Alexa Binns 00:02
Alex, welcome to swimming with alligators the VC podcast from the LP perspective, with your host, Alexa Binns and Earnest Sweat. You ready? Let’s dive in.

Earnest Sweat 00:13
Marcia, so glad to have you today. I want to jump in with just learning more about your story and how you got to Meson lane.

Marcia Mitchell 00:24
I started my career in venture. I like to talk about how my dad is an electrical engineer by training, and my mom is a psychotherapist. So what better child to birth from that union than a venture capitalist who ends up being sort of like an engineer therapist, in a way. And I really take that role. I am sort of honored to be in that position, because I really do love interacting with people who are techno, you know, sort of like have a deep education and technology, and are able to sort of articulate and materialize that technology in front of our very eyes. And then, of course, like being a supportive partner to the growth of a company, whether it’s a founder company or GP company, is, you know, my job at this point, but I started at my job my career at FF, VC, FF, venture capital. I had come out of a master’s program at RPI up here in upstate New York, and I’d sort of thought I was going to start a startup and have a platform for kids on the autism spectrum, where they would learn how to interpret and display their own emotions given prompts on a screen. And I have people in my family who are on the spectrum, and that was really dear to my heart, but I realized quickly that that is a long road. There were a lot of people sort of already doing some of that. And with my financial background and, you know, sort of acumen on that side, I’d be much better off helping people by being on the investor side. So I, you know, got hooked up with the ffvc crew by Jenny Fielding, actually, and Loraine Pendleton, who happened to be pretty good friends, and we’re the first female VCs that I really got to sit down and have coffees with and tell them that, you know, I want to be a VC. And they sort of put me through my paces, and then sort of set, you know, threw me on the front door sets of FF venture capital. And I got a job as a partner Operations Manager, which was an amazing residency program. I like to call it a venture. I was sort of right hand to one of the partners there, and I helped them do everything from, you know, work with founders, find new deals, you know, sit on boards as a proxy, due diligence, obviously, daily. And I spent four years there, really, sort of learning the craft. I then went on to work for New York ventures, sort of during the pandemic, I moved upstate, back up state, closer to family and closer to home, and an opportunity came across my desk to work in the public sector and for the state of New York. And I just thought that was such an interesting way to use the skill set and use my experience. They were standing up a new several new funds given an allocation from the federal government for investing in pre seed deals, to continue their investment in direct investments across seed to series D, to stand up in $100 million Emerging Manager Fund, to fund program, and also a community, regional partner fund program which is focused on or is focused on accelerators and incubators across the state.
Earnest Sweat 05:25
So there’s a question right now of like, are we capped out on emerging managers, and does it work in venture so I think the question I have for you is, why emerging manager programs today, when it’s a very different market than it was in 2000 right?

Marcia Mitchell 06:34
Yeah, 2000 and even 2020, like the market has shifted so many times and so gravely, in some senses, that’s a really good question. I think you know, the success of several seed focused firms has drawn a lot of attention to that industry, to this industry, right? So people who I have conversations with several funds weekly, and I’ve spoken to almost 500 now, which you talk to others like Emerging Manager Fund of Funds, like, that’s nothing, but for us, that’s a lot, like in the 12 months. And what I’m noticing, obviously, is more and more people coming from non-traditional backgrounds into the emerging manager space and into seed investing. And a lot of them, there’s still a lot of novelty to be had from their perspectives. So like, I’m of two minds. I’m of one mind that, like, there’s, you know, ex tech founders who are becoming investors, and whatever they’re bringing to the fore, and their strategy is, can range from, you know, like I said, A to Z. And then there’s also people who you wouldn’t expect to start a fund, starting a fund, whether it’s celebrities or it’s exact previous executives who weren’t tech leaders, but were, you know, have an inside baseball knowledge.

Alexa Binns 09:34
Your concern that you’re frittering it away is because of the asset class. Is your concern around how difficult it is to get alpha, or, I’m curious, like, just double tap, yeah? Like, referring

Marcia Mitchell 09:50
It’s like, Are there hyped industries that are taking up the lion’s share of the capital when there’re other industries that could potentially be, like, chain, like, you know, pay. Paradigm shifting for certain technologies that would help humanity. Or, you know, are there certain areas or investors who are not getting funded because so much energy is put into other buckets? It’s really more about, is the allocation of capital responsible right now, or is it tried and true and tested? And this is a path we’re going down, and this has worked before, so it’s obviously going to work in the future, you know, is it really thoughtful? And I don’t think, is

Alexa Binns 10:24
There is an area, yeah, is there an area you think that would be more responsible, or that you want to look at, that others aren’t necessarily looking at?

Marcia Mitchell 10:31
That’s another really good question. Um, I mean, obviously, like, I’m going to put a plug in for my community. Like, obviously, there’s been a very sad dearth of investment in people that look like me. And you can call that, you can, you know, characterize that however you want to. It still exists, and the facts also exist that companies and funds that are running people who look like me happen to be very successful. So I feel like there’s an obvious misalignment between the understanding of the potential and the actual investment in that space. So that’s an easy one for me to identify from my own personal experience. But I think also, like, you know, like I was speaking about technologies for Child Health Improvement, you know, food distribution, disaster preparedness, even regulatory -like smoothness. Let’s call it, you know, there’s been some attempts in our current administration to make the machine of government work better, and that’s interesting. There’s been an interesting approach so far. But I think there could be ways to use technology and efficiency to improve that even further, and look to the future of how we can sort of operate as a country and as humans on this earth, whether it’s sustainability, climate change, I’m very curious and open to learning more about those areas. And we’re actively taking conversations with funds in that, in those spaces. So I would, you know, look to those areas, I think, to invest in the future.

Earnest Sweat 11:57
How, just kind of on that train of thought, how is your experience working in the public sector as an allocator? Has that shaped you just like how you view opportunities, as well as when underwriting fund managers?

Marcia Mitchell 12:15
Yeah, I think obviously working in the public sector, there’s far more stakeholders in the room, or maybe not in the room or in the building than I was used to previously, like some of these checks that we wrote at FF venture capital, it’s a small group of people that get to make that decision, and it’s sometimes, you know, often easier, to get those decisions made, whether it’s yay or nay. So the process of getting decisions through certainly taught me patience and I think a little bit more or just, you know, increased focus. You have to think more holistically than simply transactionally, because obviously the state has the money to or public, you know, entity has the money to make these investments. It’s not necessarily about scarcity at that point, but it’s about, you know, not cutting quarters and making sure the decision is defensible, not only to your colleagues at your level, but to, you know, higher offices in the state or in the government. And that process, I think, brings a stringency to my due diligence now, which you know, I had it before, in terms of technology diligence, but in terms of a holistic look at the investment that’s definitely been honed, it also taught me that, like, you know, innovation doesn’t only exist in a specific zip code, and you kind of need to make sure that you’re looking at other content, other places where intellect or, you know, maybe concentrated, or maybe there’s value outside of the traditional past we’ve been looking at over this, this long haul.

Earnest Sweat 16:30
You know, over our journey of interviewing a ton of LPs, and particularly fund of funds, on the record and off the record, we’ve heard a lot about Fund of Funds having a tough go at it right now, as well in fundraising, as well as kind of similarly to emerging managers, could you speak to what you feel is differentiated in the model that Mesa lane is providing?

Marcia Mitchell 17:00
So we really think of ourselves as, like, capital, you know, partners and CO builders, not necessarily just as allocators. And I think one of the main things that I always like to talk about with GPS is that we don’t charge carry at our level, so we encourage our LPs to go around us, so to speak, and invest directly in the funds and invest directly in CO investments as they come up, and to get to know our GP, to spend time with them, to let you know their investment areas spark curiosity or interest, because a lot of our a lot of our existing LPs are high net worth, ultra high net worth individuals and family offices who may have had long standing experience investing in certain areas, Whether that’s health tech or supply chain or frontier tech or what have you. And so their interests often, you know, help drive our investment interests as well, because they’re sort of relying on us to curate a really great basket of investors and investments that come from that. So I think that relationship, that lack of a wall between the LPs and the GPS is a really important factor in what differentiates Mesa Lane from the others. Obviously, you know, we’re maybe not obviously, because I haven’t really explained this, but typically, Mesa lane will go in for about 40% of a fund’s AUM, or up to that number. So let’s say a fund raising $50 million would come in for 20 million of that. And we also promised $2 million dollars, about $2 million to a subsequent fund. So out of the gate, a fund has the opportunity to say, you know, our acre is in for our second fund as well as they’re going out to market that second fund that certainly helps catalyze further investment from institutional investors. And then, of course, other people, folks who might be at the table, sort of looking, trying to figure out, does this fund make sense for us. We’re also happy to take calls and share diligence with potential investors, which we’ve done before for both of our GPS really, sort of, you know, doing the operational due diligence and making sure that process is thorough and and complete, and then happy to sort of share our findings with folks who are, you know, maybe at the eighth inning. Oh, baseball, yeah.

Alexa Binns 20:39
And how do you facilitate that direct relationship between your managers and LPs, like, what are some of those touch points look like, or what processes are in place for them to know what like, what investment opportunities are even on the

Marcia Mitchell 20:54
table, right? Yeah. So we have a platform that we use to sort of surface. Some of those using tech obviously help everybody having a tech stack in place, but we share information, you know, obviously, via email. And then we also will set up calls with our fund managers and our LPS ad hoc to sort of get them in front of the entire base. We’ll also have a calendar of events we put together. Some of them are dinners. Some of them are salon format, where, you know, GPS can come and give their update in a room full of LPs that may be interested, some prospects, some existing LPs, and really get a feel for, you know, what they’re interested in and what they want to do, and then get to know them personally. So a lot of it is really about in person interaction, but some of it can be, you know, just like this, like having a webinar and inviting all of our LP based, to hear directly from our GPS,

Alexa Binns 21:42
Are you finding the LPS actually really do prefer you to just do the work and are happy to be in the fund of funds and show up at some nice dinners, or are they actively looking at deals? And you know, on behalf of managers, it’s sort of interesting to know, right? Like is, is the real partner here Mesa lane, or do, in general, our LPS really digging in and taking, yeah, taking advantage of this service?

Marcia Mitchell 22:10
Yeah? No, that’s, it’s, it’s by an individual basis. I would say, I think, like, to my point, there’s certain people who have been, you know, captains of industry, and have done an amazing job in their area of focus, and maybe you’re on the retirement side of life, but are still very interested, very sharp, very focused on certain technologies, and want to know what’s new now and next, and how can I get involved? And they’re kind of pounding our door down sometimes trying to figure that out, like we want to share content with them. We want them to see our CO investment opportunities as they happen. We want them to be a part of the story. And I think I would say probably 60% of our LP base is highly motivated and really interested. I’d say, like, you know, the other, sort of, like, 30% is willing to hear the information, and something sparks their interest, and they’ll, they’ll call us back, and we’ll have a conversation with them. And then, you know, the other, because 10 or so percent are interested, you know, but they’ve allocated funding. They trust us, and they want to see where this goes. And I think that’s an amazing mix. Because, you know, a lot of the people that we have pulled in as LPS come from Scott and Mark’s existing networks. So they know them.

Earnest Sweat 23:56
You have a radical transparency and an ability to like provide access in your collaboration with fund managers, but that’s what they get after. How does that show up in the diligence? Yeah, and getting to know fund managers,

Marcia Mitchell 25:02
yeah, great question too. There’s an example that I can call back to that’s really interesting, where one of our funds was sort of looking at a side letter from an Asian LP who was interested in, you know, taking a significant portion of their fund, but the terms, you know, looked like they could use a little bit of work. And so we said to them, instead of going to your council with this side letter and spending a ton of money, let us look at it and let us, you know, take some notes on it and figure out this is before we had signed them, by the way. And let us help you, sort of with this negotiation process. In a sense, we, you know, did the work over about four days. And when I say we, I’m really going to put that at Scott’s feet. He’s a trained attorney, a trained lawyer, and he really worked through the entire process and also sort of helped manage the conversation in a way that considered the delicacy, the importance of this LP and how the fund manager might, you know, narratively vocalize their concerns with the with the terms, and sort of communicate that in a way that wouldn’t scare them away, but would sort of assert their position in the relationship. And they ended up getting an outsize allocation and the terms that they’re much more comfortable with after that interaction, and probably save themselves about $35,000 given the, you know, counsel that they usually employ. And so I would say that was certainly a catalyzing event towards us, gaining their confidence and signing that deal. Because through that process, you learn so much about somebody over the weekend work, doing something a favor for someone that you don’t let you know you don’t have an existing business relationship with yet you have an LOI with them, and then the success of that interaction coming forward, I think that really shows like, how committed we are to helping our GPS. And they’re we’re sort of, we’re on call for them, like, as those situations come up, it behooves all of us for them to move through those with flying colors, and to sort of, you know, and to learn in the process. And that’s another thing that’s really important to me, is watching these really talented adult professionals have vulnerabilities, like in their understanding and knowledge of the business, and be able to rely on somebody to give them the straight up advice that they need, and the, you know, executable tactics to make it work. That’s very vulnerable. It’s very scary to, like, have this huge, like, GP fund that you’re running, and, you know, there’s all this money involved and all these people and all these stakeholders, and you come across a situation where, like, you don’t fully know exactly what you should do in this scenario because you’ve never encountered it before. You have, like, some crowd source knowledge about it. You might have a friend of a friend, or whatever. You’re not always sure who to call to get that straight up advice and feel comfortable admitting that you don’t know. So being that trusted advisor to our GPS is paramount in this partnership, because we’re taking a stake. We’re having a long term, we’re creating a long term partnership with them, and we better be, you know, ready to sort of help them with these kinds of things. That’s table stakes.

Alexa Binns 27:58
You’re You’re now a year in, and you don’t have this whole committee of voices that you’re having to listen to in terms of manager selection, between you and the two partners. Are there any similar preferences? You’ve started to notice that you’re like, Oh, this is, this is sort of how that I recognize exceptional versus this is how, you know, Scott does or, I mean, I’m curious if you’re seeing for yourselves, kind of who looks like a mesa Lane GP, that’s

Marcia Mitchell 28:29
really interesting, because I think we are, you know, if you look at a Venn diagram, we’re very much, we’re overlapping a lot, but there’s areas that we each bring an individual perspective to, yeah, so you know, one I really appreciate, you know, the two of them for bringing me into this situation, and you know, sort of allowing me to have a lot of, you know, say in like, where these come, where these GPS fall in our ranking system, or in our pipeline. And, you know, they take, obviously, my advice, really seriously, but there’s also times where they challenge it, and I think that’s great because there’s certain funds or certain structures or strategies that are dicey or could be seen as potentially risky for reasons that you know maybe I don’t see, looking at them from my perspective, or certain strategies that may, over time, come out of alignment with what we’re trying to do with Our fund, and sort of having that bigger picture business building perspective, again, from their, you know, further experience is really helpful, but in terms of like, either personality or fit or why we like someone we I would say, like, Scott and I are always very aligned, and Mark often plays a Bad Cop, which we need. Yeah, you can convince Mark that you’re doing something great, and he’ll listen to this and laugh. You are probably doing something great, but in the same sense, like he will listen to and want to hear the why or why we are so excited about a GP. And that goes back to what I was saying about, you know, making sure that you can. Have a defensible understanding and answer for why you believe in a GP and I think also giving that GP a chance to show that work. Y

Are there any aspects of that asset class that they feel should be applied to venture or that they look for in fund managers?

Marcia Mitchell 37:16
Ooh, that’s a good question. I mean, I can’t really speak for them, because we haven’t delved as deeply into that as even I would love, I’d love to ask them that I’m going to seal that question and bring it up well with them. But I think what I’ve heard is like, and I think what everyone is looking for, in a sense, and what’s actually happening through maybe organic processes, is like a maturation of the industry. And what you’re saying about the massive funds that are gobbling up everyone else’s deals and everything else in the process is almost like a natural part of how the industry was set up. It doesn’t mean it has to be that way, but it’s like an organic process that’s happening as a result of the industry, maturing funds, getting larger, having a longer, you know, lead time, GPS, spinning out and starting their own funds, like leaving a partnership at like one of these Tony firms and starting their own fund. That’s all very natural and common in hedge funds as well. So I think it’s just in a way, like a venture is just moving in that direction on its own. But I think maybe people who are better equipped or see that earlier, may have an advantage in that process by taking, you know, taking steps that would lead them to be successful because of that maturation process. And then some people obviously might make better investment decisions given the knowledge that that is happening in the industry. Whether that’s like, I know that the these x firms that have this sort of strategy are probably going, not going to survive this industry, or understanding the characteristics of venture that are so specific to it, like Co Op panic, I think that’s one big differentiator, is that these deals can only get done if there’s several funds involved often, and they need to cooperate with each other, even as they’re in competition with each other. And what that looks like at a board level of board conversations, contributing to a founders, you know, strategic advice, you know, panel, all of that is a group effort. You know, it’s like a group process as a company might be winding down or on the verge of it, investors often have calls just amongst themselves to figure out, what can we do here, like, can you guys write a quick convertible note? Can I, you know, how can we work together to make this happen? That’s not typical in hedge funds, and I think that was something that they identified very early on, that they’re excited about, like, it’s a different game. It’s never going to be just like hedge funds, because I think it would die sense, like it wouldn’t be this. It just wouldn’t work. But it is. There’s certain parts of the business that are converging towards that trend.

Alexa Binns 39:40
You gave a cool ad hoc example of, you know, helping out on a term sheet. Do I recall too that there’s a whole back office platform for your select GPS and super curious if AI is sort of integrating its way? Oh, wow, yeah.

Marcia Mitchell 39:55
I mean, that’s something that keeps me up at night, is AI integration of the. Back Office. But what we’re really offering formally is either at cost or discounted contracts for back office service providers. So whether that’s admin, HR, PEO, audit and tax, legal, you name it, we’ve negotiated, you know, 15 or 20% discounts with our scale to our GPS. So if they need to switch out, you know, their audit and tax folks because they’re taking too long with a lot of these things, then we will introduce them and sort of make that happen. If they would like, you know, to switch legal teams, we can make that happen, and they don’t have to take our advice or take that offering, but the fact that it exists, I think, is really helpful to sort of keep them from getting bogged down in the administrative side of running a fund and allow them to focus primarily on allocation and what size, you know, investments they want to make. So that’s been really interesting for us. I think there’s been, for both of our funds, some support through that process and switching over to, you know, companies that are much better aligned with venture, you know, as a space, I think a lot of people can sometimes get a back office service provider that doesn’t have a ton of experience in venture and so they are offered like a sort of cheaper pricing, but that doesn’t always meet out in the end, sometimes you get what you pay for. So we’re helping them, you know, meet in the middle, whereas getting a slightly slightly discounted access to really great back office service providers,

Earnest Sweat 41:22
I you know, we’ve talked over, over the years, and, you know, as we both have had started families, everybody here on this panel, but I’m curious on like, what learnings Have you you had from that perspective as a parent that is influenced or giving you a better perspective on on being an investor? Yeah.

Marcia Mitchell 41:51
I mean, people always say, if you feel like a different person, you know, sometimes, after having a kid, like you’re yourself, but it’s almost like a different version of you that you never expected, and like you’re meeting them for the first time, like I’m meeting, you know, met my son for the first time, and met my a new version of myself as well. And sort of bore that out over, you know, those early postpartum days that I’m sure Alexa remembers fondly. I remember reading emails, and I could sort of barely see I was just still so, like, bleary eyed from that weirdest, yeah,

Alexa Binns 42:21
The weirdest thing for me was the passage of time. I came in as, like, you know, busy, Slack, go, go, go, yeah. So I was so bored, because the babies don’t do that much, and then they reset my clock. So by like, two months in, my husband was like, how are you sitting here? And I was like, I don’t know. I have become a Buddha on the mountain. Yeah, yeah.

Speaker 1 42:52
So that part was weird, but I still can sit for hours and people are like, I don’t recognize that patient.

Marcia Mitchell 42:58
Yeah, that I guess now, like meeting you and seeing your personality. I’m like, that is definitely a shift, like, because it takes, and that happens to a lot of people. I think for me, it was like, and this may be for every parent, you can’t do everything at once, you know, as much as I want to, as much as sometimes I need to, I need to take a nap, I also need to fold the laundry and, like, what’s for dinner? You know, like, all three of those things can happen at the same time, but I can do the right things over time. You know, whether that’s like, making sure, you know, we read that extra book with him at night, and making sure, like, lunch is packed the day before, and it’s basic stuff like that. It’s like, I often call it like the monastery, like in the kitchen. For me, the kitchen is like my monastery, because, like, whether it’s chopping or like cooking or like prepping or doing those things, I It helps me sort of reach a certain, like, flow state. It’s very meditative. And so that routine for me is, like, very it’s a safe space to land, and it’s all for him, like, it’s all for his sort of, like, calm and betterment. But at the end of the day, it’s also for me and us in the house, it creates a certain level of structure among the chaos. To your point, that wasn’t really there before, because it didn’t have to be. I could just fly by seat my parents all the time, and that’s not as cool with a kid like it’s almost really good idea. You can do it sometimes, but, like, not all the time. And it’s, life is much easier when you have that structure. So I never thought I would say that, and people will probably laugh, who know me if they hear this, but like, that’s how, that’s what it’s been like for me. It’s been like, a source of calm structure that I didn’t think was possible, but with repetition and with that, you know, putting in place those those routines, it’s been utterly necessary and very positive. I’ve also gotten better at investing in people who energize me, and investing my time, and not just my money, investing my passion and energy and thoughts, you know, into them. And. And like, and at the same time creating better boundaries, to protect myself, right? Like, to protect him, my son, to protect myself and in our family, and to protect the outcomes that we all want. Because, like, if you don’t have boundaries and you’re just bleeding from, you know, everywhere, and not able to, sort of like, find a place to rest or to start over, or just to say, this is all I can give you, and that’s kind of it. Then you’re not giving enough or the proper amount to what you’re doing. You know what I mean? I think like, set yourself up for failure, and I’ve had to learn that is the lesson came quickly and rapidly over and over again when I overextended myself, and I’m so grateful for that, because the stakes are so high now with another person involved that, like, I’m not willing to mess it up. You know what I mean? Like, it’s just, it’s like, a no deal, it’s a good deal breaker. So I’ve set some boundaries with people, even, like, you know, with this, with some of this work, and they’ve been, so what’s the word? Just, like, so receptive of that, yeah, and appreciative of that, which I also didn’t expect. I think a lot of people move through life trying to make sure everyone else is happy, and thinking like, if I do this and I do that and I make sure this person has that, then they’re going to be at least I have for a while. You don’t realize that once you say to someone, look, I can’t do the best job I can with what I have in front of me. I really need to set a boundary here. And I’d like to do a better job for you, or do less or whatever, and hand it off to somebody who could do a better job. They appreciate that. I think that’s really important to not over promise and under deliver. Is like the headline of my, you know, the new Marcia that I’m meeting now through birth, she’s not over promising and under delivering.

Alexa Binns 46:38
Yeah. Speaking of setting boundaries, who do you want to hear from? Who’s listening like, who should be on your radar and who’s maybe not a fit so they can filter and not waste Marci as time, right?

Marcia Mitchell 46:54
Yeah, basic stats. I mean, we’re really looking for emerging managers, so that’s realistically fund one through fund three. You know, we’ve spoken to a couple of fund threes who had a fund one or two that are proof of concept funds, which can mean their size. So that’s the next bucket. We’re looking at funds between 30 million and 100 million. We’ll look at 25 million. We’ll look at the 125 millions. But our sweet spot is really in that 30 to 100 so if their proof of concept fund was 15, you know, I have had a couple. I have a couple ongoing conversations with a few GPs who are in the middle of their first, like, $15 million fund. And I’m, I am, when I say, like, send me your updates. I’m fully engaged in, like, watching how you allocate that fund. I want to know. So when fund two comes around, I have enough information to make a good decision. So that’s what I’m willing to hear from them, but don’t expect investment with a fund that’s sub 25 or sub, you know, sub 30. We’re also looking in all different sectors. So I had mentioned before that we’ve invested in a supply chain fund and a robotics, surgical robotics stack focused fund. We’re not just looking for specialists. We’re also looking at generalists. And we really like to see generalists who have maybe a certain bent towards a couple different technologies. And then they’re also open to others, or GP teams that cover, you know, broad bases, and end up with a generalist strategy. That’s that’s great, like, I love to see how they put their strategy together for that. So everywhere, I think we’re a little bit, I don’t want to say, crypto averse, but, like, we don’t have, like, a full level of expertise on that right now, and so it’s hard for us to make those investments. Like, there’s, you know, the time, time to understand that industry is, is shorter than we would like. So it’s a little bit hard for us. But really, everything else is open, like we’re creating our own sort of generalist fund out of the basket of investors that we’re looking at.