Alexa Binns 00:02
Welcome to swimming with allocators the VC podcast from the LP perspective, with your host, Alexa bins and earnest, you ready? Let’s dive in.

Earnest Sweat 00:14
So a big welcome to our guest today. Lisa Cawley, Managing Director of Screendoor, an investment platform with a highly regarded GP advisory program that supports new managers, raising early institutional venture funds and building enduring firms. Screendoors’ role as an LP of GPS is a connection between new managers and the institutional investment community. Prior to Screendoor, Lisa has spent over a decade working on private market portfolios across investing and operations. Today, Lisa is going to share with us her favorite stories and lessons learned investing in venture capital. We’re thrilled to have you today, Lisa, thanks for joining us. Thank

Lisa Cawley 00:53
you for having me. It’s a long time coming,

Earnest Sweat 00:58
so we first love to start just kind of setting the table. Could you share with us your LP career journey? Yeah,

Lisa Cawley 01:06
so I like to tell people that it’s actually relative to others and relative to most. It’s a little bit backwards. So I actually started my career at UI. And I think for anyone who doesn’t know what they want to do in their career, it’s like the best playground to figure that out, figure out exactly what interests you, but just most importantly, what doesn’t interest you. So I had a whole bunch of clients, health care, insurance, CPG, and really, where I spent the bulk of my time was in two areas. The first is I was auditing venture funds on their management companies, which was like my foray, that’s how I learned venture. It’s how I learned to take and tie how all the statements work together. The backbone of, basically, when you’re running a fund, what actually needs to happen behind the scenes. And then the other piece of it that I think actually still informs how I think about ventures. When I had a public company client, I was on McCormick spices. So if you guys know the little red cap, although the gourmet comes in different colors, it is a public company, so there was heavy SEC reporting, very compliance driven. It was just a phenomenal experience to be able to understand, like, how the SEC works, how you balance, you know, reporting, financial integrity, all the ins and outs of, like, what regulates the financial industry. And obviously that’s a little bit different and ever evolving in the private market space. But I think it really gave me an appreciation for just like, the backbone of what needs to be true on paper before you can even layer in the human component. And obviously in venture, the human component is so much more magnified than arguably, in other asset classes. I loved that experience. I’m still best, best, best friends with so many of the folks there today, and also that’s how I met my husband. Fact, so great all around. But then from there, I had an opportunity to go work on a portfolio where, basically, I was involved in all aspects of building this venture portfolio. And so within the private markets, that was everything from funding new firms, capital activity planning, of course, thinking through like the operations of how you take what I had seen in venture funds and their management companies and applying that into LP world, building up the, you know, whether it was the data and analytics and how we tracked things, but then also, of course, the due diligence process and everything that classically goes into making an investment. So I was really fortunate. I got to observe everything across VC, from small funds, big funds, sector specific, generalist, stage, you know, stage specialties, every geography you could probably imagine, and also naturally, every firm sophistication that you could imagine. So I did that for about eight years, and it was a wonderful experience.

Earnest Sweat 04:52
before we get into the Screendoor. Lisa, I’m curious. You know, you can throw a rock in the valley and hit a. See who’s talking on a mic, on a podcast, talking about what’s changed in their industry. But rarely do we have an opportunity to talk to someone who’s an experienced allocator, like yourself, what’s changed from your side of the table in the years like it, and what kind of challenges are there for someone who’s growing their career as an allocator? What are they facing today?

Lisa Cawley 05:20
In my opinion, I think what has changed is just the sheer number of choices, both for LPs and for GPS. And I think arguably too for founders. I think it’s a good thing for founders to have choices, particularly in who they take capital from. It’s why I think that new funds coming to market is a good thing and will always be a good thing. And yes, that will ebb and flow over time in terms of the volume, but I think that no matter what’s going on in the broader macro, interest rates, politics, what’s going on in the public markets, like all of those things. Yes, they impact and influence ventures at the highest levels. And there are ripple effects there that are very, very real. But when you look within venture, you know, I think that if someone wants to do something innovative, they’re going to do that and run into a wall to do that, right? Like, it doesn’t matter. They’re not going to sit back and be like, I’m going to wait until interest rates are better and interest rates are better and I’m going to start my business, or then I’m going to start my fund. I see that a lot too, with managers, they’re trying to time their fund raise based on their perception of re-ups. And I always like to give the example that if you speak to two LPs, hypothetically, you could have one LP who has 75% of their portfolio that will re-up in the next vintage, or have a re-up to consider in the next vintage. You can talk to that next LP, and they could just be coming out of a vintage where that was true, meaning that that won’t be the case. So I think again, maybe perhaps this isn’t what’s changed, but what’s still the same is that venture will always be about doing the hard thing, no matter what all of the other variables are. What’s changed is that there’s just so much more to parse through and so many more choices that it all goes back to the relationships helping you do that.

Alexa Binns 07:28
Yeah, one of our predictions was that GPS in the market is going to be kicking themselves that they weren’t actually fundraising in 2023 when fewer people were knocking on your door. So what is a green door? What is this door that they are not

Lisa Cawley 07:44
Well, we hope it’s a welcoming door. I think that’s first and foremost. So Screendoor exists, I think the lead and shared Screendoor exists to fund new managers and help them get their first institutional funds raised. So to be clear, we’re a fund of funds. We invest and build a portfolio ourselves. So we have a very high bar that we underwrite. It’s not a program where we kind of, you know, work with a batch and then get a new batch. It is a portfolio that we’re running. And I think our main goal and thesis is that, again, it comes back to this idea of the new: we always want people to be investing in the new in venture, perhaps not as the only thing they’re investing in, but as a really important component of their portfolio. And of looking into the future, right? Like venture is one of the longest duration asset classes there can be, and so you have to be thinking 510, 15 years ahead of time when you’re making decisions. It’s very hard to be quiet, you know, myopic and week to week when you’re investing in a venture, although it’s natural, and I think we’re really looking to back new managers whose lived experiences are what differentiates them. So everybody will go through experiences in life, and to me, that’s what shapes your identity, and that’s what I find so fascinating, is people’s stories, like what you’ve been through, what gives you an ability to attract a founder, right? Because they’re going to lean into what’s different about you relative to maybe another incumbent, right? And so we’re looking for managers that are not sitting there saying, I’m just going to follow whatever this incumbent is doing. I think a lot of those funds are while they play a really important role in the ecosystem and have phenomenal investors, they can be very consensus driven at times. And I think there’s a lot of white space for people who have this differentiated view, and it’s matched with a fund size that’s appropriate. we’re investing in managers who we think don’t actually need. Helped to succeed. But who we hope that by our participation and our point of view that we can provide compared to other LPs and other participants in their fund will actually give them access to more information, more perspectives, more ways to make better decisions as they build their own firm, and that will be the reason that they hopefully are successful in the long run. So our participation, we hope, can increase and hopefully speed up time for their likelihood of success. Of course, all of that is hypothetical, but that’s our goal, is to really get new managers in business and help them build their brands for the long run. So cool.

Alexa Binns 10:36
What are the GP advisory services?

Lisa Cawley 10:41
Yeah. So this is really the backbone I think of when I think about Screendoors, I think about it as being a firm that is for firm builders, by firm builders. So the GP advisors. You can see them on our website. We just actually announced we have four new wonderful, wonderful GPS that have agreed to join us, so 14 total. But screen, or was really started with the idea from these GP advisors that not only do they have just insane reach from networks, right, and they all have raised their first fund themselves, but over time, they’ve amassed such knowledge and such experience that when you have a new GP who comes across these things in their day to Day, somebody who can give you that perspective and say, Hey, I’ve been through this. Here’s a couple things you may want to consider when you’re making, you know, XYZ decisions. So that’s in theory, what the GP advisors are. What actually works in practice, is that they help augment our diligence process. So we love having new managers have the opportunity to meet with a couple of these GP advisors, because we find that an LP to GP conversation is just fundamentally different than a GP to GP conversation. I think it’s probably one of the most valuable points. When people do engage with us in diligence, regardless of the outcome, to have that opportunity, they probably can ask again questions that are on their mind and get feedback. It really, really is a feedback conversation, less of an interview or interrogation feel. And then I think the real game changer, you know, I would encourage you and anyone to really ask our portfolio this question. But I think the real game changer for most has proven to be our advisory part. So we pair every manager in our portfolio with two of our GP advisors, and we try to do so kind of through a different mix of considerations. But ultimately, the goal there is that you have somebody that, again, as you go through the many, many, many things that you’ll have to tackle when you’re building your firm business, you can lean on them from one point of view, right? They’re not there for the answer. They’re just there to give you, you know you don’t know what you don’t know. And they try to help you see around corners. So an example of that might be a really common one that we hear is around people developing their teams over the course of building their firms. So for example, if you have a solo GP or perhaps a two person partnership, and they, over time, want to plan to bring a partner on. That’s a really important decision, not only for the benefit of the existing partnership, not only for the benefit of the whole platform. You also have to think about economics, about messaging that to your LPs. How do you pressure test that relationship? How do you find that person? How do you get that person? How long of a period of time should that be like? These are super basic questions. There’s so much more in the nitty gritty there, but when you have access to folks who arguably have all sorts of different partnerships, that can give you perspective of what we did this, obviously everybody knows, for example, the homeroom model that is perhaps quite different than Charles Hudson at precursor, or when you think about Kirsten Green at Forerunner, and how all of these different GPs have built their team, they can really lend support and different perspectives, so that if you’re the new manager saying, all right, I need to go from fund one to fund two. How do I navigate that? Should it actually be over a fund cycle? Should it be over three fund cycles? Right? There’s really no one size fits all. Answer. That’s what we always like to tell folks. And so they’re there to help you try on those different sizes and figure out which one is probably the best for your path and your trajectory of your firm.

Earnest Sweat 14:17
That’s awesome. Sounds like real kind of, like mentorship and apprenticeship that, you know we talk about in the industry, but rarely see a lot of times, and that that that specific example about how you expand your team, really, I’m sure, shows light on how you’re thinking about where gaps you have and how that eventually gets you to kind of a steady state of an institutional firm, and where you think it needs, what type of profile needs to fit that. So I know that’s really cool. What, how was your approach as a Screendoor to your portfolio construction and kind? Texas. I really love having fun to fund because they have to deal with this similar approach too, or like, how do they present themselves differently? How do they build their own strategy? So what’s the approach for Screendoors’ perspective? Yeah,

Lisa Cawley 15:14
I think you hit on it too, that in addition to kind of the for firm builders, by firm builders, by way of being a fund of fun, like we have maximum empathy, even more so because we have lots of people who have also had to raise funds over time. And I think again, you know, it’s an overarching theme, and how I think about my day to day. But again, it goes back to the people, right? Everything comes back to the people. And so for our portfolio construction, quantitatively, we want to be a minimum 10% of a fund, and our goal is to make sure it moves the needle for us, but that it also moves the needle for that GP as they’re trying to get their first fund raised. And here’s the people. Part is that we care deeply about the other partners that are around the table. So what we try to do is we are happy to be first close, depending on when we meet someone. We may fall after that, but we don’t necessarily make our decision based on, I think everybody knows, like the old LP thing, what’s everybody else doing? And I always like to remind managers, when they’re thinking about that in their context, that every LP is so different, so they’re not making decisions or shouldn’t be making decisions based on what other LPs are doing, because each one of their portfolio asset allocations, whether you’re a family office, an endowment, a foundation, a health system, they’re all quite different in their goals, and even you could have Two family offices side by side, and their portfolio construction is quite different. So we’re not making a decision based on who else is coming into the close. So we’re happy to do that, and then once we are in that close, like we are more than happy, and spend a lot of our time actually helping round out that raise and trying to help with introductions, trying to help share our perspective, our references, with other LPs who are also committing to fun ones. And I think it’s really important that there’s a healthy group of collaborators around the table there, because, again, we think it’s really important for managers to have a lot of access to different avenues of advice. And so that’s what we overall try to do when

Earnest Sweat 17:17
it comes to the top of the funnel. And today, just like your emerging managers or, yeah, emerging managers coming up. What challenges do you feel like they’re facing that’s different, even in 2024 in comparison to 2023

Lisa Cawley 17:31
Yeah, I think some of them are the same, and that it’s always going to be the classic catch 22 of you need a track record to raise the fund, but you need to close on some capital in order to build that track record that’s attributable to that brand. And I think for the LPS out there, it’s really important to remember that you can’t underwrite a fund one the way that you would look at a fund three, a fund five, a fund 10. And so there are always going to be frameworks where you should, of course, check those boxes and diligence, and I don’t simply mean check a box. I mean like, do that component of work, but you need to analyze things differently, and you need to look at how you think about the team, how you think about track record, how you think about references, all quite differently. And I think that is a challenge for managers, because I think so often they start to have really, really interesting conversations with LPs, who like their thesis, who like their team, who have some kind of warm introduction that has kind of starts almost as like a mini off sheet reference, but at the end of the day, what starts to break down is somebody saying, well, we need to see more. And I’ve said that before, like, I will probably continue to say that, and it all depends. But everybody’s definition of more is quite different. And so when you’re taking a fun one and you’re underwriting it, I think you need to look at that track record differently. I think about it. Of course, there’s one part that’s always going to be how do I, you know, look at the company attribution. Or even if you can’t, you know, there’s some places where people have investment experience, but you don’t actually, you can’t take your track record with you, or you don’t have an attributable you know, it’s not as simple as just spitting it out on a spreadsheet. But the other thing I think about a lot is somebody’s investment of time, because time is the only resource that we all have that we will never get back. And so to me, it’s arguably the most valuable resource, because capital will come and go, obviously, sometimes easier than others. But when you look at how somebody spent their time, that, to me, is really, really compelling, and how that translates to diligence and fun. One is when you think about somebody who had operating roles. What kinds of companies were those? What did they gain from those experiences? How long were they there? How did they continue those relationships after they left? How does that feed into their strategy now? And so even though that’s not, hey, they wrote, you know, X number of checks at X dollars, and that maps to their strategy. So that’s still a really important consideration, because so often I think LPS will end up waiting for that track record where they can draw the dotted line of like, yes, this track record happened under this firm, so our IC can be comfortable with it. That’s all well and good. And those committees are again doing good work. But when you look at a fun one, you need to be willing to like draw one additional line to consider all those other points

Alexa Binns 20:24
how people have spent their time. That is a very helpful tip, I think, for other allocators who have maybe been unsure about how to think about these fun ones. For our emerging managers listening, what are some of the things you look for in a Screendoor? GP?

Lisa Cawley 20:45
Yeah, I think the one of the most important things, and where we spend a lot of time, is just the concept of GP, market fit. And so we look for folks that there’s, you know, something in their background that suggests that they have a consistent and outsized advantage in their ability to, as we all know it, source, pick, win and support managers. But I think that sourcing point when you’re a fun one is really, really important. You want to demonstrate that you can be. I like to call it a founder magnet. We say that all the time on our team, is this person a founder magnet? Are they attracting the best? Are they swimming in the right circles? Super important. I think a lot of times we see folks where, what I hear from them, some say it bluntly, some it’s kind of the undertone. But they’ll say, like, I always wanted to be an investor. And I think the best investors are folks that, like, they didn’t know that they wanted to be an investor. The investor part was just like the solution, right? That was the end of the end of the sentence. That was a byproduct, that wasn’t the goal. And so we look for folks that can attract the best founders, because they can provide some sort of very specific support to that founder. I like to say too that when you’re looking and we’re investing, just for clarity’s sake, and pre-seed and seed, a little bit of a mostly early stage we focused first on institutional funds, and by way of our fund sizes being small, right? Like under 100 million is our target zone on average. Call it between 10 and 60 is usually the sweet spot, though there’s argument, of course to be made otherwise, but when I think about what founders are doing right, like they should be looking they’re so resource, resource constrained at the earliest days, they should look at their cap table and say, Yeah, I go to this person for this thing. I go to this investor for this right? You don’t have to be all things to all people. And I think the two similarities now, we can dive into some of this, but the two common things I always see are folks trying to be all things to all people. They’re like, I help with these 25 things, and it’s like, you’re a jack of all trades, master of none. And that can be good if you have an army of people to support those things. But my favorite conversations are the ones where the managers, like, I help with, you know, go to market support or hiring, right? Like, that’s my sweet spot. I do that, and then also I get out of the way. I think that’s a really, really, really important thing for a new manager to be able to just understand. It’s hard to demonstrate that on paper, but at least in their own relationships, it’s important to know when to lean in, but also when to you know, let the founder do what they do best. What

Earnest Sweat 23:15
other kind of like light red flags Do you see from a lot of first time fund managers,

Lisa Cawley 23:24
yeah, light red, I like that.

Earnest Sweat 23:28
Or dark red,

Lisa Cawley 23:32
shades of red. So some of the things that I think can trip new managers up is, of course, portfolio construction. So on my team, we have a whole bunch of different views around portfolio construction, which I think helps us make really strong decisions. So for example, one of my partners, Jamie Road, is very specific about her portfolio construction beliefs and philosophy. That’s just one way that we think about things at the Screendoor. And so when we’re looking at someone’s portfolio construction, some common things that just don’t map always, things like the dilution doesn’t make sense. It’s overly optimistic, especially at pre seed, assuming, you know, assuming percentages that don’t map exit projections that don’t map industry data or that individual’s own investment history, right? So if you have a portfolio of 25 assuming that five to seven of them will be IPO candidates, highly unlikely, although, again, I’m hoping that we’re in those funds, of course, so we’re underwriting that. And then I think a really big one is this concept of just a lack of differentiation. And I know it’s a frustrating point for managers, and I get that, but maybe I can, maybe I can peel back the onion on that a little bit. So for me, a lack of differentiation always starts when we can’t see how this kind of stands above the pile right, like we’re reviewing someone’s deck, we’re hearing their story. And it’s really, really surface level, and really it lacks a lot of detail. And so I like to give the example of. Like, you know, you know, when you go in and you pull the template from whatever your word processor product is, and it’s like, I’m going to make a, you know, a resume, and it comes with a pre template. I always like to joke with managers that I think if you’re going in and you pull a PowerPoint right, and you have the words differentiated, unparalleled access, unique networks like, I know, managers that have this riddle throughout their deck, and that’s great. And 10 years ago, 15 years ago, that might have been great, that might have stood out. But today, what you should be doing is thinking of that as your template, and you should go in and say, okay, differentiated access. Let me take those words out and put in what I actually mean by that, and how I actually have differentiated access and being more specific there and when you can quantify, quantify, right? It’s the concept of value add like, how did you add value? I add lots of value with my networks. You made 25 customer introductions. You helped get 10 pilots set up. You made 50 recruiting, you know, for team member or future employee introductions like those are all valuable pieces of data, especially for fun, ones that might be lighter on a traditional track record that can be really, really helpful for an LP so that they can go through and see, you know, how is this person actually operating? And then when you think about an LPS diligence process, it would be, my hope, of course, that all of that would then map to your referencing conversations. Right when you talk to founders, it all makes sense of how impactful that was for them in the earliest days. So I wouldn’t say it’s a red flag. I would just say it’s like there’s no flag there that that flags it to us that it should stand out and that that’s someone that we should spend more time with so I always encourage people to kind of rip those words out and be as specific as you can. And I think one that’s maybe not talked about as frequently, that is a red flag is around just legal and operational items. So it’s probably no surprise, just given my background, that that’s something that I’m always thinking deeply about and for our work, our goal is to get you set up with an institutional quality LPA to make your clothes as easy as possible for other institutional quality LPs. And so I think sometimes we see just wacky, goofy terms, things that don’t really map to the market or that aren’t mapping to that GPS experience. And those are all things where we want to help you through that, right? Like, we want you to know the terms in your LPA. I think it’s really important that the GP, like, owns that and knows what’s in there. It’s not, I don’t know. My lawyers put that in there. I’ll figure it out later. Like, this is a 10 plus year document that you’re agreeing to. You should know those terms, and so I try to always be a hopefully friendly person in that conversation where I can explain to you, here’s the term as we read it. Here, here’s how we feel about that at the Screendoor. Here’s how other LPs might react to that, and the different kinds of moving players, right? Endowments, foundations, family offices, check sizes might play into that. And here’s kind of how all that shakes out and what we think, how we think that that will feel market wise. So I think those are some areas that you can go through right, like you get all the way to the end if you’ve made it through diligence and heavy referencing, and it’s like that last mile of legality can sometimes be the hardest part. It’s what every manager wants to rush through because you just want to get back to the business of investing, but it’s so important because, again, it is part of the backbone there.

Earnest Sweat 28:25
Now we’re going to take a quick break to speak with our sponsor. Next

Alexa Binns 28:29
up, we have our industry expert and sponsor, Brian Huber fund partner at Gunderson, Denmark pitch book has named Gunderson the number one law firm globally for investors 10 years in a row, our guest, Brian’s practice focuses specifically on structuring, forming and operating VC funds. I have used Gunderson in my own fund formation, and I can highly recommend them. Thank you, Brian, so much for your advice and expertise. Any other advice for managers who are preparing to raise in this environment?

Brian Huber 29:04
Yeah, so I would say distinguish it’s sort of a short clip, but I would say, distinguish yourself based on your attributes, your attributes and your strategy, and not based on your fund economic terms. I think especially in an off market, you see people start to get creative, and that’s great. And I think you see new things come out of that. But, you know, with institutional investors especially, and I don’t want to, I don’t want to speak on their behalf, but when terms start to look different from the norm, especially in venture, the initial instinct is, alright, what are you doing that’s that’s like, getting you a better term here, even if it’s like the it’s a lower management fee rate, all right, but what are you Where are you picking that back up, somewhere else? And I think that it just creates a little bit more friction than that you don’t necessarily have to deal with, if you just go out with, with, with what we consider Standard. Terms, and that’s and that’s what you know, you rely on your professional advisors to tell you is, this is standard. It might seem like a lot to you, but people are used to seeing this, and if you drop it, they’re going to think that you’re trying to get them somewhere else. But that’s what I would say. I say, you know, differentiate yourself based on your strategy and not based on your fun terms.

Alexa Binns 30:17
I love that idea. Yeah, it’s like you’re the new kid on the block. No, no need for you to be the one getting too creative. And any parting words for limited partners?

Brian Huber 30:29
Yeah, again, I think, I think LPs, you’re in a really good space right now. You have the bargaining power. I think you’re, you’re probably especially for institutional LPs, in a place where the denominator effect is has been corrected to some extent, I would say, use this as an opportunity to explore new managers, take a deeper dive on some that you might not otherwise have done so, and reevaluate what you’re asking for. I think you’re in a position to ask for more, but that doesn’t necessarily mean you should ask for more. I think it might be an opportunity to focus on ways to really support your managers. And again, that’s me saying that from the perspective of someone who represents primarily sponsors. So I’m a little bit biased, but I think that’s, I think, I think LPs are in a great position right now to really dictate, you know, how the recovery, if we’re calling it a recovery, looks in the ecosystem. And so I think that’s good stuff.

Alexa Binns 31:23
Would you say 2024, is going to be a healthy vintage if people are sort of on the sidelines and trying to decide if they want to be participating in a venture right now? I

Brian Huber 31:35
I think it is. I think it is. I think there’s, it just seems like there’s a lot more, just frothy, frothiness. If that’s a word in the deals. I think people are energized. They’re well rested. I guess. I don’t think it’s going to be a 2021, where, you know it was that, it was just like form a fund everyday sort of thing. But, yeah, I do think that periodic corrections are necessary in order to sort of make sure you’re on the right track. And I think, I think we’re on the right track, and I think this year will be the start of a pretty good, pretty good span. Historically, this summer was a time, especially with European investors, where there’s just not a lot that’s going to happen. Don’t read into that if you’re not getting responses. That means that we’re maybe back into the normal cycle of things, where people take vacations. But you know, I think don’t, you know, don’t, don’t lose sight of the ultimate, the ultimate goal, and keep at it. And I think, I think we’ll all, we’ll all benefit from it

Alexa Binns 33:10
sounds like a furious fall

Brian Huber 33:13
exactly, exactly I love, and that’s how it should be. That’s how it should be. Brian,

Alexa Binns 33:18
It’s been a pleasure to get in touch with Brian or any of the other lawyers at Gunderson. Detmer, please visit gunder.com that’s g, u n, d, e r dot, C, O M, and now back to our LP interview.

Earnest Sweat 33:32
Lisa one, one question that I always like to ask allocators is, what’s your favorite questions to ask a GP to get to know them better,

Lisa Cawley 33:42
yeah? Why? Yeah, I love this. Yes. Why are you doing this? Because it’s so open ended. And I think that tells me a lot that I can learn about that person, right? What motivates them, and I think for us, right? It goes back to the Screendoor’s thesis, right? Like we’re investing in the new we’re investing in people that are bringing their different perspectives and backgrounds and folding that into the DNA of their firm and so so often, like some of the most interesting answers, come with that backbone. So why are you doing this? Why does the world need another venture firm? And why is it you that they need? And I think all of those questions together give us really, really good insight, where it gives the GP and exam an opportunity to explain how they plan to stand out in the market, and candidly, just work with all the other players in the market. I think that’s also really important, is self awareness, but we love to learn just those back stories and why do we think that this is someone that’s going to do this for a long time, right? We’re looking at somebody who they’re saying, Hey, I see this void in the ecosystem. And I think that founders need me, and here’s how I can deliver potentially outsized returns to LPs, and how I’m going to build that into a firm.

Earnest Sweat 35:07
Do you think fund managers under share or overly share their personal background and how that shapes their perspective? I

Lisa Cawley 35:19
I think it depends on a super hard question to generalize. I think that you will have some LPS who won’t be interested in that, and they’ll be interested in the numbers and how those look on paper. I would say that those LPs are probably best suited to be underwriting funds that are later in their firm history, not necessarily later stage, but just later in their firm development. But I think that folks that are looking to invest in emerging managers absolutely want to hear that. I know I do. I think it’s really hard for me when someone isn’t sharing, because then we kind of find that it goes back to that lack of differentiation, right? Like we don’t get to hear that, so we like to spend a lot of time later, you know, along or, I guess I should say, throughout our diligence, where we can get to know that person. And I always err on the side of telling somebody your story, because you never know what will resonate, but if you don’t share it, no one would ever have a way of knowing. Yeah,

Alexa Binns 36:15
that’s an interesting distinction, that if you’re raising for fund four or five, the team slide is probably just one slide, but if you’re at the beginning of this journey, your story is the story,

Lisa Cawley 36:29
yeah, and we, I mean, we love to hear it, right? And I think that’s why, again, we started it with it being about the people. And I think on every question, you could argue that there’s, there’s some theme or underlying driver, right? That it always comes back to that story. And I think you know whether it’s, you know, finding that somebody grew up in the same place as you, or a shared sports team or a shared family dynamic, right? Like these are all things that we think about, like socioeconomic upbringing, being an immigrant, like all of those components of somebody’s story shape how they think about life and how they might think about if you’re a manager, that investment and being able to relate that to an LP who might also potentially have something you know when they’re thinking about a manager that can come into play as well.

Alexa Binns 37:15
How does this work for re ups? Are you looking for people that you’ll continue to participate fund after fund.

Lisa Cawley 37:24
Yeah, so when it comes to re-ups, we re underwrite everything. And I think that that’s probably an important distinction from a lot of other, you know, long standing LPs, where their model is intentionally so to invest in one fund, but they’re really doing it with an eye towards multiple funds, and I think a lot of times too for us, that comes down to, we’ve always been focused on new firm builders and first institutional funds. We have considered re ups, and we’ll continue to consider re ups. And when we think about that, we like, there are things that you can underwrite, that you can look at from a fund one or fund two. That’s the most common question I get asked is like, gosh, well, what do you actually look at? Then can there actually be anything? And again, the answer is, if you’re just looking at face value on paper, you could argue that there perhaps is not much you could get lucky, and there could be a lot more, perhaps unlucky, and there could be a lot, depending on the type of detail that’s there and the direction of the portfolio. But there are other more nuanced things that we consider in our underwriting, and it has to do with the team evolution, how those underlying businesses are performing. We look at a pretty deep look at whether they’re actually meant to be venture backable companies, whether there’s been strategy drift in the portfolio in a very thoughtful way, or in a way that actually demonstrates that your brand hasn’t resonated as well. So those are all things that when we’re working through our re-up process, we put everybody through just an equally rigorous process, but with nuance to know that, you know, it’s a different type of data set that you’re evaluating, and that’s a really important part of our internal work as well.

Earnest Sweat 39:00
Lisa, it seems like we’re in a moment. I’m going to spin out a moment in the venture space. And I’ve been so really inspired by a lot of friends who have left places I never thought that they would leave to spin out. So how do you see that evolving in the next decade and venture and how is Screendoor kind of preparing for it?

Lisa Cawley 39:23
Yeah, I think overall, when I think about the industry, you know, I’ve always thought of the industry over the past, you know, when I look back on the time that I learned it in a decade or so, there’s really been this separation of being on one end of the spectrum, venture beta, right? So you have large multi stage platforms with lots of different resources at their fingertips, with much larger fund sizes. To me, that’s venture beta, and that plays an important part in a multi asset class portfolio for an LP. But then there’s also the venture Alpha side of the equation. And so I think the biggest challenge is. Always when LPS aren’t looking to when LPS aren’t looking to deploy on a consistent vintage year basis. That is what really actually hurts them. And I think there’s always this misperceived look of like, well, my venture returns were bad in this one quarter. And if you look at things only in a singular myopic quarter, that is not how you can look at venture per se. And so I think both venture beta and venture Alpha play a really important role in a portfolio. If you drill down and you look at what your question is around, maybe folks that are individual investors moving from Venture beta to venture alpha, I think that that’s where some of the specialization comes into play. So again, somebody that has had institutional investment experience, they’ve been at a large firm, they have seen what a quality and rigorous diligence process is. They’ve seen what it means to be a fiduciary, right? Because you’re managing capital on behalf of somebody else. And they’ve developed their thesis and their relationships and networks. And I think that that can be a real advantage. I think the challenge is that sometimes, when you think about the profile, they may not have had experience and expertise spending time on firm building, right? So they’ve been very focused on deals, investing and their investment strategy. And I would say that’s a good thing, right? Like you can’t teach somebody. You can’t, you don’t want your fund manager to be learning that after you’ve committed that always has to be true, that has to be exceptional before you even start. But what can be learned if they’re open to it and have the right orientation is all of those fund admin things. I think most investors, when they go from being an investor to a fund manager, which is something really important, like we actually are, that’s a part of our diligence. When we look at fun ones, when they go from being an investor to a fund manager, I think they’re often surprised that on any given day, a large percentage of your time is actually not spent on the investing component. It’s spent on the fund component, raising capital, communicating with your LPs, dealing with your you know, your fund admin, your lawyers, all of those different things. There’s probably a huge long list of tax audits, all of which are extremely important and you can’t put them on the back burner. But I think that’s the one challenge that a lot of the new managers will have when they come out. We have folks that have balanced those things over time. We have a team of LPs ourselves too, that we can lean in on a lot of those things. That’s probably where our team spends a lot of time on any given week, as well as helping managers through that, helping them think through their ELPAC how they can get the most bang for your buck, per se, when you think about how you want those folks around the table. I think that elk, candidly, is like one of the most underutilized tools that a new manager could have, if you structure it properly. So that’s how I view the difference. I think that firm builders are moving from Venture beta to venture alpha, and I think founders are the ones that are going to benefit the most.

Alexa Binns 43:01
And if you are interested in getting access to the alpha layer, why are LPS interested in working with Screendoors? Yeah, so

Lisa Cawley 43:13
I think LPS have a couple challenges depending on their size and shape that they’re all working with. And I think the first is just their team bandwidth.And if you’re only spending a fraction of your time on venture and a fraction of that time on what we’ll call this venture Alpha concept, I think that that means you’re probably going to have a much smaller pool to pick from, and you’re also going to be going back to that timing. You’re going to miss that constant deployment into some of these new managers over time. So I think team bandwidth is number one. That’s somewhat related to what I believe is number two, which is just limited access and network. And so if you’re not fully focused on venture, if you’re not kind of ear to the ground on who some of the new managers when they first come to market and first start, start forming their funds are, that’s a really, really great way to have a partner to help you through that right, to help you build those introductions with folks, and we do that with our LPS quite frequently where they, of course, will have their exposure through us, but then over time, they’ll have an opportunity to get to know these managers well in advance of when they would be a fit for their portfolios directly. And so there are a lot of large allocators that they need to, you know, write a. Certain check size that, candidly, is the size of a lot of our managers’ funds, right when you think about and call it that 10 to $100 million range, some LPS like that is their minimum check size, and so that structurally limits them from being able to access this area. I think the other element, too, is just the network side of it. So we have across the 14 GP advisors, obviously, they all have new managers coming to them looking for advice, and so now they can work with Screendoors so that we can spend time with those managers and help them get into business. And our LP team so myself and my two partners, who all come from different LP backgrounds, different types of allocators, but have all been like very squarely swimming in the emerging manager ecosystem and spending time underwriting a fund one, and knowing the difference of how to underwrite a fund one versus a fund five, 610, 15, I think is so important, and so Having those two things combined together is pretty unique. And lastly, I think, if you’re only going to be spending a fraction of your time, then that means you’re only potentially able to commit and make one sector bet or make one geographic bet. When you think about that direct fund commitment for those larger allocators, or even for smaller family offices that just don’t, they’ve never committed to venture before, and they’re looking to build that part of their book. And so when you’re forced to only make one or two fund commitments in your portfolio, you end up increasing your risk and venture because now you’re also dependent on that very sector specific risk that you’ve made. Whereas a fund of funds approach, this is, you know, classic academic fund of funds. Thank you to my CFA charter holder. Knowledge is you can diversify away some of that risk in a fund of funds model, so you can build exposure, get to know and build your networks, and then double down as managers again, start to prove themselves

Alexa Binns 47:00
well. Thank you so much, Lisa for swimming with alligators. Is there anything we didn’t get to cover that would be fun to address?

Lisa Cawley 47:09
I think that if you are a younger op, the best thing you can do is start connecting with other younger ops. I think for me, that is one of the ways that I was able to tap in and find my sense of community. So I definitely would encourage younger ops and allocators out there to do the same. I would love to chat with anybody about Screendoors. So if you are an emerging manager who is interested in sharing your work with us, we would love to hear from you. We have an open website submission. So if you go to our website, Screendoor.co. You can share everything with us. It goes right to our team, and we love to learn about what you’re building. Lisa,

Earnest Sweat 47:51
Thanks so much. It was well worth the wait, and we can’t wait to have you back on in a year or so. Thank

Lisa Cawley 47:58
you for having me. This was so much fun. You

Alexa Binns 48:00
See you later, Allocator!