The Power of Unbiased VC Decision-Making with Kamal Hassan

Understand each investor when you reach out to them, because I— if I had a nickel— I mean, I get so many— we are very clear on our website and everywhere and everything we talk to, we fund entrepreneurs from only two sources. We fund either top alumni of INSEAD, or we fund, uh, top graduates of the Founder Institute referred to us by their program director. Um, that's the only two things, and I have these entrepreneurs reaching out to us who have done zero research. They've never opened the website to see who we fund, and they say, I've got this really cool AI company in Silicon Valley, we do XYZ. And it's like, you're not INSEAD, you're not Founder Institute, I cannot fund you, full stop. This is a talk— I mean, this talk is designed very much for investors to talk about how to remove bias from your startup investing decisions, but we do have a couple things for entrepreneurs in here as well. But this is really helping you understand how we think about things. And do feel free to share any of the things we come up with here with any investors you know, or feel free to even introduce us to other investors if that's something we can talk with them about. So look, we're talking about removing bias in investing, and there's two times when bias can come in. The first place where bias can come in is first checks, when someone's just getting to know you and they're deciding whether or not they want to invest in you. The second time when bias can show up is in follow-on checks. And it's actually two very different types of bias. Very interesting to look at these and we'll share a little bit about both. Now, look, the first question you're probably asking yourself is, is there bias at all in investing? And if you're an investor, that's one of the fair things which investors often say. Everyone says bias isn't really bias. Well, if you look at the data, it seems like pretty— it seems pretty clear that there's probably gender bias because between 75% to 80% of dollars go to companies with a male-only team and only 3%— well, I mean, the way I look at it is the percentage of dollars that go to companies with a woman CEO, and that tends to be hovering around 3%. So well over 95% of all CEOs funded are male CEOs. So, and this is the data from Crunchbase. So, you can see here, it's been a very consistent 2% to 3% female-only teams. And then, there's female-male co-founded. I mean, by the definitions they use, companies like Microsoft would be a female-male co-founded because if they have a female CFO or a female head of legal or whatever it is, that makes it female-male co-founded. But yeah, this is There seems to be certainly gender bias from the data you can see. And you can look at similar data around racial outcomes. And the racial outcomes of who's funded don't seem to match the underlying population. Now, of course, one of the questions— okay, let's assume you're a hard-nosed investor. You'll say, okay, well, great. So, men are getting all the money. Maybe all-male teams outperform. They get 75% to 85% of the money. Maybe it's because they deserve it? Well, there was a lovely BCG analysis done with data out of MassChallenge where they looked at 350 companies and they found the companies which were all male raised on average $2 million and generated $662,000 in revenue from those funds raised. And the teams which had one or more women in the team raised a lot less money, only $935,000, yet generated more revenue. And in fact, they generated 2.5 times more dollars of revenue per dollar of funding received. So, I mean, if you want to be really strict about it, this sort of looks like actually you make a lot more money investing in women than you do in men. I mean, my attitude is, look, women are underinvested. Of course, the women who get funded are the best of all possible women teams. And there's a lot of average male teams being funded. So no wonder women are outperforming. But if you're just driven by the numbers, female-led companies seem to be outperforming. Now, the question is, why is this occurring? Why is the money being allocated in a rational manner that the teams that generate the most revenue per dollar invested are not the ones getting the most funding? And there was a great study out of Harvard back in 2014 where they took an identical pitch and they had it as a script read by male and female actors. And then they showed you photographs of the person who they said was the entrepreneur being funded, and they asked audiences to score the pitches. And they found that with an an identical script, an identical pitch, the gender and the looks of the person doing it made a marked difference. So the same thing would be scored a 5.21 if a good-looking man was doing it, a 4.59 if the picture they put up of the speaker was not as good-looking a person. So just the looks of the man made a marked difference and all men outperformed women. So, when you think about this for a second, this is really telling us that when you are listening to a pitch, you are actively using a process which discriminates based on looks and gender. Now, one of the logical questions is, okay, well, does this mean all men are biased? No, actually it was interesting. Who judges doesn't affect the results. And quoting directly from the study, they said these effects, the gender and the looks bias, remain the same when the judge gender and race were included as control variables. So it doesn't matter who you are as a person, you are more likely to rate a pitch by a good-looking man higher than any other pitch. So, um, One of the solutions that people have said is to say, look, okay, well, only 3% of dollars are going to companies with a female CEO. Well, the solution for that is to get more women making decisions. And actually, we know from this study that it doesn't matter if you have more women making decisions. You're still not going to get dollars going to— you're still going to be discriminating against women-led startups. Now, of course, getting women as VC decision makers is a good thing in its own because there's lots of studies out there which say diverse teams make better decisions than mono, monoculture teams. So, you absolutely want diversity in your teams. You'll get better decisions that way. But just because you're getting better decisions won't necessarily mean that you're going to be funding more women. So, the question of course then is, okay, well, I'm sitting here and saying there is gender bias. There is this process which says who you are, what your gender, how you look is going to impact how you score in a pitch. Well, how do you get over that?

The—

and why is this occurring? One of the factors, I mean, there was an article in The Atlantic back in 2014. They talked about the confidence gap. But I've actually heard this described much better as a bravado gap. Which says men have more bravado. And bravado, I mean, this official definition of bold manner intended to impress, but basically men are better at believing their own BS than women are, who much more accurately present themselves. And the thing is, if you know that this process of asking someone to present themselves, one person will be very bold and the other will be much more accurate on average, then this is a gender-biased approach. And one of the things we've noticed is that, look, women may be modest when they're describing themselves, but if you ask a woman to describe her friend, she will happily tell you how amazing the friend is. And that modesty seems to extend more to self-description than it does to description of others. So one of the ways to overcome this is don't ask someone to tell you about themselves because that favors men. Ask them to tell you about the people they know. Get references on people. Judge people based on the references. And references are a much more gender-leveling process to use. So yeah, that is one of the suggestions of a difference you can make as an investor. For those of you who are investors, this is how you can make a difference in who you pick and getting more gender balance in your outcomes. Take references. Don't have people present themselves. Now, as an entrepreneur, many of you are entrepreneurs, how do you overcome this gender bravado factor? What do you do if you don't naturally have bravado, whether you're a woman or a man? A couple of suggestions here. One of them is to really try a mental framing trick. And this mental framing trick is when somebody asks you a question or when you're presenting your business, Think in your mind before you answer the question, if everything goes right. And then answer the question because that will get you in the bravado thing. If someone asks you, is this going to be a billion-dollar business? Well, I mean, your honest answer is, well, I don't know. It might be a billion-dollar business. But if someone says, is this going to be a billion-dollar business? Think, if everything goes right. Well, if everything goes right, yeah, this is a billion-dollar business. And then state right out 'Yes, this is a billion-dollar business.' Because that is what is going on in the minds of people with a lot of bravado. They are just saying, 'Ah, everything's going to go right here.' They're showing this bravado. 'Yeah, everything's going to go right. And if everything goes right, then this will happen.' So, think that and then state the answer. 'Yes, this is a billion-dollar business.' 'Yes, we are going to be the dominant player in restaurant deliveries in North America.' if everything goes right. And just don't say it. The second thing you can look at is, let's be blunt, you want to target your investors. When you're reaching out to investors for fundraising, I mean, you shouldn't reach out to someone who funds restaurant delivery businesses if you have a biomedical business. You want to target things. Do feel free to check the portfolio of the investors. Get some sense of who you are more likely to get funding from. Check, does this person fund people like me? And in my point of view, and everyone's got their own style, in my point of view, it's perfectly fair to still reach out to investors who don't seem to fund people like you. But ask that as a question when you're talking to investors. It is a two-way street. Yes, you're presenting your business, but you're also finding out about them. You are choosing who you take money from. And one of the questions you can ask them is like, oh, I noticed, by the way, on your, on your portfolio, you only seem to have one woman out of the 15 companies you funded so far. Why is that? And I'm a woman, so does it make sense for me to be talking to you now? What are you doing to try to make sure that you have much more balance in who you fund? So that is a very fair question, if you like, or just target people who you know are more likely to fund people like yourself. Another solution, jumping back to the investor side of the table, another solution, another way to avoid gender bias is to fund people based on the numbers. There have been a number of funds. We are one of them. But there's a group called Social Capital. There's Clearco, used to be Clearbank, who in both Social Capital and Clearco set up online portals where people could then apply on their online portal for funding. And they noticed that if you fund people both based purely on the metrics, if you don't even know the gender of the CEO, if you never meet the CEO, you just look at the numbers and you fund based on the numbers, that they had 30 to 40% women CEOs funded, which as you know, is more than 10 times the industry average. Social capital at 40% women CEOs. Clearco was advertising that they had 8x more women than the VC industry average. We can tell you, I mean, we have 33% women CEOs. 129 of the 394 companies we funded have a woman CEO. So, if you fund based purely on the metrics, you tend to see much more balance in who gets funded. And by the way, of course, this is a strategy which should increase returns. If you're funding the companies with the best numbers, you're probably going to get the best results. Another suggestion for the investors, and as an entrepreneur you can encourage this, ask the investors you talk to to be transparent. Because when you report on something, when something is measured, it tends to get managed. So be transparent as an investor with your metrics. It may be uncomfortable to start with. But when you start openly saying 33% of the companies we fund have a woman CEO or 5% of the companies we have have a woman CEO, you will feel uncomfortable if those numbers don't reflect the populations where you are. It will force you to start thinking about it. So yeah, as sharing here are our stats of 49% CEOs of color, 8% Black CEOs. 33% women CEOs. So 62% of our portfolio companies are CEO of color or a woman. And 33% of our companies are in emerging markets. But look, that's just us sharing our data and encourage every investor you talk to to share their data as well. Because the more people publicly state something, the more it will cause their behavior to change. I've been talking about things. I mean, you've been listening to sort of why it's a good thing to get more balance, I want to really drill in on the hard-nosed capitalist point of view here, which is you make the most money by investing in the best companies at the best possible price. Now, a lot of investors are very concerned about their fiduciary duty. I owe an obligation to my investors to invest in the best possible companies. Therefore, I can't possibly set any targets in terms of gender or race. Because I'm trying to pick the best companies and I just so happen to be picking white men every time I invest. Well, if you think about fiduciary duty, if you haven't got a diverse portfolio of founders, you're probably not selecting the best companies. And I can take that even further. And so, okay, you should have diversity just to get the best companies. But if you're a real hard-nosed capitalist, you can go a step further, which is Remember that data I showed about the returns? $2.5, 2.5 times more dollars of revenue per dollar invested from women-led companies to all-male companies. Well, if you think about it, venture investing, angel investing is all really simple stuff. You buy low, you sell high. And the law of supply and demand says if there's less demand for something, you pay a lower price than when there's more demand. And if you know there is less demand for female entrepreneurs than there is for male entrepreneurs, if other market participants are biased, you can profit from it. So if you're really going to be smart about this, you should be thinking about doing a fund which actually targets underrepresented founders because you know you'll probably get higher returns there because other people aren't funding them. And that is really something to look at. There's a number of funds out there which have realized this, whether they're doing it whether they're doing it for social reasons, whether they're doing it for pure 'cause I want to make the most money possible reasons, doesn't really matter. The fact is that if you want to make the most money you can, at a minimum you should have a diverse portfolio, and you should probably be targeting underrepresented founders, and that's how you'll make the most money. So I've been talking about avoiding bias in your first checks. We talked about— shared the data. Sure looks like there's a lot of bias out there. Here's some easy steps to follow as an investor to reduce bias. The first thing is if you select purely based on the numbers, you never meet the entrepreneur, you're probably going to have a lot less bias. If you want to check up on the person, don't do a reference call. A reference call says the person with the most bravado, typically a man, is the one who's going to get chosen. So you don't hear a pitch, you do a reference call because the reference call is a much more normalizer and you'll hear a much less biased point of view on the person that you're considering investing in. If you want to change your behavior, be transparent with your statistics. It'll change your behavior. And honestly, remember, you're all about making money. Be a hard-nosed capitalist and invest where you can get the best returns. Which will tend to be a diverse portfolio. Of course, that's what you should do. The corollary of the reference calls is ditch the pitch. We know that a pitch is a process that selects good-looking men. And if you want a good-looking male filter, I mean, I mean, what's the point of good-looking male filter? You know, it's a filter. It's biased by looks. It's biased by genders. You don't need that filter if you're really focused on making money. You're a hard-nosed capital So I talked about bias in these first checks, and there can be a lot of bias in first checks because people have no experience to judge by. You're jumping to conclusions. It's very easy to be fooled by bravado. Now, the bias you see in follow-on checks is very different. When you've already made a first investment in a company and then you're following on, well, you now have experience. So you can judge people based on experience and results. You don't have to jump to conclusions anymore. You've got all this evidence of months to years of working with them to prove out what has happened with their business. So it isn't dreams. It's here's the evidence. And you're no longer fooled by bravado because the bravado may have got you into the company. But after working with some months to years, you know if there's someone who over- or under-promises. So where is their bias and follow-on checks? Well, the big problem you have in a first check, you have no relationship. You don't owe the founder anything. But the second you're an investor already, you're in a relationship. You often feel that you owe people support. You start to make investments not from rational financial reasons, but from these relationship-driven reasons. And it's actually really interesting that most VCs in the world generate the same returns on their first checks that they do on their follow-ons. And this doesn't really make a lot of sense because you think about it, you've got a massive knowledge advantage when you're an existing investor. So you should have a massive advantage and make a lot more money when following on. In fact, that is our experience. We are a fund set up to optimize the follow-on investing. And we make about 3 times higher percentage return on the follow-on investments than we do on first checks. We have a massive, massively more profitable make follow-on checks, which to us makes a lot of sense because you've got this massive knowledge advantage. But what are the cognitive biases you're fighting against? Well, look, some sample cognitive biases. The first one is sunk cost. You've got this emotional attachment to the company. Oh, I invested $5 million in them. They've burned that up. They're about to go bankrupt. I want to save my investment. Let me give them another $3 million. It'll just keep them on their feet long enough to succeed. But it's because you identify with this is my investment. This is my company. I want to save them. Similarly, there's the endowment effect. And this is an effect which says, if you have a used pair of jeans and you ask someone, what would you pay for this used pair of jeans, which is your favorite pair of jeans? Or what would you pay in cash for somebody else's used pair of jeans, which looks just like your favorite pair of jeans, but they're not your favorite. They're their jeans. People will pay much more for their own favorite pair of jeans than they will for somebody else's used pair of jeans. And this really comes down to loving your deals. So, you start to get emotionally attached. It's like, oh, my delivery company is the best delivery company because I know them. I've seen the story. And that, 'Oh, those other delivery companies. Oh, they don't really matter. I know nothing about them.' You don't. So, you aren't judging them rationally. You're judging them based on love. You also, I mean, similarly, you've got overconfidence. Good entrepreneurs will create a bandwagon effect, which is the, 'Oh my God, you have to invest now because otherwise, it's unavailable and is this your last chance?' And then, of course, we've talked about sexism, racism, ageism, which which tends to be more of an issue on first checks. And lastly, there's the Dunning-Kruger effect, which is investors know less than they think they do. For the entrepreneurs here, I'm just going to drill down for a second on the Dunning-Kruger effect, which according to Vinod Khosla, one of the most experienced VCs in the world, he says this is a bias that causes investors to destroy value in their investments. And his quote on stage in TechCrunch in 2013 is, maybe some percentage that's substantially larger than 95% of VCs add zero value. And he would bet that 70 to 80% of VCs add negative value to a startup in their advising. So this is a warning, a caution for all the entrepreneurs. Don't listen too much to your VCs. Listen to be respectful and understand what they want to do, but understand that 70 to 80% of their advice is probably adding negative value. So, be very discriminating about how much of a VC's advice you actually take. So, the question of course is, okay, there's these cognitive biases. How do you overcome them? Well, I'll tell you the way we do it, which is we set up structures and rules which we force ourselves to make good decisions. And you know, it's no different than what professional poker players do. Because again, poker is a game where you can get really attached to, "Oh my God, look, I've got this, these two aces. I haven't seen a good hand all night. I've got a pair of aces. Let me just sort of bet." You're falling in love with things and you're not following rules. So, the way we avoid this sort of sunk cost saving my investment is we do large upward steps. Our first investment in a company is $10,000. Our next investment is $200,000. Our next investment is $1 million. And the point is, you're not going to invest $200,000 to save a $10,000 investment. It's just economically irrational to do that. But by forcing ourselves to take big steps up between each round, it means we aren't tempted to, oh, just throw a little more money in to help the companies. We can't throw a little more money in. We can only put a big next check. And then related to that, we force ourselves to only fund 2% of our portfolio each month. So you, I mean, we have 14 venture partners. The venture partners may think, oh, this is my favorite deal. But we're sitting down in an investment committee together where we can only pick one deal. And you may say, well, I love my company. This is, I'm trying to save this investment. Gee, that's great. But what about this company over here, which is doubling their revenue every 2 months? Maybe we should put money there instead because that's where the top 2% is. Overconfidence. You can fall in love with a deal. So we do fixed investment rounds at each stage. I mean, people will fall in love with the deal and say, oh my God, this is the next Uber. I want to put $5 million into it out of my $20 million fund. Gee, good for you. But in our case, it's top 2%. It gets $200,000. Or it's a $200,000 stage. It's top 2%. It gets a million. I know the company could use 5 or 10 million. I know you think it's the next Uber. But this is the discipline, the rules we follow. The way we get over the bandwagon effect is just spending months to years of diligence per stage. Not allowing ourselves to be rushed into decisions. And of course, sexism, racism, ageism goes away in follow-on checks. You watch people's performance over time. The last thing we do is we have a network of advisors. We realize that as VCs, we don't know everything. So therefore, we're very happy to refer people to advisors to get the help. So there we are. That was the quick overview of bias in investing, bias in first checks, If you're an investor, you want to select based on numbers and results. Do reference calls. Don't listen to pitches. Be transparent with statistics. And honestly, bluntly look at the numbers and be a hard-nosed capitalist. Because if you want to make the most money, you invest in people that nobody else wants to talk to. Bias and follow-on checks. Recognize that you build up this emotional attachment. You really want to help people and set rules and processes which force you to overcome this bias. Now of course, I've talked also from the point of view as an entrepreneur. How do you overcome this bias in first checks? Think about this trick to create false bravado in yourself, which is the mental statement, "If everything goes right." And then say the answer there because that will mentally get you in the "Everything's going right. Everything's going right," which allows you to create this bravado within yourself. And the bias and fall-on trucks. Look, most VC— most entrepreneurs are really good at this. Use your emotional tug on those emotional heartstrings because that's the way, that's the easiest way. Oh, won't you support us? Won't you help us survive? We come so close. Those sorts of things are really easy with most VCs. Those are very powerful tricks. You can try them with us. Our rules will stop us from falling for them. But once someone's given you money, you can really build that relationship to get a lot more more money out of them. So there we are, that's a presentation. Would love to move now to any Q&A, answer any questions, uh, and just open it for discussion.

Well, thank you so much, that's amazing. Let me switch this with these people. Folks, can you just drop in? I've started to add some questions in here and I'm seeing some, but like, um, yeah, let's try to get it to the solid Q&A. But yeah, call right off the bat, like, that was super interesting. I think as founder, you need to be like, oh, you need to look at the other side of the PC and see, okay, what are we up against? I'm just going to reshew the poll that we had earlier just so we know. So we had 11% angel investors, 77% founders, 7% fund, and 4% fund investor. Hopefully the investors in the crowd got a lot of value from this, and then also entrepreneurs in the crowd can start understanding what is the what does the other side look like? I'm just going to ask this question, just then folks, please in the Q&A sections dump that in. I'll start, um, looking at that, bring them up. But you briefly talked about this with the false bravado, but like, I'm just saying my question, which is, which I brought up earlier, but I think just if you can maybe reiterate it and talk about it, like, hey, if you are an underrepresented founder seeking VC funding and facing biases, like, what should your advice to them be like, should we be picking better VCs, or Bravado? Like, what's your extended answer to that?

So look, we've talked about the Bravado, so that, that's one answer. One of the things we see, it's really interesting when I talk to other VCs, other VCs often say, Kamal, how do you guys find so many good women, so many good underrepresented founders because we would like to find them and we can't. And of course, the answers are right there in front of you. You're just not looking at them. But be aware that many VCs are really honestly trying to get a more diverse portfolio. They're recognizing that, hey, it doesn't look great that we don't have more diversity in our portfolio. Portfolio, which is why I suggested the, it's okay to challenge people on this. Because in the meeting, and you can do it in a non-confrontational way, but you can really ask them about this and say, hey, I noticed it. I really hesitated when I applied to your fund because I noticed that I'm the, that you haven't funded any Black founders so far. And I'm just really curious about how that's occurred. Should I have applied to you? What's this about? But you can raise that as a conversation so it explicitly gets them thinking and potentially confronting their own biases. So, that is one approach.

It seems to have difficulties with Spain. Hey, Kamal, you there? Sorry about that, folks. I think Kamal's having some technical issues. Let's— I think he's going back on stage now.

Sorry about that. I seem to get kicked off.

Yeah, no worries. Uh, okay, so I think just to wrap up the previous question, you were saying that, hey, if you're a founder facing some bias from the investor, do your due diligence on the investor, start the conversation with the investor, and, you know, go, I guess, essentially do your research, right?

Look, it's your decision. You can judge from the interaction how it's going. But yeah, target people based on research, but do feel free to reach out to people who seem to be biased investors And feel free to have the conversation with them if and when you meet them, because many investors are actively trying to be more diverse in who they fund. They just haven't realized, for instance, that their pitch process is discriminating against people who aren't, in their view, good-looking men.

Got it. I'm going to bring up this question because I know you're going to like this one. It's, uh, Sayid from Los Altos is asking, he's like, What if you're in a hot sector and like, how does that play into the investment decision? Obviously we're in the AI rush right now. So if you type like, so if you combine the bias from male, like I guess Caucasian male, AI, like that funding score is gonna be 95%. So like, what is your, your thoughts on like these, these sector, these hot sectors and like how does that play into the bias selection?

Well, look, the first piece of advice for entrepreneurs, which many, many entrepreneurs don't figure out and don't do, is understand each investor when you reach out to them. Because if I had a nickel, I mean, I get so many— we are very clear on our website and everywhere and everything we talk to, we fund entrepreneurs from only two sources. We fund either top alumni of INSEAD Or we fund top graduates of the Founder Institute referred to us by their program director. That's the only two things. And I have all these entrepreneurs reaching out to us who have done zero research. They've never opened the website to see who we fund. And they say, I've got this really cool AI company in Silicon Valley. We do XYZ. And it's like, you're not in SEAD. You're not Founder Institute. I cannot fund you. Full stop. And so, one of the things with this hot sector, yeah, the hot sector means there'll be more funds focused on it. More of the general funds will focus in a certain area. But as an entrepreneur, do your research on funds. Reach out to people whose mandate you fit. Don't waste your time and their time reaching out to someone whose mandate you don't fit. Because they'll just end up saying no. Or if you're reaching out, at least understand the mandate first. First. So if you're going to reach out to someone whose mandate you don't fit, you can try to tweak your positioning so you sort of sound like you fit into their mandate. Um, there's absolutely— look, I was talking about the, um, the bandwagon effect. There's absolutely a bandwagon effect in venture. The— as an entrepreneur, I always hated this, which is nobody wants to talk to you, nobody wants to talk to you, nobody wants to talk to you, and then there's this little tipping point when everybody wants to talk to you and everybody wants to fund you. And it is, yes, it is what this industry is like. People want to feel they aren't missing out. So, there is mania around industries. There's many around technologies. There's many around specific companies. It's just human nature, which is human nature will fall into this mania. But you do have your best way of avoiding the mania is finding the right funds who were set up to counter the mania, were set up in another time, who will still talk to people like you, whatever you're doing.

Awesome, thank you. So I'm going to bring up another one of my questions just because, you know, you talked about the Ditch to Pitch approach, which is like very structured. You didn't talk too much about Loyal VC, so like maybe, maybe just mention a little bit about like— I think Loyal VC's model is very, very unique, so maybe like you can segue into that. But like, it's very, very interesting where you're like, hey, get rid of the pitch and like, let's kind of do a bunch of other things there differently. But, but yeah, like, maybe can we just zero in on that while I collect some more questions?

Yeah, so this all goes together. I mean, the real concept of Loyal VC is to say, um, uh, our, our thesis that we present to our investors is to say venture capital is not a business which is a bit venture capital is all about access to top deals. And the thing is, I mentioned nobody wants to talk to you, no one, and then everybody wants to talk to you. Well, everyone wants to talk to you because you've done something, the business, which shows us taking off and succeeding. And then everyone's banging down your door. And our view in loyal VC is to say, we'll work with you early before anyone else does, build up a relationship, and hope when you're taking off that we've earned the right to be in that next round and that you will be loyal to us by giving us a chance to invest when your business is taking off. So that's our premise. To do that, we do a bunch of things which are unusual. We run an open-ended fund. So we aren't sitting there forcing you to sell your business in 6 years or whatever it is. Because we want to spend years working with you, supporting you until the moment when you take off. And that could happen in 6 months. It could happen in 6 years. We don't care. We will keep working with you and supporting you until that moment occurs. So we have an open-ended fund, and the way it works for our investors is we offer quarterly semi-liquidity. We set a price, the investors can trade in and out of the fund every quarter, which is actually really good if you're managing your own money. I mean, you won't— many entrepreneurs here won't have thought about investing in a VC fund, but when you invest in a VC fund, you give them the money for 10 years, you can't touch it, you have capital calls, they force you to give you more money or you lose your investment. It's just a crazy setup as opposed to our fund where you invest whatever you want to invest, whenever you want to invest it. And if you want to sell, you sell. So we do. So we have this open-ended fund and we have calls with every company every month because we spend all our time having calls with every company every month. We have no time to listen to pitches. Most VCs want to listen to— they want to screen 200 companies for every investment they make. They're going to listen to, I don't know, 30, 40, 50 pitches for every one investment they they make. And we just don't have the time to spend on the pitches. So, we've said we've got to spend time with the entrepreneurs supporting them, getting to know them, building the relationship. So, we have to invest in a different way. We have to invest without the pitch. And then, okay, when you're investing without the pitch, what are smart ways to pre-screen companies to get high potential companies coming in? And that's sort of a little bit the logic that led us to this ditch the pitch. We are— our returns have been— look, we have good returns. We have returns which are in venture capital. We are a second quartile fund. We're an above average venture fund. And we are consistently above average venture fund. We've been running for 6 years. We've done 300+ investments. You can slice and dice those investments however you want. And we consistently come out to an above average fund. But that's what we offer our investors is consistent outperformance. We are not a first quartile fund because you want to be a first quartile fund, you have to take massive risk. And it's my money. I want to manage in this disciplined, diversified portfolio way. I don't want to be betting everything on one company and either making a ton— I'm a first quartile fund— or losing everything and ending up as a fourth quartile fund. I don't want to lose money. I want to be consistent second quartile. Cartel. So that's the way we run our fund.

Perfect, thanks so much. I'm just going to bring up this question from Jeff. He's asking if you can just go over the setup structure rule slide. I think you had it and you just kind of went over it. It might be helpful if you can maybe just explain, um, structure rule slide.

Um, yes, um, so I think, uh, sure, let me just reshare. Um, you'll have to stop sharing for me to share that So I think you're referring to, uh, this slide here. Is that right?

This is the cognitive bias one. I think there's a—

because there's on the right-hand side, there's this series of rules that we use when we're setting up our fund, which is like, look, we do staged investing, we own Probably the most important rules are we only fund 2% of our portfolio each month, and we write fixed check sizes at each stage. And these two things are— I mean, if you just apply these two rules, the only 2% of your portfolio each month will force you to pick only the best companies. It'll force you to not support everybody because you're thinking about money-making, not support, and especially the large upward steps and the fixed investment sizes. So these are sort of the general rules we're using to overcome these cognitive biases. Now, by the way, if you're an entrepreneur, investors have these cognitive biases. Take advantage of them. You know that people get excited by this bandwagon effect. Take advantage of it. Create scarcity. Make them think, oh my God, I have to invest now. So do feel free as an investor. You got to overcome these. But as an entrepreneur, no biases exist. And where you can, take advantage of them.

Awesome, that's, uh, that's really good advice. Let me do one more question and we can, uh, break out, uh, for networking. I like this question from Inam. He says, how can investors balance using data to make decisions about early-stage startups, also considering soft skills of resilience and adaptability, which are not easily measured? The reason I think this is interesting is like like you're making a lot of investments in that early stage. So one is you have all these biases, but also you have performance. Like, this founder actually needs to perform. So like, how are, how are you evaluating performance at the earliest stage when product could be all over the place? And yeah, love you to get into that.

Look, the way we do it is that the reason we talk to the local directors is the local directors have worked with companies for months and they can answer all these questions for us. So that's where we're getting really the reference from the local director. And I mentioned we're all about references rather than hearing pitches. The general answer is, there's a two-part answer. If you work with a company month in, month out, you start to see things like resilience. If, however, you're an average VC who doesn't do small first checks and get to know the companies, but you're just investing blind, The data often reflects these different outcomes. So, how do you see resilience? You see resilience because you see data where the sales were like this for a 2-year period. And then, they start to turn up. And you know that for the entrepreneur to get through that period until the numbers start to succeed, you see resilience. Now, if the company is succeeding right away from the start, you're right. It's really hard to evaluate resilience there because the data tells you, wow, this company is doing really well. But you actually don't know when you're writing that check how resilient they are. You just know they're doing really well. Look, for most entrepreneurs, for most investors, traction outweighs soft skills. You use soft skills, you look at soft skills when you have no traction. But the second you have traction, you're judging, you're largely judging traction. And remember, by the way, venture capital is a specific type of funding. It is to help already successful companies grow faster. But if you're not already successful, VC is not right for you as a general rule. Everyone thinks, oh, VC should fund at the early stages. No, at the early stages, angels fund, individual investors fund. People who already know the industry well fund, but you don't get early-stage investment coming from VCs is generally not what happens.

I think that's a great way to wrap things up because a lot of people get confused with the type of investment they need, whether it's angel or VC. You heard it here, everyone, like Kamal did a great job explaining the difference between those two segments. But, you know, if you're early, early stage and you're still— I saw some questions in the chat about ideation and MVP. You don't have the early-stage customers and all that type of stuff, you're generally looking for friends and family and some other angel investors, but then once you've hit that product-market fit and you have that traction, that's when you start to activate and unlock different, potentially venture capital dollars. Perfect, I wanted to make sure we wrap up in time, so there's time for networking. Kamal, thank you so much for taking the time, this was a lot of fun, I learned a lot as well about the different bias. I had somebody DM me, Pablo Tripoli from Babbel based in the UK. He said, great event, excellent speaker, very relevant content. So awesome job and you're getting a lot of thumbs up emojis and stuff. So thank you so much for taking the time. Very educational, very helpful. Some heart emojis as well. So awesome. We're gonna wrap up here, folks. Thank you so much. We'll send a recording within 48 hours. Yeah, within 48 hours. If you do want to stick around, we still have about 112 people. I think we hit about 180 people at one point. So, you know, we'll have some virtual tables. Hopefully come out and stick around for 10 minutes or so, jump on this table, ask questions. Please rotate as well, meet each other. That's the beauty of these online events. With that being said, Kamal, any final thoughts? Final words for the audience?

Look, if anyone wants to follow up with me, if you're an entrepreneur, um, actually, is it— it's a waste of your time to email me. I— we've got a— we take all our portfolio companies come in through our website. So if you're interested in being funded by Loyal, just go directly to our website, place there where you can apply. And there's also our— all what we use to screen is put right, right there up front. But everyone comes into our website. Don't bother emailing me. If you are an investor, the flip side, if you do want to hear more about our fund, getting information about investing in it, email me kamal@loyal.vc.

Perfect, thank you so much. All right, I'm going to wrap up the event right now. We'll see on the networking table. Thanks everyone.