Earnest Sweat 00:14
For today’s episode. We’re lucky to have Justin Dyer. He’s the partner and CIO of aw capital. It’s a multi-family office specializing in wealth management for professional athletes. Today, he’s going to share with us how to think about the athletic LP target market, AWS capital’s approach to VC, exposure to their clients, and takeaways from reviewing hundreds of emerging manager decks for the raise program with that. Wanna say, thanks for joining us. Justin

Justin Dyer 00:47
pleasure, thanks for having me looking forward to chatting today. Yeah, so

Earnest Sweat 00:51
I always like to start off with kind of just like the origin story, because becoming an allocator, we found over these 50 plus episodes can happen in various different ways. So want to know, Justin your journey into financial services that eventually led you to, aw,

Justin Dyer 01:11
yeah, in a way, maybe somewhat traditional, but also at the same time being somewhat somewhat random. I always knew I wanted to be in finance, going back to when I was trying to figure out what to do with my major. I knew, I knew finance was, what interests me the most, most exactly which path, what area Finance, Financial Services, is huge, right? You know that was definitely yet to be determined. But I was fortunate to have a mentor, y midway through college, who pointed me in the path of the independent financial services world. A couple of core reasons for that. One, it was, was, and still is a very fast growing part of the marketplace, just because of the conflicts of interest that are rife in other parts of the marketplace. And that was certainly the case way back when, when I was getting started, but just the direct alignment with clients, I mean, it kind of goes why goes to why it was a fast growing part of the marketplace, but just being able to work more directly with clients in a much less rigid environment was also part of the conversation. So when I finished up college, I did take a year off. But I had this, this,, true north, that I always knew I would come back to And so I just started looking around. And luckily, was able to find a roleat the ground level, within a independent RIA with in San Francisco at the time, and and then, since then, my career, It’s been all over the place. Within the independent financial services world, it hasn’t just been okay. You’re going to come in as an analyst. You’re going to stay on the investment side, learn the craft of being an allocator, the profession of being an allocator. It’s certainly, like I said, kind of what I initially was most interested in: the financial side of financial services and working with clients. But I pretty quickly found out that working directly with clients is actually really interesting. It’s completely different, right? You have to understand the human psychology and behavior of finance and all that type of stuff, versus just understanding the numbers and thinking about things much more black and white. And I, I am super, super thankful for that experience. In fact, today, I still have direct client relationships, and will likely always maintain that for that exact reason, making sure the decisions we’re making on on behalf of allocating client money actually still reflects true client interaction and the human side of it since those early days to today, I’ve, I’ve been a Chief Compliance Officer, I’ve been a COO I’ve been, a wealth manager, or maintaining direct client relationships and responsibilities, and so it really has gone through almost every possible iteration within the financial services world. I started off with more of the analytical interest and desire and here I am now the CIO and really overseeing that and and I’m pretty, dang happy with how it’s all turned out. That’s really

Earnest Sweat 05:14
cool. I love the fact that, like you’ve played many parts within this, this sub sector, financial services, before we get into, like, how you got to Aw, I wanted to get your take on, how have investment management, Ria, how has that world changed since you entered it because, from afar, it seems like it’s changed a lot. I

Justin Dyer 05:44
mean, it has, is the short answer, but to answer your question specifically, I mean, some of the more interesting changes both, you could say positive and negative. I mean, on the positive side, it’s still continuing to grow. I don’t think it’s growing as fast as it was. Gosh, this is 1520, years ago now, but it is still growing, and I believe that it continues, it should continue to grow, because it is part of the marketplace that that provides such phenomenal advice to clients, and, most importantly, unencumbered advice, right, as conflict free as you can possibly get. The whole idea of the fiduciary mindset is there and real. So I think that aspect is continuing, and I expect to continue quite a bit. On the flip side, and even kind of related, there’s a lot of institutionalization of this part of the market, both institutionalization in the sense that there are larger, much, much larger platforms, pools of capital firms within this space that are impressive organizations. And that’s good to see, because that’s evidence of maturation, etc. But related to that, on the flip side comment is there’s a lot of private equity money coming into this as well. And again, it’s evidence of maturity and somewhat of a validation. And I’m curious, still being relatively young but experienced, have plenty of experience, kind of in this nice little sweet spot, what that, what that’s going to do, right? When, when you change the business model and the business structure, there are potential implications, right? Are you still able to do what’s truly in the client’s best interest when you have a more short term capital partner at the table with you. these are all all interesting questions and interesting dynamics that I don’t think we know what the outcome looks like quite yet.

Earnest Sweat 07:54
Yeah. I mean, it’s been, one thing I’ve been thinking about is with the institutionalization of, you know, our eyes through kind of the private equity dollars should we expectshould we as the kind of the collective, emerging manager, collective GPS, think that this is going to be committed dollars like we think of pension plans. And, fund to funds that are directly focused on private assets, venture capital, or should we think of as a point in time, like, what do you think? oh,

Justin Dyer 08:32
gosh, I’m gonna hedge and say probably a little bit of both. But what I mean by that is, I mean, I think I am right with the institutionalization or professionalization of the Arab world should come more more committed capital. I think it’s only natural. There’s also a desire and demand from the end client to allocate more to just private markets more broadly. At the same point, I think, I think a lot of, let’s call it, generally speaking, retail investors can be somewhat fickle. everyone wants access to private markets right now. Well, when you start to see returns if they don’t necessarily meet what’s expected, even though, you know, this is a very long term asset class, you have to be patient. You have to be committed, etc, etc., it can be, it can, it can pull back out, probably just as fast as it’s gone back in. I mean, that’s nothing to say about the various regulatory restrictions and whatnot, which obviously,, kind of a moving target. Or certainly, there’s, there’s conversation around breaking down some of those guard rails for, for better or worse, quite honestly. But I do, I do think, I do think there’s going to be, you know, if I put it into it, I would put it into the summer. I do think there’s going to be more capital going into private markets. I think that trend is going to continue. Is it going to be long term, committed, stable? I kind of question that. I think it probably depends on the partner, the firm, the platform, etc.

Earnest Sweat 10:15
Okay, that’s fair. I’m kind of in the same boat, and how I think about it too. Justin, Now, moving on, we were in your story. How did you get to AWS?

Justin Dyer 10:28
So my career started in the Bay Area. I worked for a couple different organizations there. While, while we were in the Bay Area, I had pivoted more truly back to the investment, the allocator seat within the industry on the personal side, my wife and I, we were living in Marin at the time, we had lived in the city Marin had our first child, my son, James, and all of our family was still in Southern California. We both grew up down here, and as we just were looking to grow our family basically just cut that made the hard decision to relocate down here to Southern California, just to be closer to family. And then fortunately, within our network, and specifically some family connections here in Southern California, I got put into contact with Brandon Avril, one of our co-founders here at AW M and Brandon and I gotten to know each other actually prior to us moving down here, but really started to develop a relationship when We came down to Southern California and just saw extreme values alignment and extreme alignment, what they were trying to accomplish with aw m in the early years, and what I really wanted in my career. And so it was kind of a no brainer to join forces at the time,

Earnest Sweat 11:57
nice and give us an overview of what you all do today and your focus, your focus clientele, obviously, is professional athletes, but all the things that you offer, yeah,

Justin Dyer 12:11
sure, and it’s actually super, super important to us to expand it just beyond the allocation or asset allocator side of it, even though, obviously, that’s the point of this conversation and my area of responsibility. But as you mentioned in the intro, aw capital, we’re a multi family office with a focus on professional athletes and the differentiator, the strong identity that we have is, is around this idea of a human centered cap financial services firm. What that means much more than just kind of a sound bite is to say, hey, money is a tool and should be thought of solely as a tool. Money is a tool to accomplish what is important to you figuring out what’s important to you is, is step number one, and then orienting everything that money touches, which is quite a bit in in life, to to support that goal, is this idea of of a human centered financial services firm, and the the the hope, or the theory being that if we can allow money to play a supporting role as a as opposed to a central role in people’s lives, they’re going to have a lot more impact, whether that’s local, you know, whatever impact is is unique to each and every individual. And as a result of having more impact and more direct purpose, you’re going to live a more flourishing life, which should lead to a more flourishing community. So we really view what we do as being mission driven and allowing us to have an impact through our clients who are arguably very impactful individuals. It depends on the sport and obviously how prominent of an athlete they are, but professional athletes in general have an impact, and it’s certainly a way in which we can support that.

Earnest Sweat 14:10
Do you have any favorite, you know, anecdote or story with any athletes that kind of show, kind of help that you guys have provided, or just even going on the journey.

Justin Dyer 14:25
I won’t name specifics, but so we work with, we work with professional baseball players, football players and professional golfers. We do work with non athletes as well.But one of the coolest stories to answer your question specifically is, I think, because, because of that framework, we have a client. He was a young pitcher at the time, and. Yeah, just, I’d say, kind of simply through this general framework, right? There are some very specific and tangible items that I think led to the outcome I’m going to highlight. But this idea of a human centered money as a tool type framework is basically what he attributed winning a Cy Young to which is huge, right? It’s awesome to be able to say, Hey, you, you reach this pinnacle, this this award, because of a framework and guidance that we, that we put into place, you know, a few years leading up to it, but it just allowed him to focus on his human capital, on his craft, and take it to the to the next level. So I think, I think that example, that highlight is, is something pretty cool to rest our hat on.

Earnest Sweat 15:51
No, that makes a ton of sense when you’re someone into his position where you know, assuming, unless they came from significant wealth, which some athletes do too. But if you are kind of taking care of a whole generation or more, and there’s so many things in flux, having the confidence of knowing that your finances and wealth creation is in a good space, you feel comfortable about it. It’s also aligned with whatever your values are. I can see how that then helps you focus on your craft, right? Yeah, exactly. Think a lot of times people forget athletes are just like real regular people, where you know they’re going into the office with a lot of real life things going on too, and then expect it to perform, and then answer questions. It would be equivalent. And if, like, after every board meeting we had, like interviews after we had to do a press conference, which maybe we should, that would be kind of cool. That would be kind of earnest. You’ve been traded. I wanted to move to,, a large number of our audience is GPS, either at established firms or emerging managers. How should they think about even approaching kind of, this sub segment of of athletes as LPS or, celebrities

Justin Dyer 17:24
carefully, I guess, no, I mean that somewhat tongue in cheek, but somewhat legitimately. And part of that is, you know, I think you hear athlete entertainers, well, first of all, not, not every single athlete and entertainers are the same, right? And there’s a couple sub bullets even to that comment, right? So it depends on the sport you think about baseball. Baseball is, it’s challenging to engage with professional baseball players. And that’s both, I think, a detriment to professional baseball players. But even, you know, I think it from a GP, even founder side, trying to engage with professional baseball players like you just have to right size your expectations. The reason being, it’s an incredibly long season, and you’re playing almost every single day, and so the ability to have free time to go, you know, do extra curricular activities, meet managers, meet founders, tweet, etc, like, use your platform. It’s challenging, whereas sports like the NFL and basketball, and this is kind of why I think you see more, more athletes from both of those sports, more engaged in the world of private markets, direct company investing, etc, it’s, it’s a little bit easier. And so not all sports are created equal. I think number one, number two is just to be very clear, either directly with the celebrity, athlete, entertainer, on expectations, and they should be very clear back often. I think that the expectation that these individuals can, you know, move heaven and earth through a single tweet, or will show up when they say they’re going to show up, quite honestly, can’t. Can just set people up for failure. So I think very, very clear expectations and lines of communication are critical. You know, hopefully I’m biased, obviously, but hopefully there’s an intermediary involved and can help facilitate a lot of that, that conversation and accountability, etc. But you know, the other thing as well, I’d say, is from an athlete’s side, for any athlete. That might be listening. You know, you need to think about this. And you can really learn from GPS. If you’re interested in the private markets, just because deal flow is coming towards athletes doesn’t mean you should do a bunch of direct deals. That is an incredibly difficult endeavor. that’s a conversation we talk about quite a bit. Are you thinking about portfolio construction the right way? And if you don’t know what that term even means, then you’re probably not right. This is an incredibly difficult endeavor, uh, investing in early stage companies, and you should think about it and surround yourself with the right people. Yeah,

Earnest Sweat 20:38
I was going to mention that later, but since it seems like a number of athletes and entertainment, there’s now more ideas about, you know, an interest in the private markets and actually kind of jumping right in, right like, I think it’s because of maybe a shark tank or whatever. But ventures become more mainstream in those instances. How do you all approach when you know a potential client or current client has a number of ideas and ambitions, whether it’s like starting their own fund or just doing you know, as you mentioned, the example, have a ton of deal flow coming to them and want to do those deals.

Justin Dyer 21:26
Yes, I did mention at the outset that part of the ethos, and really the genesis of Aw, was to change the culture between athletes and money. And so to answer the question, specifically, we we love that actually, because it ends up being an education opportunity to to expose what how difficult it is to do this, and really, ideally get to a point where we say, Hey, are you truly interested in this, or is this just kind of a passing fad, and you want to do this because we see other people doing that and and that’s fine, right? Either outcome is fine, but if it is this idea where, hey, we have a deal flow, I got this opportunity. Okay, let’s understand what other professional GPS do in their portfolio construction like, like I talked about, okay, if you’re interested in going down this path, let’s put together a some sort of portfolio construction model. How many deals does that actually look like? What do you think your unique deal sourcing mechanism looks like? What can you actually commit to, both in terms of financial resources and time resources and like, really try and formalize it and professionalize it. And sometimes those are good, really good, or, I shouldn’t say they’re always good conversations, but lead to really productive outcomes. And other times it’s just like, Oh, I understand that. You know, let’s just keep it more in in this systematic fund of fun type platform that that we have to offer folks, to give them that opportunity, because you can still have the exposure to founders and be able to influence, influence people, even within in the fund to fund platform that doesn’t always have to be direct. So we welcome those conversations. We think they’re great. It’s a, it’s a, it’s an excellent opportunity to educate and really, really inform. Yeah, I

Earnest Sweat 23:25
I think you kind of touched on it, but I wanted to just throw up the question anyway to see if there’s anything you want to expand on. But is the ethos of the AWS liability driven approach to portfolio construction. Is that kind of all the things that you’ve mentioned thus far, or is it, succinctly, a little something else?

Justin Dyer 23:49
No, I think it’s, it’s exactly what you said. It’s all those things. In a way, it allows us to do it. It’s where the rubber meets the road, I guess, to use that cliche, where it allows us to take all of these frameworks that we’ve touched on, these these concepts that we’ve touched on, and and capture client priorities, client goals in the form of we just call those liabilities, to use your your you know, to use the liability driven framework terminology, and are then able to build or to match those liabilities, slash goals, slash priorities, with the proper asset class. You know? You think about something as simple as just plain old reserves. Okay? You match those with treasuries. I call this like Maslow’s hierarchy of portfolio needs. So you start with that, that foundational level, and then you build from there, then you build from there. So it does, it really is the culmination of everything, and allows us to get to this, this portfolio that is truly supporting client priorities, client life, client. Uh, impact. Now

Earnest Sweat 25:01
We’re going to take a quick break to speak with our sponsor. What do you see as the biggest regulatory shifts impacting venture funds today? And that could be, seems like a loaded question, but

25:13
Yeah, Matt, why don’t you go ahead?

Mathew Eapen 25:16
What is really fascinating with private capital right now is it’s really on the precipice of, like, becoming mainstream. You’re seeing more retaliation. And you know, as I’m getting in trouble with my capital markets peers here, but as there is, like, softness in cap markets and companies are staying private longer, there’s really, like, tremendous opportunity in private capital, and being able to retail that, and being able to lower the thresholds, potentially for an accredited investor and qualified purchaser, and to give access to retail investors to private capital, is like very interesting, And I think we’re going to see over the next like five years, just an explosion in the amount of funds raised, the amount of like, different strategies. And I think that’s what makes it really exciting to be a lawyer. There were some fairly interesting private funds rules that ended up, you know, going through the court system and not being enacted. I imagine we’ll see a second iteration of that at some point, and it might be a watered down version, but yeah, I think the retaliation, and it’s something that people are aware of, but I think it sort of gets lost in the background, and I think that’s going to be tremendous momentum for the industry as whole.

Shane Goudey 26:46
Yeah, I think that’s right. I think that, you know, what I have seen is just the relative level of interest in venture capital from non-traditional sources, and I think that a lot of it is largely attributable to those who are becoming venture capitalists these days. And whether it’s you know, mainstream people like Snoop or you know, you name it, there are a lot of people who are attracting relative interest from people who have historically never heard of venture capital or had any interest in even thinking about personal investments in this way. Now, seeing an understanding that these people, I don’t know, say, emulate, but certainly are exposed to, and have the ability to open up, you know, whether it’s entered the intersection of entertainment and venture capital or social media and venture capital, I just think that not only is it the relative access to much more deep pockets in terms of the audience in which is going to be available to invest, which is very much the retaliation piece that Matt talks about, but I just think it’s just the relative level of interest, and that’s the managers themselves and seeing the success stories of people who, you know, haven’t been at Excel or benchmark or red point or Lux or, you know, you name your blue blooded venture capital firm, you know, these are really people who are the emerging managers are seen get into deals and be tremendously successful. And how exciting is that, that, you know, opening it up. And it’s people, not only just white males, it’s, you know, its diverse fund managers. And you know, seeing the relative level of excitement for it all now, it’s challenging and it’s difficult, and fundraising is brutally difficult. But you know, having more diversified approach and perspective in the venture bloodstream has been a damn exciting thing to see, no doubt,

Earnest Sweat 28:46
yeah, and I think to that point, even seeing not only the new entrance or kind of non traditional, but seeing those folks team up with a lot of people who are spinning out of the bigger funds, I think we’re going to see some exciting things over the next 1520, years. But I think you know one reason many people well: first of all, you need to have counsel, especially if you want to get institutional capital. But one of the main reasons is also thinking about all the compliance and risk mitigation. Are there any kind of topics that come to mind for you all for 2025 and 2026 that fund managers should be acutely aware of?

Shane Goudey 29:36
Yeah, I think it’s, I don’t know if there’s any newness to any of it at all, but I think that there will be as newer entrants come into the marketplace. It’s just the protectiveness of the SEC and other regulators with respect to ensuring that these individuals understand the difficult decisions and. Relative decision markers allow them to invest in a fund, or if they’re going to invest in companies directly through other platforms, to be able to do that. So I would say that, whether it’s retaliation or not, I would say that the that the underlying key regulatory ethos, I guess, opening up the markets to be sure, I think just, you know, the current administration will be very much in that, in that mode, opening it up to less regulation in certain areas. Maybe, you know, cryptocurrency is a perfect example of that, but nonetheless, that the investor themselves is going to be somebody who’s going to be protected. So I think access and protection are certainly going to be two interesting avenues to see how they ferret themselves out. I don’t think we know that quite yet, whether it’s a, you know, a lessening of a standard on accredited investors, or broadening, you know, who might be eligible to be treated for securities regulations, you know, legality of an investment in a venture fund. But nonetheless, I think it’s important to to have that be, you know, understood, but, but I will say is that if we look at, you know, these private fund advisor rules that Matt mentioned, or the corporate Transparency Act back and forth, you know, circus act that’s gone on recently, there are pushes and pulls all over the place, on the right answer for how to deal with any of this. And, you know, our heads spin often as lawyers trying to advise clients when the law is changing, you know, on almost a daily basis. But nonetheless, I think it’s more just understanding and having a deep knowledge of what’s active. You know what, what sticks of dynamite have been lit, and you know who’s likely to get to the fuses before anything blows up. But if there’s a very short fuse, and you need to know about it, you’ve got to have partners who know kind of what to look out for. I don’t know, Matt, what are your thoughts?

Mathew Eapen 31:54
Yeah, as the fundraising timelines are longer, what we’re really seeing is like just very complex side letters and very complex contractual arrangements where you know, like you will spend weeks, months, getting you know these very, very long agreements, and then closing happens. And you know like you, you sort of like to explain to your client all the obligations, and then everyone pauses, and you wonder, five years from now, if anyone’s going to remember what was in here. And so, like, I think in that compliance aspect, because the relationships are very complex now, it’s incumbent on GPS to remember, sort of, like, what they’ve agreed to and what they need to abide by, and things like that. And so those, those are where, I think really sophisticated counsel that you view as a partner, like that. Communication says, like, Hey, did we ever agree to something like this? And it’s like, yep, three years ago. Here’s the side letter, you know, like that. That is really important. And the other is just like, open communication, if you’re thinking about as a manager, you’re thinking about asking a question. Just ask it. You know, like the worst case scenario, everything is covered. But there’s so many times where you know, people will hesitate to ask about something because they don’t, you know, they’re either afraid or they don’t want to incur large legal expenses. And there’s so many times we’re just like, approaching an issue early from a compliance perspective is just worth sort of exponential returns before it turns into a bigger problem

Earnest Sweat 33:30
with and then there’s so many. This is kind of driven by the fundraising period, but yeah, DPI, right? And trying to find, trying to find through secondaries, and then we also have, you know, all these continuation funds . Who knows if people raise other ones and GP led restructuringAnd then I’m not even mentioning the emergence of more zombie funds.

Alexa Binns 34:01
And now back to our LP interview.

Earnest Sweat 34:07
I wanted to shift gears and talk about, AWS venture capital strategy versus other RIAs.we talked about it earlier in this conversation, but we’re seeing a lot ofroll ups, plus outsource CIOs. Do you think there’s any limitations to that? Or do you think, you know, the approach that you guys have had is like hiring you and having you as the CIO and having that expertise of venture. Do you think that’s needed as well?

Justin Dyer 34:43
Well, of course, they’re gonna say yes, but, but I’ll give you, hopefully, a very strong rationale to that. You know, I think those other solutions are not bad, right? But my, my, how? My best guess is that you’re going to get average returns in a solution like that, especially as more and more capital goes to the private markets. Right, the cost of capital is going down in the private markets, broadly speaking, certainly in venture and that has ramifications to expected returns long term. Again, we’re talking macro on average across the entire asset class, and these platforms have so much capital and need to allocate to certain fund types, and the ability to deploy those large amounts of capital dictate larger funds, usually. And so you put all this together, I just think the expected return is going to be less all things being equal, using those platforms. And so it’s it that that logic is essentially why we’ve set our venture platform up the way we have in in focusing on smaller funds, the emerging manager space, not exclusively, but certainly having an emphasis or tilt to that, just a that’s supported, I think, broadly by the data, where there’s, there’s higher likelihood of of out performance there, certainly there’s a lot more distributions. I’m not, I’m not ignorant of all that. But if we can craft a portfolio of committed managers that have certain criteria, etc, that fit these smaller buckets, some of which will be emerging, some of it which will be established, but have committed to smaller fund sizes, you can, you can only do that at a certain scale, and we’re, we’re fortunate to be in this like we’re big enough to have the resources to do it, but we’re also small enough to still allocate effectively in this space. You know, we’re not hundreds of billions of dollars. We’re a very healthy size to get a very good exposure to that part of the marketplace.

Earnest Sweat 37:01
that makes sense. And, we, we just had Samir on the show from allocate. And so I wanted to just get your, your take on, what do you guys use allocate for within your venture platform and kind of processes. Yeah,

Justin Dyer 37:25
so it’s evolved a little bit over time. I mean, Samir is just a good friend, and what they’re doing over there is great. It’s cool to see the success that they’ve had so far. And Hannah is a great friend as well. So I can’t, I can’t, I can’t leave her out. And so as our program or platform has evolved, we, I would say, use them somewhat as a completion tool where, you know, I’m I’m a lot more. And I think that the part of the market that we just talked about, smaller funds, even emerging managers, requires a substantial amount of due diligence and part of our portfolio in the past, it’s evolved over time. Did have a little bit later stage allocation and leveraging a platform like Samir and other partners in the past, like we’ve partnered with what used to be called next play capital early on in our venture allocation days. And those, these are, these were all great partners, right, to pretend we could do it all, is, is, is a fool’s errand, you know? So they were great partners for those purposes. And now fast forward to today. I’m super excited that on the technology side that allocate is building to help us better maintain our pulse, the details, the data within our portfolio. Because, you know, after a while you get 30 plus manager relationships, and the underlying portfolio there becomes this vast, vast amount of data. And I think what Alan Kate is really trying to do on that front is awesome, and we’re looking forward to helping them develop that and utilizing a lot of those tools going forward.

Earnest Sweat 39:15
Could you talk to me? I mean, at some point, you know, if you started out getting into some more later stage established funds, but now you know evolution to also include emerging managers and heavily tilt towards that. How did you get to that process? Because, as you mentioned Justin, it’s really hard to, you know, to do that, and there’s a lot of due diligence required. How did you build that expertise,

Justin Dyer 39:46
the strength of the network? If I were to distill it down into one quick answer, but to unpack it a little bit more so earlier on, when we were small. You know, this was almost 10 years ago. Now, I guess you. Could say we wanted to do a venture where our clients had an interest in it, and but we didn’t want to, we didn’t want to just say, Oh, we can do this. We can figure it out ourselves. And so that, again, that’s where these great partners, at various phases in our history, have been incredibly valuable to us, to allow us to, you know, kind of climb, crawl, before we walk, before we run. But as we got our toe to toe and then understood the broader asset class, it gave us visibility into the data that I referenced earlier on, around smaller funds, around earlier stages, earlier parts of the market, and all these different characteristics that now represent how we allocate today. It just took time. It took being in the ecosystem. It took getting exposure to raise where you see the dynamism there. But you also, you also see, you know, the good. You see the good with the bad as well? I guess is what I want to say and and it certainly gave us the the exposure gave us the confidence to to create the platform that we have today and over time, allowed us to learn what actual due diligence takes and how complicated that that whole process is,

Earnest Sweat 41:22
what’s the criteria and processes that you use when evaluating new fund opportunities?

Justin Dyer 41:30
So not to go into the gory, gory details, but just to give kind of a high level overview how we think about it. You know, there’s just, I would call it the basic screening criteria. Does it align with our target fund size? Does it align with what type of stage exposure we want? And we’ll go through our internal process to understand portfolio construction. Okay, can this fund actually accomplish what they say their goals are, you know, are they trying to 3x is this? Is this a fund that’s swinging for the fences? How does that complement other funds within our portfolio? So it’s both, I would say, almost like top down our portfolio construction. Does this? Is this overall fund additive to what we’re doing? But then bottoms up, is this a viable strategy in its own right, is, is, is the, is the sector focus a little too myopic for us. We do allocate to certain sector specialists, but we don’t want to focus on sectors that are so, so, so narrow, in our opinion, where, you know they have to, they have to thread that needle perfectly to get a big outcome. Where, whereas we like sectors that, maybe, you know, our little quote, unquote sector specialist type funds, but the sectors themselves are just these massive opportunities. You know, one of the big, and I’m sure everyone does this, but one big area of focus and and honestly, area that that we’re always trying to prove upon is the reference check process. Because, you know, you can go through a standardized or just, you know, a due diligence process, like, kind of very rules based. Are we asking this question? What’s the strategy? Does the fun math check out and I but the reference check process can be so critical on actually highlighting the manager themselves as a human. Are they? They are capable of building their own firm, right? If, in the case of an Emerging Manager Fund one, right? That’s a completely different skill set, oftentimes than just managing money or, you know, writing checks. So I think that’s something we’re constantly, constantly trying to get better at. Can we, can we figure out how we can reference our network better triangulate certain things, versus just, you know, going down an LP ref or GP reference list, and in getting some more, you know, it’s helpful, but a little bit more boiler plate type referencing. So that’s, you know, I probably kind of went all over the place, but that’s the general due diligence process.

Earnest Sweat 44:13
Okay, no, it made me think of an emerging manager friend who told me that one of their LPs that committed on fund one, like, heard their pitch and did like, 30 reference calls and told them, you’re doing everything wrong. You’re doing something wrong, even though you know he has committed. And the insight she provided me was that the LP actually was looking for, and I never heard this, but it makes total sense. But he was looking for consistency of what the emerging managers were pitching, and was that aligned with what they were hearing from founders, other LPs that they pitched and everything, because that should. Really, that’s true. Truly be a through line, one that emerging managers should be extremely self aware of, like what they’re good at and what other people see their value. Is that, and then those stories in different ways, should be coming up in their references. So I thought that was such a fascinating perspective.

Justin Dyer 45:16
I actually really, really love that. The one other thing I try to try to isolate is, is this idea of stewardship, you know, stewardship of capital, especially like it’s something we take pride in and talk about a lot internally. We believe we’re, we’re stewards of our client capital. I think it’s incredibly important in the private markets and ventures as well because of the long duration of this asset class. You know, you’re, you’re putting money to work that that is going to take, gosh, in this marketplace, many, many, many, many years to come back. And that’s, you know, obviously, that’s a criteria and trait that we all need to be comfortable with. But I like having this idea of if we can figure out if someone has that, that identity of being a steward of capital

Earnest Sweat 46:10
in their process. Absolutely do. Do you have a manager selection story that you want to share?

Justin Dyer 46:21
Actually, one of the more recent funds. And I, I won’t name the name,but maybe some people can figure it out. And I want to highlight it, because obviously there’s a lot of GPS that listens to it and it’s just a great example of the length of time things can take sometimes. Yeah, so it was at a global conference bridge global. I’m sure folks know, know of that organization trying to back women GPS and really grow and support that part of the marketplace, which is great, and they do this speed dating process for lack of a better term. And I met a manager, you get pitched in, I think less than 15 minutes. I think it was like 12 minutes at the time. Anyway, very long. A little little little, a little laborious process. Can we do that for, I don’t know, two or three hours in the afternoon, but that was my first interaction with a GP that we then committed to. I think it was 18 months, maybe even more, closer to 24 months after that initial interaction. And part of that was the length of the time was, I think I give credit to them to follow up. Part of it was me and my team’s comfort, just slowly understanding what they truly do and what their differentiators are. And I think it’s a great example, because both on our side, you don’t know where opportunities are going to necessarily present themselves, but then on the GP side, it just, unfortunately can take, take quite a, quite a long process to get that final commitment, to get that final Yes,

Earnest Sweat 48:17
Yeah, it’s you’re always here. Persistence is important for a GP, especially if you’re starting your own firm, and you have to keep at it, because after talking to so many allocators, they’ve told me they’ve been accustomed to meeting someone great and then the person quitting or just not following up, right? You all. Everybody has busy lives right now, and so like, it’s important for you as a GP to be just like you want for your founder, if they’re trying to get customers to give revenue through the door, you need to do the same thing and kind of cultivate those relationships. But during that time, Justin like you spoke to like getting comfortable and understanding the differentiation, what were the best ways that that manager kind of helped show you that?

Justin Dyer 49:11
Yeah, that’s a good question. You know, I think, I think a lot of it can boil down to the good old fashion in person. That was a big, I’d say, step function, if I’m looking back on the process. It was a 15 minute in person interaction, which was great, but they, luckily are here in Southern California as well, and the LA area in and that’s really what it’s like. Re reignited the conversation. We had an in person interaction. It was actually, I believe it was up front a couple years ago, a great place, yeah, great place. And we sat down and had lunch up front, and it was just this, this moment. Of really good personal connection, where I think I understood them better as humans. And I was like, Oh, actually, not only are you good, you know, good human and you’re incredibly thoughtful, but your strategy is thoughtful as well. And so I think that was, that was the if I pointed to one singular event, and then, you know, we got into the weeds and really understood everything and validated that way. But that piece of it was incredibly important.

Earnest Sweat 50:28
You mentioned before raise. How did you do? Could you give us an overview of raise global? Because I think you’re probably the first person to talk about it here on the podcast. Sure.

Justin Dyer 50:40
Yeah. So raise global. It was co-founded by Ben black at Acadian and Joanna Drake from magnify. Now magnify ventures. Joanna started it before she started magnifying. And it’s a platform built to support emerging managers or expose rather emerging managers to a base of LPs that are very interested in that part of the marketplace. It has grown. It’s cool to see. It’s grown pretty, pretty substantially. I think it’s in its 10th year. Either last year was its 10 year anniversary, or this upcoming year is and it’s grown substantially. It’s very, very cool to see I’ve been involved on the selection committee. I think this will be my fifth year. And that, that exposure, that you know, invite, if you will, which actually came from Joanna Drake. At the time, Joanna and magnify, and I can, I know she wouldn’t mind me saying this. That was one of the very first emerging managers we committed to and to build out our platform and and that coincided with us getting exposure to the raise platform and then just seeing this incredible onslaught of fund deal flow, which can be a lot to go through, but it’s, it’s incredibly valuable data Justin

Earnest Sweat 52:11
any major kind of takeaways from reviewing those hundreds of emerging manager decks for raise.

Justin Dyer 52:17
Yeah, it’s really hard to stand out. It really is hard to stand out, you know, I also think this is the unfortunate reality of a popular asset class or popular marketplace. You know, there’s a lot of people who are doing this kind of thing more from a point of vanity. Hopefully that’s changing. I think it’s changing. There is certainly a peak or crescendo to that in the 2020 2021 even maybe 2022 time frame. But that is on the flip side too. I think it still is an incredibly important part of the venture ecosystem. So keep at it. Try to really, truly differentiate yourself. You know, if you’re you, you’re doing another $50 million fund that’s focused on SaaS, you’re going to have a really, really hard time doing that, or AI, you know, whatever, you’re going to have a really, really hard time doing that. I would also say, don’t, don’t trade, don’t chase trends, unless you have a true, differentiated thought on that, or ability to allocate capital there, because those are not ways in which you’re going to build a long, lasting firm.

Earnest Sweat 53:38
Yeah, it’s so true. You have to differentiate yourself and really be it goes back to being that thoughtful, especially when you’re submitting with hundreds and hundreds of other people. Are there any lessons that you learned from fellow judges? We saw that a former guest on the pod, Eric simple, was there as a judge as well. But curious, if you’ve learned anything from being around those other folks who have various experiences and as allocators?

Justin Dyer 54:14
Yeah, yeah, yes. I know there is a short answer. Is there any one specific, nice little sound bit. I think it’s hard for me to distill it into a nice little sound bite, but maybe I’d highlight themes more so than anything, some of which I’ve already talked about. One is just in general, how important the emerging part of the marketplace is. You know, all going back to Eric simple, and those individuals, seeing them and their commitment to this part of the market is great for me. I’m not just, you know, this lone warrior there. People have come in, in my path, I guess, before. So that’s great. That’s also, that’s very, very validating. And. But then you know, it’s understanding nuance, so you’re your example around the like, what are the themes that you’re trying to assess and due diligence, and what are true standouts when you’re reviewing deck? Like, sometimes it isn’t just like super tangible quantitative things, something. Sometimes it is trying to assess some sort of theme that can, can, can, can highlight itself through a deck. And I think how they’ve, they’ve set up the review process, the scoring process for raise so that I got, I think there’s like 20 some odd people on the selection committee now can all take their biases and then get it to somewhat of a consistent methodology so it’s somewhat uniform. It is pretty impressive. And I think looking at how they asked us to score certain things is indicative of that, and what type of categories or what type of qualifications that they’ve asked us to score on, is really, really helpful.

Earnest Sweat 56:10
Any parting thoughts for our audience, which is allocators, emerging managers and established managers, sure

Justin Dyer 56:21
keep at it. I mean, I’m gonna, I’m gonna repeat a couple things that we’ve already talked about. You know, the persistence, the the standout, right? Or the really, really make the effort to differentiate yourself. And I think the community at large is there to help people, but ask them in a respectful way, right? Don’t ask them in a way that they think you’re also asking to raise money. But if you’re truly saying, Hey, can you look at this deck for me? I, you know, I’m curious what your feedback is. I, you know, I’m happy to do that time permitting. I The other big item I would, I would say, is super important to us, and our ETL ethos is that, you know, the more that people can think about money and allocating capital in this, in this human centered framework, so you can, you individually, can live a more fulfilled life. I think, is incredibly powerful. And I could talk about that all day. We can talk about that all day, but it is. It’s super important to how we think about constructing, constructing portfolios, overall, public markets, private markets. But then that’s how we’re allocating our end client dollars within the venture as well. And and it’s, it’s important to me to to help people think about money more holistically, as opposed to just, you know, in your specific little silo, or our specific silo in this in this case, a venture capital, or maybe it’s real estate, maybe it’s something else, but take that step back for yourself personally, and I think It can lead to some better outcomes.

Earnest Sweat 58:02
No, totally agree, having that, you know, money be a tool for your, for your, for your life, and holistically, I love that approach, because a lot of times it just becomes a means to an end, not knowing also kind of the family, families of origin. People come from that shape their view of money. So yeah, we can talk about that next time I’m in LA for the last few hours. Yeah, Justin, thank you so much for being on the podcast. And yeah, can’t wait to have you on in another year or so. Awesome. Thank you so much. I really enjoyed it.

Alexa Binns 58:38
See you later, Allocator.