Earnest Sweat 00:03
Welcome to swimming with alligators, the VC podcast from the LP perspective, with your hosts, Alexa bins and earnest. Are you ready? Let’s dive in on today’s episode of swing with allocators. We’re blessed today with two guests. We have Robin Etienne and Kevin Moore Robin is the founder and CEO of de Raja capital with over 25 years of institutional investment experience supporting emerging fund managers. And Kevin is the Founder and Managing Director of Sarac ventures, and has over 16 years of experience as both a LP and GP today. They shared with us how allocators, new to ventures, should approach the asset class and why GPS should focus on building the relationships and not rushing the relationships with LPs. To close the deal with that, glad to have you both Kevin and Robin.

Raudline Etienne 00:59
Pleasure to be here. Thanks for having us.

Earnest Sweat 01:02
No problem, no problem. Thanks for being here. So I always like to start off all these shows with just, you know, how did you come to this like alligator world and just your respective journeys? So would love to first start with Robin, if you could share your background and how you got to this point? Sure,

Raudline Etienne 01:22
happy to do so. I am in the allocator world because of the Teego foundation. I was awarded the Teego Foundation Fellowship when I went to business school. We go to an organization that was created 35 years ago to encourage minority MBA students to pursue careers in finance. My entry into the world where I made my career was a day that Teego organized for the West Coast fellows to go up to Sacramento and me CalPERS and I grew up in New York. I heard of Wall Street. I was completely unaware of this side in the world, until that moment, and that opened the door in a window into a world where, essentially, I made my entire career. To be frank, I have

Kevin Moore 02:25
a very non traditional path into venture capital. I got my degree in civil engineering, but started exploring and thinking about finance my last year in college. Couldn’t start over. I was on a six year college program, and I wasn’t going to stay any longer. I did engineering for two years after college, and then made the switch to finance, just to learn the business and ultimately try to get into venture capital. At some point in my career, that was a eight year period of working at a few different institutions in the financial services arena, before first joining in VC on the GP side, investing in startups, and then also spending some time on the LP side, investing in funds and CO investing along with them, before starting Sarah Ventures. So as you said, that was a 16 plus year period where all those different things happened, but it was a great decision and a great journey. Hey, Kevin

Earnest Sweat 03:29
because you have this interesting perspective of multiple hats, you know, both the allocator and GP hat. If you put on your allocator hat, which I was trying to think about this today, I don’t know if it’s a top hat or I don’t know what kind of

03:46
what it is. Rabbit out of it.

Earnest Sweat 03:49
Rabbit out of it. I don’t know what a fedora is. It’s a fedora. I like fedoras. Let’s say. Let’s stay with that. It’s a fedora. But if you put that on, were there any lessons during, like, as you were learning, you know, you had some experience in directly investing, and then, you know, how was it learning about how to invest in funds and what were you looking for at the time,

Kevin Moore 04:18
The biggest takeaway I got from working on that side of the table was the best fund managers of those who had very streamlined operations. And I say that because most of the funds that we saw that failed, it was because they didn’t. And that always stuck with me. And when you think about most of the companies that VCs are going after, they were very competitive and things that sort but they usually all invest in good companies, but where things seem to always fall apart, where they didn’t have a process for sourcing, they didn’t have a process for secession, they didn’t have sort of clean operations. Operations. So that was one of the things that I learned the most, and was a big takeaway for me in starting C rank ventures, was seeing behind the scenes of how the best fund managers in the world really built their firms and how they scaled and had people doing different things. That was a very helpful experience. And I think that I was very lucky to have had that sort of inside baseball of the business before starting my firm.

Earnest Sweat 05:27
I’m just going to pull a thread there,, how do you actually determine if someone has streamlined operations? Because I’ve looked at a lot of my friends, like GP decks. I’ve been at funds and seen our kind of fundraising deck. And just like we can say about a lot of founders and different spaces, they all kind of start to blend together and look the same, and everybody is saying the same talking points. How do you really kind of look under the hood to determine if somebody has streamlined operations?

Kevin Moore 06:01
I think just like any company, the GP is kind of like the CEO, and their sort of visionary approach to where the firm’s going, what they’re investing in is one thing, but most of the firms that are in the business are structured pretty much the same, where you have your lower level people doing what they do in your mid tier. Then you have your operations people, and then you have the dynamics that exist between the GPS and that’s sort of like your leadership team or your C suite. And how is that sort of laid out such that it’s fair and equitable among them and for the firms that did that really well, you could tell there was a pattern to it in the firms that didn’t, they seemed to just be figuring that out. And a VC firm, to me, is no different than any company. It’s just a different medium where you’re applying that model. So I think for both Robin and I, when we’re looking at an investment, there’s just certain fundamental things that make sense, and the framework by which you’re looking at that just depends on the industry, but structurally, it has to operate a certain way.

Earnest Sweat 07:16
Robin, you start, you brought up twego, which I’m glad I’ve had a lot of friends who’ve gone through that program, and it’s had made waves in all aspects of finance. But I was curious, you know, as you then started your career as an allocator, what were there any specific kind of like experiences or lessons that have really shaped how you your perspective on investing in the managers,

Raudline Etienne 07:43
I think one of the things I didn’t do in your first question was talk through the trajectory of my career. So post business school with a little two minute detour into real estate, I ended up spending a large chunk of my career as a consultant, rising institutional investors. That period was probably on the order of around 14 years working at two firms. And so throughout that decade plus experience, I saw everything and everyone, really, and I think that my perspective is a little different than what I experienced, because I viewed the structures and the processes that we had in consulting. And as someone who came to finance from a non traditional background, like Kevin, we have that in common. My perspective on the processes, the mores, the standards of what we were doing in consulting, always seemed to me a little bit different from what we said versus the reality of what we did. And I think that that understanding how the business was structured, in terms of the gatekeeper, the allocator, and ultimately the manager, and understanding the relationships between all three was important for my perspective, but I think the most important thing is I have a critical eye on just about everything, and I think process is essential, but process that doesn’t allow for creativity is not optimal, right? Because at the end of the day, what we are all doing is making judgments, and judgments are not just based on the steps that you must do. There’s a qualitative assessment, there’s intuition, and there’s vision, and I think my trajectory has been about. Making sure that the intuitive, qualitative aspect of judgment is just as important as the process.

Earnest Sweat 10:12
Yeah, you bring up some points that I’ve you know through all these conversations with LPs, I’ve heard on just like it’s, it’s, it’s an art and a science. Like, how do you balance both, knowing we need to be diligent and have diligence in a process. But if you’re so, if you have your visors on so much, you might miss out on true alpha that kind of leads to my next question for you, Robin,, you decided to, you’re a builder, just like Kevin, and decided to start your own firm with those kind of lessons in mind. how did you make sure that you like your firm? What was the inspiration to start your firm, and what? How did you make sure your firm incorporated all those lessons from your career?

Raudline Etienne 11:06
Let’s see, there’s multiple questions you’re asking there. So I started deraja to be frank. Because what let’s not be, why don’t we just be frank about Yeah, it was that I was at a point in my career where I felt that pause, restart. I reached a point in my career where I was transitioning, and I could have had what I call the board life. I was too young for that, and that I had more to give to our business. And so I started Raja as what I call my third act, or the third phase of my post business school career. And I started it because it was the purpose for me. I thought that there was a lot of talent out there that wasn’t getting the opportunity to demonstrate their brilliance, and I thought that one of the things I realized is that I have always been willing to go first, both when I was a consultant and when I was a CIO, and I didn’t feel that that opportunity for someone to say, I believe in you. I think you could be successful. Let me help you start happening enough for people who look like us, to be very frank. So that’s why I started to Raja, plain and simple. It. It is my realization that opening doors and giving people a seat at the table who don’t normally get it, was what drove me and what was consistent in all of those professional highlight real moments for me. And so I thought this is the thing that I could contribute in this chapter, and this is why I started it.

Earnest Sweat 12:58
I love that. And just as a point of clarification for our listeners, you said board life, meaning B O, A, R, D, and that, B, O, R, E, D, right? Yes,

Raudline Etienne 13:08
the board life I joined, but I’m still on. And you know, you know, at that phase in life, you can become a professional board member and have an interesting, varied life, but I was too young for that. Yeah,

Earnest Sweat 13:24
and for some people, it might be B, O, R, E, D, and Kevin, what was the inspiration to start your firm when you’ve had a successful career as both an LP co investor, all those things

Kevin Moore 13:48
very similar. It wasn’t until I started working on the LP side that I saw just the massive chasm that existed between where dollars went in the business and I think that this became more apparent, maybe starting prior to 2020, sort of became sort of Top of Mind, and then during that period, just had a lot more time to think through that. And I started to think, why was that? Was it because there was this sort of underlying bias in the business? I wasn’t sure, because it didn’t seem like that when we were meeting with managers, but it really came down to network effects, I think is a big, big part of that. And people aren’t ever going to admit that they have even an unconscious bias, but everybody has that. So I wanted to start a firm that sort of leveled the playing field and would give everyone, like Robin said, a seat at the table, and I think it’s a core reason for the depth of our connection. At that very point, I feel like I’m an extension of what she’s doing, and vice versa. And so rack ventures will look at all founders, and I think that that is a huge differentiator between the firms that exist in the market and ones that are sort of coming up, coming up like mine.

Raudline Etienne 16:18
I think that Kevin’s point is important. I think, why is it important for us to be doing what we’re doing? Right? It is because we have different lenses. We have different lived experiences, which is a cliche, but I can’t find a different way to say it, which means that we look at opportunity in a different way, and we see opportunity where others may not for that very reason. And I think, you know, we all have biases, implicit, explicit, we all do. But the thing that I tell the marketplace is that you’re not going to encounter from from me, racial or gender bias from me, right? As a black woman, to be frank, you will encounter investment bias, right? I have biases as an investor that remains unchanged, but I can see the potential in ideas because of the differences and the experiences that I bring to the table. And it is, it is hard to make the generalization, but I have personally experienced even the last couple of years where investment opportunities are not recognized. Yeah,

Earnest Sweat 19:05
so true. We need more perspectives. We need more seats at the table. We need more tables for all these things. And you know one thing I wanted to just come back to Kevin, that you brought up that I just want to learn a little bit more get both of your perspectives on is this idea of network effects and this concept of being able to prove your proprietary network and your ability to get access, because that’s honestly what As venture capitalists, what we’re selling, is our ideas and our access. Have you found, you know, for you, Kevin, interesting ways to be able to convey that yourself versus also, were there things that you found when you were an allocator? It as ways for people to really show that when it’s not the most obvious, it’s

Kevin Moore 20:04
a really good question. It’s like being in a bubble, but once you’re in there, you don’t realize you’re in there until you step out of it. And it’s it’s weird sort of thing when you really think about it, how do you demonstrate the strength of your network. When I was in those rooms, I always felt that one, I was the only one in those rooms that sort of looked like me, but at the same time, no one was looking at me differently because I was in the room. And the strength of a network is subjective. Yes, it’s like strength is relative to what. But within the venture capital industry, there’s been a history of different firms and people and ideas that tend to be people who scream the loudest, and when you can reach out to those people and have their perspective on things, and you’re in that network, and you can illustrate that easier, either through conversation or by direct interrupt introduction, then I think that you can start to manifest that to others in a material way, and part of that network was driven by really introductions. And I would say that some of the best founder relationships that I was able to build over the years came from doing reference calls on the fund managers that we had in our portfolio, and they would introduce us to really big people, like the founder of ring and the founder of Door Dash and all these people. So you start to develop this network effect. And now, if you wanted to gauge that by a number, you can see that on LinkedIn, but I’m a big believer in sort of Dunbar’s number, where none of us can have really strong relationships with more than 150 people. So when I think about network effects now, it’s not so much how we sort of brag about our network, but more so, how we bring people into our network, and that’s something that we’re doing with technology. It’s something I think about now, and bringing in new investors to the venture capital industry, because that, to me, is that’s the broken part of this business, and I actually think it’s very limiting, because if you’re only limited to your network, then you’re not seeing all the opportunities, and you may not have all the best people in it.
Earnest Sweat 22:49
I think a lot of people who’ve been on this show or that talking to in private, who’ve been in the business for a long time there, isn’t going to be like a succinct like writing down the fair fairway answer, but that should give people like hope too. It gives me inspiration too. It’s like, okay, I need to be the best earnest that I can be and show that I can out earnest, everybody. Mm, hmm.

Raudline Etienne 23:19
I can be earnest. I think I might borrow that. I want to add a comment, though, about network, not just not in the VC context, but just in general. Because I think one of the things I realized is that we all live in these networks that don’t necessarily intersect. And one of the things I’m doing in this phase of life is deliberately trying to connect networks that don’t intersect, right? I’ve had a series of networks that I’m a part of that are not necessarily related, and trying to intersect them and bridge them is one of the things that I’m intentional about. And at this point, when people say to me, may I introduce you to the answer is always yes, because there are so many you know, if Kevin’s point about you can only have meaningful relationships with 100 people imagine, then how many real networks exist out there, and you realize that in particular, when you’re talking about diversity, and you’ll have people say, I don’t know where to find the talent, and my experience is, I’m surrounded by the talent. Why can’t you find it? Right? It’s because their particular ecosystem and my ecosystem are separate, and I realized that sometimes we have to function as the role, as the connector, as the Brit and it means learning. It means being sometimes in places where it’s uncomfortable, because it’s not your network. But you know, this was my experience at. For example, working at Albright Stonebridge, which is a completely different animal than all of the chapters that is a national security, diplomacy, global network of people who have access to that there’s nothing natural about me being in that particular network. If I hadn’t made that move to connect with people who are not just strictly finance, and I think to the extent there’s anybody early in their career listening to this podcast, I think one of the pieces of advice idea is try to be intentional about cultivating your networks, because at the end of the day, that’s going to be key to everything in your professional

Kevin Moore 25:47
life, absolutely and earnestly. Can I say one thing that I’d be remiss if I didn’t say this about the network thing. That doesn’t mean you can sit back and make excuses, because I know there are a lot of people on both sides and of all ethnicities and backgrounds that make excuses like I don’t have a network. I don’t know these people now, I will say, and it’s for both rollin, not trying to speak for rodland, but I would assume, how dare you. But I know for myself, in order to build the network I had to force myself into situations and put myself in a lot of very uncomfortable situations, yeah? And if you’re not willing to do that, your network is never going to grow, yeah? And that, think that’s a really important point to say, especially in this climate, what that we’re in right now, that at some point you have to just own up to it and embrace the discomfort if you’re willing to do that, and just ask people out to coffee and ask people for advice, and humble yourself and really Try to push yourself in the rooms. That’s how it is, that’s how it works. If you’re willing to do that, then that network effect can get stronger.

Earnest Sweat 27:10
Now we’re going to take a quick break to speak with our sponsor. How do you know, how does a firm like yours help navigate fund managers in all these different things?

Mathew Eapen 27:26
Yeah, I think it’s first and foremost, just the breadth of experience and, you know, allowing clients who have never really had to think creatively about, you know, getting to this liquidation part of their life spectrum. And, you know, what’s the playbook for that? And, and, you know, even today, the playbook changes. You know, continuation funds in the venture context, outside of very, very large venture firms, who are, you know, maybe in the growth stage, who are almost private equity-ish in many ways, you know, and the Liquidity Markets, right? It’s just been god awful to, you know, you get that, you get that lack of liquidity, and you pair that with really not having a lot of experience dealing with, you know, our life fund management issues. It’s very difficult. And now, you know, a lot of funds are coming back to market, but they’ve got, as you said, have that dpi, you know, they need that track record to be able to put gas in their fundraising tank. And so you have to talk about so many different aspects of these transactions, you know, you know. And Matt has done incredible work on a number of continuation vehicles in his past, you know, I’ve done a lot of stuff over the years in terms of GP led sort of secondaries, whether it’s rights offerings, it’s actually, you know, the deepening of relationships and the necessity of GPS to broaden their connectivity to the secondaries world and secondary buyers. I think that is part of the successful playbook of any venture fund these days. And so I think it’s really just a matter of, you know, our job is, is a matter of just opening up the playbook so people understand what the options are, and also being able to tell them what the pros and cons of each are, because a lot of these things are incredibly expensive. You know, continuation funds are not for the light of heart, and they are transactions that can be transformative, but they are also filled with a bunch of mines in the minefield that, if you’re not doing this correctly, and there are so many conflict and fiduciary issues, there’s so much expense dragged to a lot of this. You know, there’s a swamp out there, but you know, if you’ve got, you know, some of your swamp people who are in the boats being able to paddle you through it. You know, that’s the kind of stuff that you need, you know, if you’re really going to explore the best options. But you know, they take comfort in knowing that there are, you know, relative abilities, but it’s also knowing when to do it. And you know, because LP temperature is really going to be based on. Lots of bound value created on these exit transactions. It’s not doing it for just the sake of doing it. LPs are only going to bless it if it’s, you know, they’re getting juice. Is worth the squeeze in a lot of these in a lot of these ways. So, you know, we get asked the question a lot these days, and as markets open up, as secondary players become more broad, as transaction structures get more interesting. You know, this is absolutely something that is a material part of what we do on a day to day basis. I know, Matt, what do you think? Yeah,

Shane Goudey 30:29
I spent a lot of time on secondary transactions. And I remember, because I came to sort of law after career and policy, there would be a time at like, three o’clock in the morning where you’d like, pull back and you’re like, why are we doing this? Like, are we sure that this is going to go through? And so that’s the thing. Like, when I have clients who are contemplating this, it’s sort of like there are a ton of factors like that influence. Like, if you put aside the assets, put aside the nav that you’re going to get, like, what is your relationship like with your LPs? Like, what is your LP base like? Are you going to get to majority consent really easily? What’s your advisory board like for the conflicts, things like that, that are really sort of like, fundamental to a discussion. And then it’s also, you know, with secondary transactions, there is a lot going on. I would say there’s sort of only one other instance where it is just like, every single communication is complicated, and LPS ask, rightfully so, to ask a lot of questions. And I have managers who say, like, we have 30 other initiatives happening right now. Like, I don’t think we’re going to do this. And I would say, Yeah, that’s probably, you know, like this one is a very time intensive thing. It’s not like a fundraiser, where you can prepare at a time. They’re things that come up all the time. You have things outside your control with a lead buyer, things like that. And so they are doable, and they can bring liquidity even in a market like now, but it’s important to recognize these are very complex. And, you know, it’s not just us lawyers, it’s bankers, it’s accountants, it’s fairness opinion people. There are a lot of other expenses out there that people should, you know, think about as they sort of dip their toe into secondaries. Yeah,

Earnest Sweat 32:22
All right. Are you all seeing any, you know, changes over the last 12 months in the fund terms and governance structures that LPs are looking for?

Shane Goudey 32:38
Yeah? Yeah, completely, you know, we it’s, it’s so fascinating. If you think of 21 and 22 where, you know, there were people asking questions, and then GP say, Okay, we’re going to cut out your allocation. And now in 24 and 25 it’s just, you know, people want more reporting. People want disclosure about conflicts. They want insight into the investment pipeline. You know, there are so many more things that result ultimately in more robust reporting, deeper relationships, but there’s a lot more obligations and strings that come attached to the money now that we weren’t seeing years ago. And then to what Shane mentioned earlier, there is also a lot more of an emphasis on separately managed accounts and funds of one that allow very large investors to set up vehicles that they can co-invest for reduced fees or free fees they can invest across different strategies. So it’s interesting the venture is, you know, somewhat becoming more like private equity and like the bespoke nature sometimes for large institutional investors, and the products that managers are able to use to accommodate what they need. Yeah, I’d

Mathew Eapen 33:56
say the things that I’ve seen change are the limited partners request for accountability in any number of cases, you know, in particular, if there’s a key person event or you know, they want to be able to have inflection points across the fund Life Spectrum to put themselves in important decisions with respect to the fate of the fund, and if it’s key person, or if it’s no fault divorce, or if it’s no fault GP removal, or GP removal as a topic, or, you know, anything at all points in between. I think that there has just been much more LP insistence on making these life events of any management team of a fund or the fund itself be something that’s accountable, reportable, transparent to the limited partners. And that’s not to say that GPS gives in on this a lot, or even a little, in many ways, but nonetheless, I think that there’s been a tremendous amount of discussion around the consistency of reporting and notifications of the life events. LPS want to know what’s going on with the fund, and they want to know it more often than a quarterly report that they’re getting or an annual meeting they may be having. They want to have it as much and as often as they possibly can. And so I think that just the relative involvement of the LP community in the day to day of a venture fund is more now than it ever has been for good and for bad. And I think some of that is dependent upon who you talk to, whether that’s a good thing or a bad thing. Obviously the rise of ILPA, and you know, a specific set of guidelines, and the overall meteor impact of that on the relative negotiation posture of GPS and LPs, and insistence that something may be market and something isn’t, and, you know, all of that sort of leads to, I just not circumspection, but I just think that LPS desire to be much more involved in not the management, but just understanding operationally, how Decisions are made and what’s going on with the fund, and if things go incredibly left or incredibly incredibly right, LPs want to be involved in, I think they want to say in the future of the fund and what the management team may look like and their rights vis a via all of that. And now back to our LP interview.

Earnest Sweat 36:41
You guys are both talking about something that is, is, you know, is, is my TED talk on, you know, growth comes with discomfort, right? Some of the best gifts in life come from discomfort. Every mother I know says some of the best gifts of their life that they’ve ever had, their children came from discomfort, and so that’s something that we kind of have to live by. One reason I wanted to have both of you on this show was because of the partnership that you both have. And Robin, you brought up earlier than you know, given your demographics and who you are, there’s certain biases you won’t have, but you’re also definitely going to have some kind of investment bias. And I remember our first conversation, even before we got reconnected, the first first conversation we had. Yeah, you were like, Well, I don’t really do venture and, and, and so I get that, but you’re invested in Kevin. what was it about Kevin and what you saw that you were like? I want to invest and partner with what he’s building, even if it’s an asset class that I’m not as familiar with.

Raudline Etienne 38:10
So, you know, I think that’s a great question. I’m going to try not to soup him up too much. But oh

Earnest Sweat 38:17
no, no, no, I don’t, I don’t want that. I want to. I want, I want you to provide insights for other people and feel hopeful, but like, Yeah,

Raudline Etienne 38:25
but, but, but your point, your point is a good one, right? Because it was not my intention to say, Oh, I’m gonna back a VC fund, right? I allowed myself the opportunity set. I’m agnostic. I’ll back anybody who’s doing something in the private markets. But if you had asked me what would have been first, this is not what I would have expected to do. Yeah, I thought Kevin was special, right? So as someone who has you know, the metaphor I use is I’ve seen the play 1000s of times before. There’s an element of intuitive recognition about talent that comes I think just because I’ve seen the play 1000s of times before and in Kevin, what I saw were the things that were kind of the gating mechanisms for me, which is, what do I like in an investor? What attracted me to a manager or a GP when I was a consultant or an allocator, right? What ultimately, were the characteristics that I found compelling? And,, I will say a couple of them. The one is the GP, and Kevin is very passionate about what he’s doing. So first of all, smarts, all of that, that’s table stakes, right? You know, we’re not going to put that in front here. I’m just going to assume that I’m not going to invest with somebody who I don’t think is smart and good at what they’re doing, but you have to exhibit a certain passion for the area that you’re investing in. You have to have an investment philosophy and a perspective. That you bring to the markets that you’re investing in, and you have to have the right balance of confidence and humility. Right? The best investors, the investors that I’ve always been attracted to, have a point of view, but are always trying to be better, and are always questioning themselves and questioning whether their circumstances or the market has changed, and have asked themselves, do we need to adapt? Do we need to change our basic investment philosophy? But the idea of continuous improvement is one of those things that I think is very important, and I thought that Kevin possessed those things right besides, you know, character, integrity and all of that other good stuff, which we should not underestimate, because I think it’s important in a long term, very difficult endeavor that we’re all going through as builders. And I say that’s what I don’t want to get. I don’t want my ego to blow up too much. I’m going to stop there.

Earnest Sweat 41:03
No, no, we want. We want him to, we want him to have something to strive

Raudline Etienne 41:07
for, ability to continue a little bit. Yeah, Kevin,

Earnest Sweat 41:11
to that point, and I think in the market today, you know, I’m not going out on a limb by saying that it’s a tough fundraising market, in particular to venture capital, right, especially emerging managers. And it might be a point in time where I’m hearing from a lot of friends, oh, we need to expand the pool of capital, and look at other folks that could be allocators into this asset class. Sohow do you think , our emerging managers should think about convincing, people who are either sour on the asset class from recent kind of like indicators or who don’t have much experience in the asset class at

Kevin Moore 42:07
all, I want to answer that, but also want to thank Robin for your kind words. It means a lot to me. It’s also a testament of our relationship, because I feel the same about her and our meeting was the most different type of meeting I’ve ever had in my career, just in general, because of how you approached wanting to know who I was and why I was doing what I was doing. Still, no one asked me those things. And I think it’s so important to do what we do, because it is such a long term business. So I want to say that and to answer your question earnest, I think that what the perspective I gained just over the years, not just working in venture, but also working in finance, is that you as an investor, you see that there’s cyclicality in the market, and if you understand just the fundamentals of that, one of the things I try to tell new investors to the asset class is venture goes through waves. And if you can point to not only specific examples of periods, but also what happened during those periods, you can start to educate people about why now might be one of the best times to invest in venture capital ever, and why this happened over the course of history. I don’t think history repeats itself exactly, but it certainly rhymes. So I think now, with the asset class as it is today, we are possibly at a Nadir and on the way back out of this. I don’t know if that’s this year or next year, but if you zoom out and look at the course of a 10 year period where you don’t want to be investing, is in 2018 2019 when the market was at a high, and that’s exactly what happened, which is so bizarre to me, but at the same time, it’s not bizarre, because no one knows if that’s the high, but we certainly know when it’s the low. So educating people on those things is part of the process of being a good sales person, but a good sales person doesn’t sell people things that they don’t need. in February, we wrote an investor education series talking about all these fundamental things about venture capital, and ideally, we’ll structure those together in a package and share that with individuals who are accredited investors and might have interest in venture capital, but just to say, like, here’s here’s the playbook on how this works. Because some people just don’t know, but some people who even do know just need to be reminded that the cyclicality of this business is never going away, and when we’re in these periods, it’s time to embrace it and double down on it. Can

Raudline Etienne 44:58
Can I co-sign? On that, because I think, you know, earnest, if I think about your prior question, why did I when you met me the first time, I said, I’m not really into venture and then all of a sudden, I’m backing a venture fund. It’s not just Kevin, it’s also, I think that you have to be slightly contrary to be a successful. And so therefore, you know, after this particular bubble verse, I thought, Okay, well, now may actually be a good time to venture. And so besides, I thought he was an exceptional GP. I thought this was also a good time to put money to work in a venture. And I think investors who have the stomach and don’t follow the herd. You know, you don’t, you don’t buy at the peak. You know, you try to buy the trial. You may not be able to time it, but if you have the right long term perspective, I think that approach makes a whole whole bunch of sense.

Earnest Sweat 45:54
Kevin, you mentioned that Robin had just liked your experience with her was just very different than some other LP conversations that you had, what do you think allocators today should be doing differently in a market where there’s literally so much change, we’re starting to see your tradition, Traditional spin outs coming out right where people who are 3040, somethings from tier one, tier two firms leaving and starting their own thing. We’re seeing kind of like seed and pre seed become extremely crowded with a lot of different players. And then we’re having people do multi stages across, you know, competing with YC all the way to public companies. What do you think people should do differently?

Kevin Moore 46:48
I certainly think what Rodlin does differently is she’s an investor where she is taking time to evaluate all the aspects of the opportunity, not just the financial component, but the people behind it. And to do that, it takes time, and to do that, it takes patience, and to do that, it just takes a different perspective. Now, for the industry writ large, because there’s so much capital in the system, some people don’t have the luxury of doing that, and that forces them to think about things in buckets, where they have to put money in certain places, because that’s the mandate. I’ve sat on board myself. Unfortunately, they were, they were, they were big boards, pension fund boards, where we have portfolio, allocation, policy, things that we have to do. So when you have to do that, you kind of have to do it. But therein lies the challenge of the business. And if there was a way to restructure the industry such that there are more smaller investors to deploy that capital like, have more funds to funds and more firms like rodland, then you could have a wider distribution of where that capital is going. I actually wrote a white paper on this and had an illustration that showed there’s a ton of capital at the top of the system, but there’s not enough people in the middle to distribute to all the different opportunities that they’re in that are at the bottom. So what ends up happening is the larger, more established names end up soaking up all the capital and venture and that’s what happened in 2024 70% of all the capital that was raised went to 30 different firms, and when you think about that, there’s no way that talent is distributed among 30 different VC firms in the business that logically doesn’t make any sense. But it’s not an issue with those firms. It’s an issue with how the industry structure, you need more people in the middle to distribute it.

Raudline Etienne 49:20
You know, I think that this is, I think this is a great question, right? So if I, if I take it from a perspective, I think you’re right, right? Kevin, I think managers and GPS don’t understand, in general, the resource constraints on the part of allocators that may lead to checking the box thinking continue capital to the biggest players. You know, when you have billions of dollars to move, it’s difficult for you to focus your limited resources on writing a ten million check, right? Yeah, and you know, those are structural issues that won’t get addressed to you. Uh, immediately. But I would say two things for LPS. The one is, there are knee jerk negative reactions to things like fund to funds, I think, because of what happened in the GFC, where on the hedge fund side, where no one was protected for Madoff and fund of funds didn’t do the work that they claimed that they were doing and that, I think, has infected the entire ecosystem in a way that’s been detrimental. And so I think one LP is rethinking that negative knee jerk reaction. Yes, there’s an extra layer of fees, but that’s because you don’t have the resources to feel the team to do this. And yet, we all know that there’s a world of opportunity outside of the 30 major venture funds that Kevin was just bringing up. I don’t think this is just a venture issue. I think this is true systematically. So that would be one rethink. It’s a negative knee jerk, extra layer fees. I’m not paying for it. Sometimes you actually should pay for it, because you are not equipped to actually execute on the smaller end of almost any market you’re in where there’s typically a lot of opportunity. I think the second thing I would say LPS needs to do differently is they need to widen their aperture a little bit. Yes, it’s true that you don’t get criticized if you know one of the oligarchy firms loses you money, but there’s a lot more opportunity than what’s safe and convenient and challenges yourself to think a little bit differently than you have historically. Period, yeah,

Earnest Sweat 51:41
that’s amazing advice, and I think it definitely needs to be, you know, people need to widen their perspectives, as you mentioned, because there’s true alpha out there and an opportunity, kind of changing gears. Kevin, where do you think I know your answer, but want to know some details behind it. What trends do you see in venture capital in 2025, and beyond? And you know, are you overly optimistic or bearish on it over these next, this next decade,

Kevin Moore 52:23
The future of venture capital, to me, isn’t an industry like a technology that’s going to change everything. I think the future of venture capital is a wider representation of talent and founders that are in the market that are going to bring new ideas and new applications to technologies that need to be applied in different markets and in different ways. And I was listening to a podcast of a guy who said that he was talking about this in the cruise industry and very random cruise industry, but the reason why certain of those cruises go really, really well is because of the diversity of staff that they have on board and that the NPS scores, where people are really, really high. Things are just going really, really well, but it had a lot to do with who was on the ship. So I think, as if the VC industry is a ship, who is coming on to the ship, is what’s going to make that better, and I think technology is what’s pushing that forward and making it. We’ll see that in 10 years it will be a totally different landscape. Hopefully,

54:46
I don’t predict the future.

Earnest Sweat 54:52
We can be optimistic. You do it a bit, and who you like choose to partner with that’s predicting a little bit of the future. I’ll push it back. I. Push back on that.

Raudline Etienne 55:01
So if I use the metaphor I choose with cruise times, I will go on, you know, I think it’s interesting, right? Because, yes, I think AI is going to be a game changer, and we can only begin to imagine the impact you will have across all industries. But, you know, one of the things as an investor, I noticed, on some level, like technology is everything, yeah, and what that has led me to is actually, especially since I’ve been really exposed to a lot of venture because, because I backed Kevin, therefore every aspiring venture fund is is approaching us. But I have to tell you, what it has led me to is thinking more about the bricks and mortar businesses as opportunities as well, right? Because I think the herd is, you know, listen, I just remember all. I remember this venture fund who was doing AI, who just raised, I don’t know, so much money so quickly, before I could even do diligence, you know, I just like, Ah, this is a bubble, right? There’s going to be a lot of junk in here, because people are just throwing money at it. That, again, to the slight contrarian nature here, the investments I’ve made thus far are already technology exposure. And so I am deliberately looking for what I call basic businesses, right, bricks and mortar, things that need to happen in the real world as well. Yes, technology will have an impact. Yes, technology may make things more efficient, but we’re far off from technology being a solution for everything. And I think that again, to be a little bit different from where the herd goes, I’m paying attention to those kinds of opportunities, especially in the investments I make with independent sponsors.

Earnest Sweat 57:00
I appreciate that perspective. I might push back a little bit on that because of my bias, but like I appreciate that perspective, I want to I’d be remiss if I didn’t have you both talk about something that I think is really important if you’re VC, manager, growth manager, just in private markets overall, is how do you develop and cultivate strong relationships with allocators and LPS when there’s so much noise today so many more firms? I got this crazy stat from one of our prior guests, Megan, from altimeter. And it basically was, like, there are more venture funds than franchisees. It might have been all private so, but I think it was venture funds rather than McDonald’s franchises and so that’s insane, yes, but that also shows that it’s become mainstream a bit, and a lot of people are in the market. So how do you actually differentiate yourself, and more importantly, how do you have these strong relationships? Like Kevin, when we were talking kind of in a pre call, you spoke about the importance of, like, being intentional with relationships. So for our emerging managers listening, how do you actually do that when there’s so much noise and so much competition?

Kevin Moore 58:35
I’d say something very simple. Every single time you reach out to someone you don’t have to ask for a meeting, and I think that people consider that a wasted effort if they don’t, I strongly beg to differ on that. I would say about 70% of my outreach is just sending people follow ups and updates and interesting things that I’m seeing on a daily basis, and the other 30% it might be I’m asking for someone to meet with me, but that’s the relationship building component of this is that’s number one and number two. Everyone says this, but how do you add value to that relationship? So when I’m pre planning for meetings for the day, I’m always thinking, man, what can I bring to the table that’s going to make this work their time? And I will postpone reaching out to someone until I can figure that out. This business is such a marathon, and people forget that it takes 18 months to build a really good relationship with someone. And Robin and I met back in May of 2023, so now we’re almost two years into this, and we have this amazing relationship. But that’s it. It took time to develop. And I take 10 or 15 minute calls with people all the time that reject serac ventures, our firm, and I tell them, I’ve been in this business long enough to know that it’s a relationship game, and I’d love to keep you in the loop on what we’re building for the next four or five years until we get to fund three, that stuff just doesn’t happen overnight. The immediacy of needing things now certainly is important, but you have to be building for fund three and beyond, and those relationships take longer because there’s a lot more competition. So to the to the extent that an emerging manager can think like that, I think it differentiates them from others in the market a little

Raudline Etienne 1:00:48
a bit. I think I think that’s correct. I think this is a long game, and emerging managers need to approach it as such. I also think emerging managers need to be a little bit more realistic in their expectation of what is possible, and understand that the Counter Party has their own issues that they’re Managing through, and what we think about relationship building, what I have found, you know, I am not one of those people who does well, going to 2000 people conferences and introducing my people. But I believe that the best relationships are developed when there is a warm introduction, right? So full circling back to your network and developing your network, it’s those kinds of personal connections. Me saying, Hey, Kevin, meet this person. Kevin. Saying, Robin, Hey, meet this person. That leads to a certain level of intimacy and the prospect of building a long term relationship, because it has nothing to do with a transaction that’s immediate. Yeah, and you will be disappointed along the way, but you have to have the attitude that, again, these are relationships, not just prospects, and each individual or entity has its own horizon that may not fit yours, and you’re just going to have to be patient. I think the other thing I would add is because, you know, people think I’m an extrovert. I’m not. I’m quite introverted. I People exhaust me, not energize me. But what I realized in this building your network and cultivating a network, what I always used to do and what I still do, is, do I want to spend time with you, not what can you do for me or what I can do for you? And so if you find people, as you progress and as you find people that you are simpatico with, maintain those because you should be in your 100, right? The criteria of how they’re in your 100, because it’s not work. It’s natural, right, you’re developing natural friendships because there’s some connection or bond and whether or not you’ll be useful to each other in the future. Trust me, you will. It will happen, but that can be one way for you to sort of qualify who you spend time with and who you invest in, in terms of building long term relationships.

Earnest Sweat 1:03:58
Well, I don’t think there’s any better way we could. We could end the pod with that sage advice from both of you. So I want to thank both of you, Kevin and Robin, for being on the podcast today, and I’m sure we’ll have in our notes you guys social so people can get connected to you. So really appreciate you guys being on today,

Alexa Binns 1:04:27
See you later. Allocator,