doing, right? Like, When we started Southeast Asia, we were the second VC fund ever in the region, right? There were PE funds, but there were no early-stage folks, right? So one, it helps if you have a little bit of money yourself so that you could kind of just, you know, get the ball rolling, you know, because they're putting kind of $25K checks to work. Two, people have to just believe in you or your team, right? So like, they might understand the market is raw, they might understand there aren't a lot of deals now, but if you can kind of tell a great story of where the market can be, You give comparisons to what's happened in other markets around the world. And then, yeah, if you could go out there and sell them a story about how you're going to run through walls and your team is going to be the ones going to build ecosystems and, you know, you could do like things to even be ahead of that, right? So another important thing is like before raising the fund, you could start building up activity in the ecosystem, right? Can you start throwing events? Can you start inviting founders from other parts of the world to that region? Can you go out there and start working and educating the corporations? All these things kind of start planting seeds. That will then help you raise that fund in that respective region, a.k.a. the Caribbean or whatever kind of other corner of the world is underserved today.

I'm going to ask about another corner of the world and throw something else out. So a number of our fund managers will also run a chapter of the Founder Institute, especially if they're doing early-stage, like pre-seed investing, because Founder Institute creates pre-seed companies, which gives you pipeline. So pipeline is very important. Soccer is asking, what's your take on the Middle East? Is there interest for Middle East and/or Africa? US seed fund?

There are a bunch of Middle East funds already. I'd say most of them are headquartered out of Dubai. I would love to see more stuff coming out of really cool places like Lebanon, Egypt, Morocco, Tunisia. I think those ecosystems are all booming. So there is a good amount of seed funds, but I think there could be more, maybe a little bit more deeper into some of the specific countries I mentioned. So yeah, I think there's definitely appetite, and there's a lot of money slushing around there. So if you tell a good compelling story and you kind of touched their heartstrings, like, hey, you know, random LP from Abu Dhabi, why are you putting all your money outside of our country when you should be putting it inside of our region? So I think there's something to be there in kind of making people open up their wallets.

Don't be shy with questions, guys. We got another great one from Anthony. When you set up your first fund, is it better to have more or less GPs? And he goes on to say, small fund to start with a single GP, question mark, or a larger fund with multiple GPs? And I'd love to like just— before you answer the question, let me add one thing for everyone here. You really have to know your partners really well. So it's not so much a math question, it's more of a chemistry question. It's not like, oh, large fund, I need 10 people. It's more, do you know people well enough to work with them for 10, 15, et cetera years? So Paul, take over.

Yeah. I mean, so your life will be easier if you come to the table with 2 to 3 GPs at a fund, but obviously smaller fund, different economics. You have to split it with the 3 people. Your management fee is basically going to be pretty small. Can you pay everyone salaries? Maybe not. Are people willing to sacrifice? But yeah, I mean, like a lot of our funds have had 2 to 3 GPs. We have never had a solo GP fund that I kind of helped incubate just kind of by myself. But yeah, I think You can still do it by yourself, it just makes it harder, right? Uh, but if you have multiple people at the time, well, it's less lonely. It's just like being an entrepreneur. You could be a great solo entrepreneur, but it's, you know, always easier to do it with 2 or 3 people with complementary skill sets. So, but yeah, the point that Dale made is it's better to have a solo GP than to have like one person who you met yesterday, uh, that you don't know, like, but they have a great resume. And yeah, but like, that could be a nightmare, right? So I think it'd be better be a solo GP raise the fund and bring that person in as a venture partner or some kind of, you know, do some deals with them so you build that relationship and then maybe you have them come in on a second or third fund. There's always exceptions, but I mean, that's the ideal scenario.

So what we've been seeing, guys, is that another way to test a relationship, even with someone that you know and trust, is to go through the VC Lab program together. We've seen a number of relationships get started in VC Lab, but we've seen a number of relationships that people were good friends, etc., say, you know, I really can't work with you on this, you're not carrying your weight. So test the relationship as much as possible. Stress test it. Okay.

Yeah, I mean, I'll give you a perfect example. So out of your first cohort, um, there was a team that was kind of together as a group. They broke apart, but one of the folks decided to go on as a solo GP, uh, and I got involved. I thought the person was amazing and, you know, got involved, put some money in, came as a senior advisor. And that thing is rolling right now. And they did their first close, or they're in the middle of it right now as we speak. And, you know, holy cow, it was an amazing turnaround. So yeah, it's a really great place to stress test the team, I would say.

So, uh, great questions coming in. Thanks, guys. Ashwin's asking, do LPs have, uh, thesis guides which, uh, control their investment in VC funds? Information about a VC's thesis are generally available publicly. "How do we as aspiring VCs match our thesis with LPs whose information can be hard to find?" Great.

Yeah. Well, this is— Okay. First of all, let's take a step back. The LPs are hard to find, right? Like, they are intentionally obfuscated. A lot of family offices or even some of these pension funds, like, they don't want to be bugged. They are— I mean, because VC is like one of many different financial instruments they're investing in, real estate, PE funds, who knows what, debt, et cetera, right? So A lot of them are making it hard just to find them. So I don't know if there's going to be a day where all of a sudden they'll be like, hey, we are looking for this, this, this. That being said, there are some LPs that are trying to be more open. They're trying to go out there and even write about or broadcast what they're looking for. But the majority of these LPs, especially for your first-time fund managers, are going to be family offices, are going to be individuals who actually like to stay quiet. So I don't see that changing. But when you get on a call with them, don't be afraid and don't be shy to ask. I mean, it's also an interview. They're interviewing you, but you should also ask them to see if there's alignment on both sides.

So I would say, and, and for new managers, maybe if we just talk about the type of LPs that they can expect to go after, because thinking about that's very important. So it's mostly going to be family offices. It's very hard as a new manager, meaning someone launching a new fund, to get endowments, to get sovereign wealth funds, to get pension funds. It's almost impossible. And you can get some corporates. So I would say corporates, you may be able to know what their thesis is because they'll publish it in an annual report or something like that. Do you wanna add anything else, Paul, about the type of limited partner?

Really, the only exception is sovereign wealth funds, I would say. Is that sometimes these governments set up programs to help new managers. So it's very common in some of these— I mean, so Singapore, for instance, when we got out there, we got money from the government. It wasn't a sovereign wealth fund, but it was a government kind of aided thing that got us in there. Our fund in Poland that focuses on Eastern Europe, the Polish government put money because they had like a program. They were looking to launch a few different funds or help launch a few different funds. So sometimes you'll find these special programs enabled by governments. But yeah, like a pure sovereign wealth fund as a first-time fund manager or like a pension fund, it almost never happens. Right.

So great, great points. All right. Great questions coming in. Let's go to the one from Emily here. What are the level of mistakes you can make as a first-time fund manager that aren't disastrous in terms of being able to raise a second fund versus mistakes that make you unfundable the second time around? I would say any sort of trust issue is an unfundable mistake, but please elaborate, Paul.

Yeah. I mean, so if your LPs, if you don't communicate clear with your LPs and kind of build a relationship with them, there's a very good chance they won't come back in, right? A lot of LPs don't come in for second or third funds. A lot of people just come in one time. That's very common. But like, if you do things that are just like, yeah, untrustworthy, illegal, whatever, yeah, it's it's game over, right? But also, if you go out there and you invest in companies that perform really poorly, or you're putting it at really bad prices, and your LPs don't feel confidence in you, that could hurt your story too, right? But if you do it and you could justify it and you could tell a good story around it, I mean, you still could recover from that. But it makes it much harder if you put into all stinkers, right? So yeah.

One of the things I would say there too, so mistakes that you can make, so you can make investing in bad deals, right?

Everyone does.

Are there any other sort of acceptable mistakes?

I mean, you can have personal issues, right? I've seen teams rejuggle a little bit, right? I mean, if it's not completely new team, right? But if you had like 1 or 2 people leave because it just wasn't fit, that's still part of the process. You could kind of, you could explain that away as you're kind of raising your second or third fund. I would say— no, I mean, I think those—

we can go on to the next question because it's kind of funny. So why do the majority of VCs suck? This is not my question, but sometimes I feel that way, Grill. And then, um, and this is a question from Grill: how, how do we not be one of them? I'll let you take that ball. I'll be happy to start this after.

I'd say a lot of VCs suck because a lot of them are shitty humans. I mean, like, there's just a lot of VCs that are in it for the wrong reasons, I think. And so they come from a background where they're kind of very, I guess, you know, themselves-focused versus kind of, you know, ecosystem or kind of holistically focused. I mean, you have to look at trying to make money. There is that component, right? You can't dismiss that, right? But some people, it's all about them. And I think that can that kind of does hurt. But unfortunately, a lot of people that are very good at being into themselves are also very good at fundraising. So it does attract a certain type of person. And yeah, so how do you not, or be less sucky, or be less shitty? Well, I mean, try to think, you know, not only for yourself. I mean, you have to think for your LPs and for yourself, of course, right? But do try to put yourself in the founder's shoes, right? If you've had experience being a founder, that helps a lot. You know, having empathy helps, right? But you still have to run a business too. So you can't be a charity, right? You have to find this happy balance. And none of us be perfect. I'm sure some people think I'm a horrible person as well too, right? Because I said no. Even though I said no for all the right reasons, they still look at me because I wasn't on their side, right? So you can't be a perfect person to everybody too. I mean, in life, in VC, in anything you do, into your relationship with your children, whatever, you can't be perfect at all times, right? So you're gonna have people gonna hate you no matter what. But if you try to be, you know, have empathy and try to put yourself in other people's shoes, that will make you be less shitty, I'd say.

Yeah, and it's hard to do. As you said, you parent, whatever. Funniest side story, I had my house cleaned for the first time since COVID and my kids run in and threw a mess everywhere. I'm like, "Ah, what are you doing?" And I realized, they're just kids, right? But you still are like, "Whoa." So you just try to be the best human you can be and that will help you be a good VC as well. Mark is asking, "So many funds, so little time. Are you finding that there's a supply chain congestion?" been partially fueled by the COVID pandemic and Zoom that has actually slowed down deal flow? I'd love your answer to this one. I have thoughts as well.

I don't feel that deal flow slowed down at all. Um, at least, are you talking about deal flow on the VC side or on the startup? I just see so many startups popping up, so I don't think—

I would say you could maybe look at this answer two ways. Um, deal flow from VC to company and from LP to VC.

I'd say there's been an explosion on both sides. There's been even more startups being created. A lot of people have had a chance to kind of, you know, spend time alone or in their own respective homes. And I kind of been calling it an adult timeout, right? You go sit there in the corner, you're like, what am I doing in my life? Oh yeah, my life is awesome. I could do— like, oh fuck, I've been doing everything wrong for the last 10 years. I want to change it. So a lot of people have been going out there and rethinking their lives as entrepreneurs. Or also a lot of people have been thinking, they're rethinking their lives like, hey, Maybe VC is my next step up, right? So I think there's been a lot of amazing people coming to the table, both in the entrepreneur ecosystem— that means more pipeline— and there's also been a lot of great VC started because people are wanting to take a level up or a different path in their lives.

Yeah, interesting point. So I would agree. In my experience, I'm seeing more LPs and more entrepreneurs. So I don't know if there's— but maybe if we ask the question a little differently, Paul, Is there a supply chain breakdown? I know one of the problems with the pandemic and Zoom is it certainly was easier to pitch LPs without Zoom. Yeah.

Yeah, I'm trying to think. I guess it's been a little bit harder for first-time fund managers to raise in the pandemic because VC is so relationship-based. So in some aspect, that's been a little bit harder for first— especially for first-time fund managers. That, but yeah, for entrepreneurs, I've not seen a slowdown at all because there's so many new funds out there and they have to put money to work. So it's been kind of an amazing boon for entrepreneurs. For GPs, maybe a little bit harder because LPs have not increased. There's still only so many people in the world that have money. And like I said, a lot of these things are relationship-based. Like people want to meet you in person, have a beer, have a dinner, right? But if you were a person who has a lot of relationships, It has been a pretty good time for you, actually.

I'm guessing that with the opening up of societies in most of the world, not everywhere, that it's gonna be a true explosion over the next year. Okay, so let's keep going. Tons of questions. Upvote questions that you— 'cause I'm gonna try and get them by vote, and ask questions if you have them. So Ben is asking, what's the difference between a founding partner, general partner, and managing partner in a VC? And before you answer that, Paul, a lot of these terms are legal terms and VC doesn't have a lot of great consistent terminology. So, but take that one, Paul.

Yeah. I mean, so founding partner is easy to, I mean, it's not like an official title. It's just a way to discern yourself that you're a general partner, but you're also one of the founders because it kind of puts you at a different status. You're like, hey, 'cause creating a VC fund It's really, really hard. So being a founding partner is like mega legit, right? Being a general partner or managing partner is super legit, but being a founding partner is like mega legit. It's kind of like, hey, you know, who's more legit, one of the general partners at Sequoia or the founder of Sequoia? Oh shit, well, he started Sequoia. It's even more hardcore potentially, right? So yeah. So, and then the difference between general partner and managing partner, I think that's just kind of more like in geography. Like British people, I think, use more managing partner. General partners are more or in U.S. And I think they kind of use it interchangeably. I don't see much of a difference there. But then also, some VC funds just use the word partner, and that's a complete shit show. Like, that could be a partner, you could be a partner working there for 2 years and you'd effectively be, at some funds, an associate, and in some funds, you're a partner because they're trying to just like, you know, do title inflation. It's kind of like you see in some companies, like corporations, like, I'm a VP. And you're like, what the hell is a VP, right? But in some organizations, oh, you're VP, you are literally number 2 in an organization, right? So Yeah, some of these terms are kind of BS.

Yeah, VC terms are all over the map, guys. Like, carried interest means different things based on who you're talking to, literally. So if you have a 5% carried interest position, that literally has different meaning depending on who you're talking to, literally. Okay, Juan's asking, what are your thoughts about increasing valuations Now he's saying due to corporate VC, but they're increasing valuations across the board. And how do you handle the increasing valuations that you're seeing in the market?

You handle them poorly. You're like sad that they keep on going up, but you realize that they probably will never come back down. So you have to go out there and bite the bullet. This is something my brother Dan chides me on because I could be sometimes— he's like, Paul, get over it. You know you love this company and you got to pull the trigger, and he's usually correct. So, um, I'd say that's what it is. So you have to deal with it begrudgingly, uh, and the people who probably embrace it faster, uh, won't be shut out of the deals that will be big in the future.

Well, I mean, I think the increasing valuations aren't just happening at like A1 stage.

It's across the board. Yeah, exactly.

Yeah, so you end up— it ends up help— it's been a boon for venture capital I think because, you know, you're seeing the highest markups I've ever seen in history. I don't know if that's your experience.

Yeah, I mean, so let's say with one of our funds, it took us like 2 years before we had up rounds in some of these funds, right? And now, on certain funds we've raised, within like 2 months, companies are getting up rounds. We're like, that's weird. Awesome, but okay, right? So just the story has changed a little bit. So you have to kind of roll with the times.

Oh, another great question, man. Guys, keep them coming. All right, so what is the one thing that 99% of VCs do wrong and the one thing that only 1 or 2% get right? Uh, what distinguishes the top stars from the rest in the VC world? From Kirill.

Um, this is tough. Um, and I mean, I'd say I'm pretty weak at this too. It's like letting your gut sometimes override popular opinion. It's that really hard balance where like, am I insane because I like this versus like, oh my God, everyone else thinks this is dumb. So the best VCs are somehow able to sit there, process things, not let outside information bug them too much, and make a decision with conviction. A lot of VCs get caught up in the FOMO game, myself included. And I think All the best ones, they struggle with that too, but they're just a little bit better than everybody else in kind of fighting off that, um, that need to conform, that need to kind of get validation by other people.

So, okay, let me, let me— like, that's what you just said is super important. I'm not sure everyone might understand how important it is. So FOMO is what 99% get wrong. Yeah, right.

Yeah, right.

And that's just like, oh my God, this deal's so hot, everyone, we gotta get in, we gotta get in, right? FOMO. That's, that's VC FOMO, if you will. And, and, and then the 1% right is being a bit contrarian, thinking, oh, like, or just kind of—

or it can be contrarian, or just like, it's just people aren't necessarily even looking at that space, so it's just kind of like undiscovered, um, willing to kind of take a risk. That means, like, if you look at some of these companies who've come out, I mean, the last They're very obvious now. Like, oh yeah, of course Airbnb and Uber makes sense. Of course Coinbase makes sense. They didn't make sense when you— dude, all those companies had a hard time raising their first round or even their first 2 or 3 rounds. So those companies weren't contrarian. They just were whatever. They were just kind of like, meh, whatever. They were not stars. And there's companies that were superstars, they got all the pretty darlings of those times that are dead now. And so it's sometimes just hard to say yes to something that no one else is excited about. How do you pull the trigger on something that no one else is pumped about? That's really hard.

So Ilya is asking, hey, Paul, how do you articulate the thesis of BB? And I'm presuming he means Bergyll Brothers.

Yeah.

Which is one of your funds. Obviously, it's you and your brother.

Yeah, yeah. Bergyll Brothers is a fund run by two brothers. That invest extensively into our network that we've built over the last 25 years in Silicon Valley, and that's it. And we only pitch to people that know who we are, like, it's like, or they come through a very strong introductions. I'm not going to go out there and pitch somebody who doesn't know who I am. If I don't, then my pitch is already dead. So I have a very specific way of pitching our stuff, and luckily I don't have to pitch too far and wide.

Okay, this, uh, so Umut from Turkey is asking about a specific fund thesis, and he's soliciting feedback, so I'll read it to you. Uh, $10 million fund for mobile game companies in Turkey to be spent on 100+ companies' seed round.

Okay, well, I know the game industry quite well, and Turkey has had a couple really amazing exits, uh, two of which to Zynga, which is kind of cool. That's really happened. Um, I actually worked with some Turkish developers in 2002 So I know the scene there. I don't know today how big that scene is. Are there 100 game studios in Turkey? I'm not sure. What I would do and I recommend is lower that number, do like, you know, $2, $3, $4 million fund, and you spray into 20 companies just to see if they could absorb that, and then you could do more over time. But I think 100 companies might be too much in the country of Turkey alone.

Right. And that's a beautiful way to think about it, right? So let me paraphrase what you just said. That so it's universally applicable to anyone. So essentially 100 companies, $10 million is kind of big, right? Because first of all, doing 100 deals is hard, time-consuming. $10 million in Turkey is a pretty sizable seed fund. And what you just said is like, don't go do the big enchilada V1, you know, to do something much smaller to begin with which is $2 million in 20 deals and see if that works. And then your second fund, maybe do the 10 and 100. Yeah, I get that.

Perfect. I mean, along the format of games. So I run this one called Sisu. It's a global-focused fund, but our first fund was only Nordics, right? And there we raised $1 million. It was a test. We did it all part-time and we did 20 deals and it worked amazingly well. And we're like, oh shit, we need to ramp this Then we did a second one, then we did a third one, right? But there's nothing wrong with doing a smaller, kind of taking a bite of the enchilada, to use Adeo's termage there, right? So yeah.

My enchilada termage. Okay, so Jason's asking, what strategy would you have for generating a prospective limited partner target list? And is there some determinist number that you would say is too small even to start raising a fund for, let's say, $25 million? And I think, can I, let me answer the first, the second part of it first. So guys, I have a very simple rule of thumb for fundraising, okay? A venture capital fund, and it's been battle-tested, okay? Now it's what can you raise very quickly from people that you know, right? And of course you can guess this, And then multiply that by 10, and that's your first fund size. But Paul, why don't you take that part and the first part about the limited partner list?

Yeah, I mean, so I love that framework that you developed through VC Lab. I think that's a great one. Yeah, kind of like, yeah, aim for your kind of your— you make like one blast of emails, whatever you can get from that, you multiply by 5 to 10, that should be a first fund. I agree, that's awesome. In terms of How big your target list is. I'm a brute force type of person. I like a large funnel. I want to go out there and talk to as many people as possible and see what comes out the bottom end. You'd be surprised that sometimes, you know, your kind of more extended network that you didn't really think you could tap into could be very, very fruitful. So, but if you could do it with less conversations, bravo. But I just know historically, especially the first time fund, I've had to talk to a lot of people.

People.

And there's kind of, you know, no way of really getting around that, especially after your first close.

And Will is asking, related, what are some primary means which you can secure these relationships with LPs?

This is just, you know, in general networking, right? So anything from, you know, cold emails work, people, by the way. Also, you know, asking friends for introductions, hosting events, You know, doing your research, you know, trolling, trolling around the internet. Yeah, I mean, like, it's never one source. Your placement agents also, they don't really work with first-time funds, but those sometimes help in later funds. Yeah, it's never one magic solution. You have to just really work hard and dig in deep.

Right. And Ilya is asking, how often do you connect with LPs through cold outreach? I mean, I would say it may be the better way to answer that question is to give sort of a taxonomy, Paul, of LP outreach. Like, what's— I would say cold outreach is the, you know, in the hierarchy of LP outreach, cold is—

yeah, yeah, yeah. I mean, like, the easiest is like, oh my God, I've started 5 companies with this person. I mean, or he was an investor in my company, I made him $100 million. Hey dude, I made you $100 million, can you give me 5? Yeah, that's like the highest, like the most awesome. If you made that person money somehow in the past, that's the best, right? Second is like, you know, people that made money with you, uh, or people that, you know, that you're friends with that made money, kind of on that kind of your kind of friends, really close friends. And then maybe people that kind of know of your work or you've partnered with and other stuff. And then maybe then people that are like, you know, really excited about what you're— what you represent, your verticals and stuff like that. Um, and then maybe, you know, people you don't know but they're excited about some vertical you're in. And then yeah, maybe the cold emails.

And I'm sure I missed a few in there somewhere, but like, uh Yeah, and generally you probably want to have a warm intro to anyone that on that hierarchy. Ideally, yeah, yeah, unless you know them already. Okay, um, let's go to, uh, uh, we're running out of time, we're at the end here, but I want to do— can we run a couple?

Relax. Yeah, I'm good, so let's keep it going.

Okay, I want to be set. Yeah, I— because I'm loving these.

I always put in a half-hour buffer on talks because you because you never know if it's a good rhythm. Good rhythm. See ya.

Well, we'll keep, we'll keep a few more questions going. Uh, okay, so this is an interesting one that, that a lot of people come into the VC Lab with ideas around, and I love— and I haven't asked you, so I'd love your thoughts. But from Angoon, what do you think of non-dilutive revenue-based financing options?

Um, so grants and awards and stuff like that. I love those.

I mean, as long as there's also revenue-based financing, right?

Oh, you're talking about debt too?

Yeah, well, that too, right? I would imagine.

Um, yeah, I was thinking more just like financing is like somebody from the outside putting money into you. Um, I mean, by all means, if you don't need to raise the money, uh, or what, a dilutive money, take it, right? Uh, so like, you know, revenue is obviously the best. That is super awesome because it's money you generate from your customers and you control that flow, right? Now, grants and these other type of, you know, things encourage, uh, you know, awards, prizes, etc. Those are great, but be cognizant of what kind of strings come attached with those. Uh, sometimes they're like, hey, we'll give you this money, but you have to do this, this, this, or you have to kind of open the kimono and share everything ever, and, you know, and name your first child after us. Be wary of those things.

Okay, so there's a couple, couple great ones that, uh, and this is an interesting one from Azra. Would you evaluate entrepreneurs in their 50s and 60s differently than those in their 20s and 30s? And if so, on what points? And that's a— you get tricky asking questions like that in America, by the way, because there's definitely laws around that. But I mean, it, you know— but anyway, Paul?

Well, yeah, you judge people differently at different ages because they have different, uh, experience, right? So a younger person is less experienced, but they might have certain energy or a certain thing, right? The older person might, you know, have some experience that the young person don't have. So you're just, you're trying to look at the person holistically, whether or not the age is there, right? But if somebody comes to you that's older and they have no experience, I mean, yeah, they're gonna value the exact same things as a person that's younger has no experience in that field. Like, they both have no experience, they have no right to be there. So like, you're gonna say no to both of them. So, uh, you should just look at the person holistically, uh, and age could play into some factor, but it shouldn't be a major part of it.

All right, I love this next question. It's so for you, by the way. It's like God wrote the question for Paul. So, Uldis, and I hope I pronounced your name right, is asking, for the global nomads out there, which basically Paul was until the pandemic, do you need to have— do you need to be local to start a fund? From your experience, can a foreigner who moved to a new geography ever be successful running a fund? And how.

So, yes, and yes. Um, so yeah, I mean, so from 2013 up with the pandemic, I did not own or live, you know, in any one place. I didn't pay rent, or I just— hotels, Airbnbs, you know, friends' houses.

You didn't even have a cell phone for a while.

3 and a half years I didn't have a phone as well too. I am— because I'm quirky and that's who I am. But, um, but no, I mean, like, I, I built most of these funds while I was doing that. And the reason I could have all these offices around, because I was hopping from place to place to do it. So in my specific case, it was actually the best optimized scenario for that. Now, that being said, can you build a fund as a foreigner moves into a new geography? Hell yes. So I mentioned that fund, Golden Gate Ventures, out of Asia. That was started by me, my colleague Vinnie, and my partner Jeffrey. So Vinnie and I, we actually had started two companies together in Silicon Valley. Vinnie is an Italian-American guy from Long Island, right? And he moved to Singapore after only visiting there twice or three times and started a fund there that is now, you could, I could safely say, top 3 funds. I would say even higher, right? In the region. And so Vinnie nailed it. And he's a random, you know, Italian-American living in Singapore. So absolutely, yes, you could go out there and do that. And the reason he was able to do that is because he came in with a wealth of experience having built startups in Silicon Valley together, having done some investments, and he brought that expertise to the region and he merged it with local knowledge. You know, we brought in local co-founders and local employees that kind of complemented him. So it was an amazing teaming up.

Didn't his wife move there for a job and then he's like, yeah, I want to go as well?

The story actually was, so after we sold our company in 2010, then he took a year vacation with his wife being a global nomad. They went and spent a whole year traveling around the world. And after that trip ended, you know, we hung out because we're really close friends. He's like, Paul, I really like Asia. I'm thinking about doing something in Asia. And I'm like, dude, I've been talking to the Singapore government about doing something there. Maybe we should team up and build something there together. And then Vinny literally moved out there a month later and started building it. And then his wife came with him, right? She started, she joined the company locally. So she got employed there while he was scraping away with zero salary. By the way, like, got zero salary for years while he was building. So like, total dedication, total sacrifice to build this thing. So that's why he's getting all the rewards now. You know, we found an amazing local partner named Jeffrey, who, Jaime, we met him through your network because he was a local FI chapter in Singapore, Jeffrey Payne. And yes, it was this really cool team came together and the rest is history.

But yeah, it goes right to the global nomad point because actually he was literally a global nomad.

I mean, he discovered where he wanted to work next. I mean, he was like, before he left for that trip, he's like, I'm going to probably build a company in Silicon Valley, right? And he came back, he's like, no, the world is changing and I want to be part of this bigger story, right? So absolutely, yes, you could be a global nomad. You could find a market that you love. You could find a niche. You could go in there. But make sure that you're bringing some kind of expertise to the table, right? You can't just be like, hey, I'm a cool backpacker dude and I don't know anything. Like that's not going to fly. But like, hey, I've been accomplished and well, you know, versed in some industry somewhere else and I'm bringing and translating information to this region. Oh, that could be a super magical combination.

There's a few more great questions here, and then there's a couple questions about the program. I'll wrap with those. But I love this one because I'm very interested in your view on it. It's from Max on MENA and APAC investments. How do you assess risk from local governments that can potentially suppress the internet banking access to entrepreneurs on the ground, i.e., China, Lebanon, Egypt, Turkey, tons of places. And I'd love to hear your thoughts.

I mean, so we have funds that have countries in their, I guess, mandate that have had those issues happen, right? My partner, Buana, in my Africa fund is from Tanzania. They shut down the internet often there, right? Guess how many deals we have in Tanzania? Zero. It's not because we don't want to. It's because we are way more conservative there, right? So we're trying to find jurisdictions where, you know, the governments are more open. That being said, we also make sure we have deals across many different countries, right? I would not do all my deals into one country if that country has had a history or is kind of having feelers that it might flip. That being said, you can't predict the future. 5 years from now, some country might become authoritarian where it was, you know, a bastion of freedom in the past. I mean, you said Lebanon, or let's say you can even go many years back. I mean, Iran was very open in the '60s and '70s, and then it changed. If you talk to somebody in 1965, it was under the Shah's government. I don't know if they would have predicted what happened. So you can't predict the future. You can only come in with the best information you have, try to diversify. Another thing you could do is actually have some of those companies domiciled outside the country. A very common thing I see is that a company will be based in some country, but they're domiciled in the United States, in places like Estonia, are malicious, stuff like that. So that's another way to maybe de-risk.

So that's another question I want to get to. So 3 more questions and I'll answer the general questions about the program because we still also have a lot of participants. So because Sally was asking, what's the ideal composition of a VC fund in terms of governments, business structure? Let's first, because you brought up domicile, let's explain what that means because—

yeah, yeah, yeah.

You could live in a place like wherever, Africa, Asia, wherever, but your fund is incorporated somewhere else. And that's usually called the jurisdiction or the domicile. So you could live, for example, in Hong Kong and have your fund domiciled in Singapore. That's very common. You could live in Estonia and have your fund domiciled in Luxembourg. That's also very common. Back to the structure. So is there anything you want to add on?

That's perfectly said. Good to clarify. Thanks.

Okay. Yeah, just because I know that—

I assume sometimes everyone knows my language. I use a lot of jargon.

That's okay.

Language soon, by the way.

So you'll be thinking a lot. So let's talk about the structure component. I'd love to hear your view. There are usually 3 entities, if you want to quickly answer that for—

Yeah. So usually there's the LP structure, which is all the investors. There's a GP structures was kind of the partner on a per-fund basis. And there's like the management company, which is kind of the owning of the GP of sorts. It's kind of wonky how it works, but like there's certain things. I've seen it even more slicker where it's just like an LP/GP because it's a very specific thing. But if you plan on having multiple funds, you'll want to have a management company over time.

Which owns the brand.

Yes.

And we'll answer some of these more logistical questions, but I wanted Since we had the whole domicile thing right before, I thought I was right. Okay, 2 more questions, then I'll wrap up with some thoughts. So, um, this is a good one because I think we can apply it to not just— Bernard is asking, how do I transition to a career in VC in the States coming from Latam private equity? And frankly, you— we could say a career in VC and then also moving, but love to hear your answer to that.

Um, I mean, yeah, so if you come from the PE side, you're gonna have to kind of readjust your brain because it's a very different way of evaluating companies. And I don't see, honestly, many PE fund managers do well at the early stages. Now, I've seen some PE funds do great at kind of growth funds, Series B funds, but if you want to do earlier, I just feel like the, the way you look at the universe is very different. And for example, I would not do well Even with the amount of experience I have, whatever you want to call it, I would do horrible at, you know, buyout firms like super late-stage PE. It's just a very different style, right? It's a very different due diligence. It's a very different way of looking at companies. But if you're amicable and you want to learn more about this, I would say start sprinkling small checks yourself personally, or roll up your sleeves and become like an advisor or venture partner at some— you can kind of unlearn some of the things that you've learned in the PE world. Um, and then in terms of across geographies, well, just show the hell up. I'd say that's probably the fastest way to do it.

Exactly. Okay, last question, um, and I like this: what qualities should a founder have to become a good VC? Now that's, that's a— that transition happens a lot, but they don't always become a good VC. So let's make sure we— not just a VC, a good VC, right? Yeah, I mean, this is from—

who this It depends on your style, right? So some entrepreneurs are great entrepreneurs because they are so singularly focused and they're control freaks, like in a kind of good way, right? And they're able to kind of manipulate their world really well. That skill does not necessarily apply that well to VC. You have to be a little bit more hands-off. You have to be able to delegate better. You have to trust and verify a little bit more than just kind of like, you know, do it yourself, right? So So that's one skill I see a lot of great entrepreneurs don't make the leap, right? But if you've been a great entrepreneur or like an early employee and you were quite good at delegating, you were quite good at promoting people, you're quite good at kind of like handing things off, then you might have a higher chance of succeeding as a VC. But yeah, I mean, like, it's just like even with companies, like your first company might have been good, your second company might not be good. You might not make the transition, right? Or it might take a few different kind of takes at it, right? So there's no guarantee that you'll succeed. Even if you have the best intentions, you change things, all type of stuff.

So yeah, there's a bunch more questions. What we can do is we're going to have other of these events, and maybe Paul will have you on again because this was lovely, really lovely. Let me— there's one set of questions, let me quickly just answer about the program, applying, getting in, all this type of stuff. So look, they're going to be lots and lots of applicants, and I can tell you someone said, oh, I didn't get in but I need the help, whatever. So I'll tell you simply the best things that we're looking for. Okay? So if you have a strong thesis, right? We're gonna— and we're like, wow, that's an impressive thesis. It could be because you have an interesting market, an interesting segment, like an industry, interesting fund size or approach. So An interesting thesis is definitely something we let lots of people in. Obviously, if you have an interesting track record, so you've done investments before or you have some interesting accomplishments, that's another big way that you can get in. But at the end of the day, you can have either of those and produce a crappy application, like a video on your phone walking around with background noise. We can't really hear you. We do like to see your video, and the reason we wanna see your video, FYI, is for the foreseeable future, which means the rest of 2021, you will be pitching most of your LPs through video. So if you can't make a good video to apply to VC Lab, we're concerned that you probably can't pitch LPs well, right? For the foreseeable future. So good video, good thesis, good background, and, you know, or either good thesis and/or good background, and you'll get it. Okay? And we have a whole pre-curriculum on creating a good thesis. So I don't wanna take too much more time of Paul, but Paul, you know, what an honor to have you here.

You are—

Yeah, you've been one of the best. Maybe we do another one. And people can come back and we'll get through more of the questions.

You know, I love doing this stuff. I want to see more people in VC. Otherwise, yeah, everybody feel free to reach out to me. I'm most easily contactable via LinkedIn or Twitter, personally.

All right, everybody, thank you so much. Thank you, Mike. Thank you, Paul. Have a lovely day.

Just as a reminder, early admissions deadline is on the 27th for VC Labs. So if you're thinking about building a firm, Apply now. All right, talk to you soon.

See you. Bye.

Bye everyone.